What crisis? Chinese firms step up investment in Europe

What crisis? Chinese firms step up investment in Europe

A Sany factory in Changsha. Sany announced in January a deal to buy a 90% stake in the German concrete pump maker Putzmeister.

An increasing number of capital-rich Chinese enterprises are targeting the European market for investment, report the Chinese-language Economic Observer. For example, construction equipment maker Sany Heavy Industry Co and Citic recently agreed to pay €360 million (US$477 million) for Putzmeister, a German manufacturer of concrete pumps, a deal which attracted widespread attention.

In addition, sovereign wealth fund China Investment Corp (CIC) paid €3.187 billion (US$4.223 billion) to GDF Suez for a 30% stake in the French utility firm's energy exploration and production business.

China's outbound investments in 2011 grew to US$68 billion, with European shares worth US$10.4 billion being acquired by Chinese firms, more than the corresponding amount for the United States, according to data published by A Capital, a private equity firm based in China and France.

Since 2001, when the World Trade Organization approved China's entry, A Capital has used the Dragon Index to measure China's overseas merger and acquisition activity. The index is calculated by dividing the number of overseas acquisitions in a year by the year's GDP. It stood at 1,000 in 2001 and 2,015 in 2011.

In addition, statistics show that China's GDP in 2001 exceeded 10 trillion yuan (US$1.59 trillion) for the first time, reaching 10.97 trillion yuan (US$1.74 trillion). GDP in 2011 was about 47.16 trillion yuan (US$7.49 trillion).

While China's GDP increased fourfold during the 2001-2011 period, the index in 2011 was double that of 2001, indicating that China's overseas acquisitions are growing at an even faster rate as its economy expands.

The Economic Observer reported that during the implementation of the government's 11th five-year plan from 2006-2010, the Dragon Index surged significantly. Over the five years, China's cumulative direct outbound investment grew to US$220 billion, an annual increase of 30%. The growth in investment also climbed five notches in global rankings.

A Capital predicts that by the time the 12th five-year plan (2011-2015) ends, the index will rise to 4,400 — an annual growth of 16.9%. Outbound investment during the five-year period is expected to grow to US$800 billion.

Chinese enterprises have begun investing in Europe even as debate rages over whether China should provide financial aid for the European debt crisis. The US$10.429 billion invested by Chinese firms in European shares in 2011 accounted for 34% of China's total overseas securities investment that year, compared to the 10% of 2010. In 2011, three of China's 10 top overseas securities investment projects were in Europe.

Europe is becoming increasingly attractive to Chinese investors. This is good news for Europe, which is still plagued by the sovereign debt crisis, according to Andre Loesekrug-Pietri, founder and CEO of A Capital.

Many of these projects have benefited from the advantages of the European market, such as a high degree of openness to foreign investment. Moreover, China welcomes the current model of cooperation, under which it provides capital while European enterprises supply technology and market share.

[ Last edited by kingkong at 24-2-2012 08:52 ]