According to a new study, Chinese companies are expected to triple their foreign assets over the next five years, with Europe being in the center of the thrust. The authors urge governments to adapt to the situation.
Boosted by more than a decade of double-digit growth rates, the war chests of Chinese companies and state authorities are bulging, as they look increasingly for sizeable returns abroad.
According to an in-depth study by the Mercator Institute for China Studies (MERICS) in collaboration with Rhodium Group, China's foreign assets are expected to triple over the next five years, from a current total of $6.4 trillion (5.7 trillion euros) to $20 trillion by 2020.
The study released on Friday found that China's annual Outbound Foreign Direct Investment (OFDI) in the European Union has risen from virtually nothing in the mid-2000s to 14 billion euros in 2014. During this period, companies from the Middle Kingdom invested in more than 1,000 greenfield projects in the EU and acquired assets worth over 46 billion euros.
The report also said Chinese companies are increasingly investing in real estate, technology, brands and other assets in advanced economies - a shift from a previous focus in natural resources in developing countries.
Modern technology sought
In Europe, the United Kingdom was the largest recipient of Chinese investments, with greenfield and merger transactions totaling 12.2 billion euros between 2000 and 2014. Germany came in second at 6.8 billion euros, followed by France with 5.9 billion euros.
About 13 billion euros were spent by China on investments in Europe's energy sector, notably on utilities, fossil fuel assets and renewable energy projects. The Chinese have also set their sights on advanced manufacturing, including 6 billion euros worth of investments in the automotive industry, 4 billion euros in machinery and 3 billion euros in information and communications technology.
Although seeing rapid growth in the past two years, two sectors that have not been on the radar of Chinese companies include agriculture and food, as well as commercial real estate.
Special interests elicit concerns
The study notes that China's investment boom will provide benefits for Europe, as many countries are lacking capital for urgently needed investment due to the debt crisis. At the same time, however, the authors say China's authoritarian political system and lack of openness are reasons for concern.
"The highest priority is to conclude a robust bilateral investment agreement that addresses the existing asymmetries," the report said.
It concluded that European leaders need to "react if the structural economic reforms promised by Beijing to address subsidies and other non-market elements that distort global competition happen slower than required."
China has pledged to deepen economic reforms and ease market access for private investment during a meeting of its main legislative body in March. A partnership and cooperation agreement between China and the EU is currently under negotiation.
uhe/cjc (dpa, MERICS)