Mainland firms to increase investment in Europe

Chinese companies looking to gain technology and expertise to improve competitiveness

PUBLISHED : Friday, 01 February, 2013, 12:00am
UPDATED : Friday, 01 February, 2013, 5:22am

Nearly all the mainland companies in a survey said they would increase investment in European Union countries in the foreseeable future, in spite of difficulties including higher labour costs.

Of 74 companies that have invested in the 27-nation bloc, 97 per cent plan to make additional investments in the near future, according to a report released yesterday by the EU Chamber of Commerce in China, KPMG and Roland Berger Strategy Consultants.

Foreign investment in the EU fell 35 per cent last year from 2011, according to a United Nations report released last week.

Investment from the mainland in the bloc dropped nearly 21 per cent year on year in the first 10 months of last year, Ministry of Commerce data showed.

"Chinese companies are looking to further engage in mergers and acquisitions to serve the European market and acquire technology, brands and expertise to improve competitiveness," said Davide Cucino, the president of the European chamber.

Outbound investment from the mainland has soared since 2005 as firms have been encouraged by the central government to acquire technology and resources overseas.

Deals signed last year included State Grid's €387 million (HK$4.07 billion) acquisition of a 25 per cent stake in the national electricity grid of debt-stricken Portugal and the acquisition of German concrete pump supplier Putzmeister by Sany Heavy Industry, China's biggest machinery maker.

The European operating environment was not, however, regarded as particularly easy to navigate, Cucino said.

About 78 per cent of the respondents said they had encountered "operational obstacles" - from difficulty obtaining visas and work permits for Chinese employees to problems dealing with European labour laws.

Understanding the EU market was also a key concern, given the lack of uniform legislation in the 27 member states with 23 official languages, the firms said.

Chinese companies seeking to invest in Europe said they found its business environment less welcoming than in Africa, the Middle East and Latin America.

Liu Wenbo, a senior partner at Roland Berger, said: "Chinese companies used to start with emerging countries to gain experience of operating overseas before tapping into developed countries."

The survey was conducted between August and November among state-owned enterprises and private companies that had invested in an EU country.

In 2011, direct investment in the EU from China was €3.2 billion, accounting for 1.4 per cent of total foreign investment in the region, while the EU accounted for 20 per cent of foreign direct investment in China, according to the European Commission.