Chinese Investment in Europe
An Opportunity or a Threat?
The goals of “Made in China 2025” are pretty clear. China wants to place itself on the global centre stage by 2050 powered by massive investments in both industrialized and developing economies. It may seem good news for everyone, including Europe. However, given the scale and nature of Chinese investment, it could bring EU open market system to a breaking point.
Initially, due to the financial crisis that left Europe with an estimated 330 billion EUR investment gap, Chinese investment was fondly welcomed. Spotting an opportunity, China has boosted its investments across Europe by 1,500% since 2010. Nevertheless, the risks of aggressive investment in technology and critical infrastructure sectors should not be underestimated.
Firstly, China’s massive cash investment focused on infrastructure projects in distressed European economies, with the crisis offering opportunities in Portugal, Greece, Italy and Spain (about 50% of all investments in 2015).
In recent years, China’s attention has also turned to northern Europe, targeting the technology sector. Europe is slowly beginning to wake up to this risk. The European Commission proposed a screening mechanism to sound the alarm bell on investments in sensitive sectors. However, a EU early warning system will not make up for the lack of national screening rules in Union’s states. In Japan, for example, large investments in sensitive sectors require finance ministry approval. Putting greater safeguards on foreign investment is not an attempt to distort the marketplace, but to protect the rules-based open trade system from abuse.
In 2013 the Belt and Road Initiative (BRI) was launched: a platform for China to develop infrastructure projects to connect Asia to Europe with the aim to facilitate Chinese access to the European market, to export China’s excess capital and labor, and to build its global power.
So far at least, China’s economic engagement in the region lags far behind its promises. Despite last year’s announcement of a 10 billion EUR investment fund for infrastructure projects in Central and Eastern Europe, most Chinese investment in Europe has been mainly directed to Europe’s four largest countries in the West: the United Kingdom, Germany, Italy, and France.
What is next?
Luca Masoero