China's Overseas Investment in the European Union

Abstract

Chinese overseas investment is a new, and growing phenomenon. In the last decade, there have been exponential increases in how much direct investment is flowing from China, particularly into the resource sector. As the eurozone crisis has deepened since 2008, there has been continuing talk by political and business leaders of investment in Europe being a key target for Chinese companies. And yet, the amounts invested so far come to less than 5 percent of China's global overseas foreign direct investment (FDI) total. In the crucial determinants of Chinese FDI, the EU ranks low. There is therefore a good structural reason why, despite the ambitious talk of the Chinese coming to invest more in vital sectors in the EU, this is not happening at the moment and is not likely to happen until China develops into a middle income, more developed economy.

Keywords:

• China
• direct investment
• EU
• economy

Notes

¹ Godement et al., The Scramble for Europe.

² “2010 Statistical Bulletin of Chinese Outward Foreign Direct Investment”, http://hzs.mofcom.gov.cn/accessory/201109/1316069658609.pdf and UNCTAD, “World Investment Report 2011”, http://www.unctad-docs.org/files/UNCTAD-WIR2011-Full-en.pdf.

³ MOFCOM, “2009 Statistical Bulletin of China's Outward Foreign Direct Investment”.

⁴ “Streaks of Red”, The Economist, 2 July 2011, 56.

⁵ Buckley et al., “Determinants of Chinese Outward Direct Investment”, 503-7.

⁶ Clegg and Voss, “Chinese Inward Investment into the EU”.

⁷ Quoted in Brown, Rise of the Dragon, 168.

⁸ “Huawei Waits for White House Review before Selling Unit”, BBC News, 16 February 2011, http://www.bbc.co.uk/news/business-12461553.

⁹ Quoted in “Will China Buy the World: The Beijing Debate”, Wall Street Journal, 10 March 2009, http://blogs.wsj.com/chinarealtime/tag/wang-qishan/.

¹⁰ This issue is dealt with in Brown, “No Reverse Gear”, http://www.kerry-brown.co.uk/files/clsa_paper_final.pdf.

¹¹ This history is covered in Yang and Stoltenberg, “Growth of Made-in-China Multinationals”, 61-76. In fact, the Going Out policy was launched in 1999, though not formally endorsed as Party policy till 2002.

¹² See Brown, Rise of the Dragon, 180-1.

¹³ C.V. Nicholson, “Chinese Carmaker Geely Completes Acquisition of Volvo from Ford”, The New York Times, 2 August 2010, http://www.nytimes.com/2010/08/03/business/global/03volvo.html.

¹⁴ “Rover Sold to Nanjing Automobile”, BBC News, 23 July 2005, http://news.bbc.co.uk/1/hi/business/4708739.stm.

¹⁵ Studwell, The China Dream.

¹⁶ B. Schmitt, “The Importance of Geely's Volvo Purchase for the Chinese Auto Industry”, The Truth About Cars, 28 March 2010, http://www.thetruthaboutcars.com/2010/03/the-importance-of-geely%E2%80%99s-volvo-purchase-for-the-chinese-auto-industry/.

¹⁷ Ibid.; and “Geely Denies Financial Troubles Triggered by Volvo's Acquisition”, AutoNews, 17 November 2011, http://www.inautonews.com/geely-denies-financial-troubles-triggered-by-volvos-acquisition. Reports surfacing in November 2011, however, claimed that Geely was experiencing financial difficulties due to large sums owed to foreign investors arising directly from the Volvo purchase. These reports were denied by the company.

¹⁸ Quoted in Martin, China's Sovereign Wealth Fund, 5.

¹⁹ Quoted in D. Teather, “Washington Opposition Forces Chinese to Withdraw Oil Offer”, Guardian, 3 August 2005.

²⁰ C. Morris, “Could Chinese Investment Rescue Ailing Greece”, BBC News, 25 June 2011, http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/9520732.stm.

²¹ “China Invests ‘Billions of Euros’ in Debt-laden Greece”, Daily Telegraph, 15 June 2010, http://www.telegraph.co.uk/finance/7829889/China-invests-billions-of-euros-in-debt-laden-Greece.html.