In 2017, Chinese investments in Europe rose by 76% to reach $81 billion according to a survey published by the law firm Baker McKenzie, in collaboration with Rhodium Group. During the same period, investments fell in North America by 35% and only represented 30 billion dollars.
Although at global level 2017 marks an unprecedented decline in Chinese investments over the last decade – the total amount of transactions having fallen from $225 billion in 2016 to close to $138 billion in 2017 – it is still the best year for Europe.
“Due to the toughening of investment controls by the Chinese authorities, the market was waiting for certain clarifications. From mid-2017, once the regulations had been clearly explained, the activity started up again strongly” explains Anne Quenedey, partner at Baker McKenzie in Paris and Beijing.
EUROPE IS THE SPECIAL TARGET FOR CHINESE INVESTORS
Europe is thus the leading destination for Chinese investments in 2017, ahead of North America. For the second consecutive year, the Old Continent is leading the way as the preferred target for Chinese investors.
“The new One Belt One Road (OBOR) initiative by the Chinese government, which provides for the construction of roads, ports and railways in 65 countries for more than $1,000 billion, is boosting Chinese investments in Europe, particularly in the transport, logistics and infrastructure sector”, explains Guillaume Nataf, partner at Baker McKenzie.
This development should nonetheless be put into perspective to the extent that Europe’s lead over North America is due above all to the finalisation and postponement to 2017 of the “megadeal” worth $43 billion concluded between the Chinese chemical conglomerate, CHEMCHINA and Syngenta, a Swiss group specialising in the chemical and food industry.
Furthermore, China’s relations with the United States are becoming more complicated. On March 22 of this year, Donald Trump effectively announced the creation of customs tariffs on Chinese imports for $60 billion per year, following on from multiple declarations in 2017 against “China’s economic aggression”. These tensions allow Europe to consolidate its position as China’s special partner.
CHINA’S GROWING WEIGHT IN TOMORROW’S KEY SECTORS
Beyond developments in international business relations, Chinese enterprises are characterised by their strong activity in high growth sectors, such as tech, finance or distribution.
- Tech & telecoms: In this sector, some veritable Chinese giants are emerging such as Baidu, Alibaba, Tencent and Xiaomi (often called BATX, facing up to the American GAFAM). In addition, the Chinese government’s efforts to incite these tech companies to go public in China should stimulate the dynamics of this sector in 2018.
- Finance: Chinese enterprises should also draw a large part of the M&A activity in the financial sector between 2018 and 2020. Chinese finance and mobile payment players are beginning to appear on international markets, with a strong influence on the global financial sector: Alibaba recently made a bid for the American company Money Gram whereas Tencent – through its mobile payment offer WeChat Pay, which already has one billion clients in China – is developing on new markets thanks to various acquisitions and partnerships with payment services (such as Adyen, Citron or Airwallex).
- Distribution: Like with the development of mobile payment in China, the Chinese have a strong appetite for e-commerce and new consumer trends. “The rapid rise of players operating in this sector in China is linked to the increase in Chinese consumers’ purchasing power, associated with the considerable size of the domestic market. Thanks to the expected growth of e-commerce in China, companies will have the means to invest in Western markets”, underlines Alyssa Gallot-Auberger, partner at Baker McKenzie, in charge of the Consumer Goods & Retail sector. As a result, IPOs by Chinese players in the distribution sector have risen sharply – out of about $38 billion raised during IPOs in the sector in 2017 at international level, nearly $8 billion were raised in China, whilst out of the 10 biggest cross-border IPOs carried out in 2017, 6 involved Chinese businesses.