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Chinese investment in Europe maintains downward trajectory

Last year was the second slowest year for Chinese investment since 2013

Chinese investment in Europe increased last year but remains on a downward trajectory, according to a new report from Rhodium Group and the Mercator Institute for China Studies.

The report, Chinese FDI in Europe 2021 Update, said that investment went from €7.9bn in 2020 to €10.6bn in 2021. This was, said the authors, driven by the €3.7bn acquisition of the Philips home appliance business by Hillhouse Capital and greenfield investment worth €3.3bn.

The authors wrote: “Still, 2021 was the second-lowest year (above only 2020) for China’s investment in Europe since 2013.”

Surprisingly, the Netherlands received the most Chinese investment, followed by Germany, France, and the UK. Those latter three countries apparently accounted for 39% of total Chinese investment. The nature of the investment is also shifting, becoming more focused on greenfield projects, which made up nearly a third of Chinese FDI in 2021. Meanwhile, venture capital from China doubled to a record level of €1.2bn, mostly concentrated in the UK and Germany.

State-owned enterprises losing interest in Europe?

At the same time, the share of Chinese state-owned investors fell to its lowest level in two decades in Europe.

The report’s authors wrote: “Compared with 2020, investment by state-owned enterprises (SOEs) decreased by 10%. Their share of total Chinese investment also reached its lowest point in 20 years, at 12%. SOE investment was concentrated in energy and infrastructure, particularly in southern Europe.”

The news comes a few weeks after Ernst & Young Germany said that the number of takeovers of Chinese origin within Europe rebounded last year.

Chinesische Unternehmenskäufe in Europa (Chinese Corporate Acquisitions in Europe), which came in March, said that the number of transactions increased between 2020 and 2021 from 132 to 155. Meanwhile, Ernst & Young said that the value of investments and acquisitions increased more than eightfold to $12.4bn from $1.5bn.

The firm also said that the favoured destination for Chinese investors in 2021 was the UK, pipping Germany by a single takeover. After just 21 deals in 2020, Chinese investors bought out 36 UK firms in 2021. In Germany, that figure rose from 28 to 35 over the same time period.

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