Chinese investors prefer Europe to North America. This is the conclusion of the new edition of the “China Foreign Direct Investment” report drawn up by the international business law firm, Baker McKenzie, in collaboration with Rhodium Group. This study estimates that Chinese FDI activity on these two markets in 2017 represented a total of $111 billion.
This investment was made in Europe in 2017, to the detriment of the North American market which recorded a 35% drop in Chinese FDI, with only $30 billion in 2017. Over the same period, Chinese FDI in Europe rose by 76% to reach $81 billion. Switzerland, the United Kingdom and the Netherlands are the most popular destinations for Chinese investors in Europe. France comes in fifth position on the continent, with $1 billion in 2017 (compared to $2.4 billion in 2016).
Record FDI in europe thanks to mega deals concluded in 2016
The record amount of Chinese FDI in Europe is principally due to the reported completion of a mega deal worth $43 billion concluded between the Chinese chemicals conglomerate, CHEMCHINA and Syngenta, a Swiss agribusiness that produces agrochemicals. Although the number of international deals rose by 6% to reach 350 operations in 2017, more than half of these deals merely result from the completion of transactions announced in 2016.
“The Chinese government’s new “One Belt One Road (OBOR)” initiative provides for the construction of roads, ports and railways in 65 countries for more than $1,000 billion. This massive expansion project, which aims to reinforce exchanges between China and the rest of the world, has boosted Chinese FDI in Europe in the sector of transport, logistics and infrastructure. FDI rose from one billion dollars in 2015 to more than $16 billion in 2017, in particular thanks to the acquisition by China Investment Corporation of Logicor Europe from Blackstone for $12.5 billion” explained Guillaume Nataf, partner at Baker McKenzie.
Economic slump in the number of operations with china in 2017
Yet the number of deals announced in 2017 was down compared to 2016. In Europe, 133 deals were announced in 2017 compared to 245 in 2016. North America faced an even greater drop in the number of deals signed in partnership with Chinese businesses, with 78 deals in 2017 compared to 315 in 2016. The uncertainty regarding regulatory policies seems to have weighted heavily on development prospects abroad for Chinese companies.
The tightening of controls by the Chinese authorities effectively explains the unusual number of operations cancelled during the first half of 2016 and the beginning of the year 2017. However, the restoration of investor confidence during the course of the year led to a reduction in the number of operations cancelled in 2017 (19 operations cancelled, for a value of $12 billion, compared to 30 operations in 2016, for a total of $75 billion).
“The dynamism of operations involving Chinese investors lost considerable momentum starting from the 3rd quarter of 2016 until the first half of 2017. At the time, the market was awaiting certain clarifications. Now that certain rules relating to investments in China and outside China have been clarified, the activity is once again rising sharply. To such an extent that despite everything, 2017 is still the second best year for the North America zone and the best year for Europe”, concluded Anne Quenedey, partner at Baker McKenzie.