For more than a decade, Chinese political and corporate leaders have been scouring the globe with seemingly bottomless wallets in hand. From Asia to Africa, the U.S. and Latin America, the results are hard to ignore as China has asserted itself as an emerging world power. Less well known is China’s diffuse but expanding footprint in Europe.
Bloomberg has crunched the numbers to compile the most comprehensive audit to date of China’s presence in Europe. It shows that China has bought or invested in assets amounting to at least $318 billion over the past 10 years. The continent saw roughly 45 percent more China-related activity than the U.S. during this period, in dollar terms, according to available data.
The volume and nature of some of these investments, from critical infrastructure in eastern and southern Europe to high-tech companies in the west, have raised a red flag at the European Union level.
Leaders that include German Chancellor Angela Merkel and French President Emmanuel Macron are pressing for a common strategy to handle China’s relentless advance into Europe, with some opposition from the EU’s periphery.
Many of the EU countries in favor of establishing a screening process for foreign deals already have a high number of Chinese investments themselves.
We analyzed data for 678 completed or pending deals in 30 countries since 2008 for which financial terms were released, and found that Chinese state-backed and private companies have been involved in deals worth at least $255 billion across the European continent. Approximately 360 companies have been taken over, from Italian tire maker Pirelli & C. SpA to Irish aircraft leasing company Avolon Holdings Ltd., while Chinese entities also partially or wholly own at least four airports, six seaports, wind farms in at least nine countries and 13 professional soccer teams.
Importantly, the available figures underestimate the true size and scope of China’s ambitions in Europe. They notably exclude 355 mergers, investments and joint ventures—the primary types of deals examined here—for which terms were not disclosed. Bloomberg estimates or reporting on a dozen of the higher-profile deals among this group suggest an additional total value of $13.3 billion. Also not included: greenfield developments or stock-market operations totaling at least $40 billion, as compiled by researchers at the American Enterprise Institute and the European Council on Foreign Relations, plus a $9 billion stake in Mercedes-Benz parent company Daimler AG by Zhejiang Geely Holding Group Co. chairman Li Shufu reported by Bloomberg.
Nowhere is China’s buying spree more evident than in the British capital, where it has gobbled up around a dozen office towers in the City of London and Canary Wharf financial districts.
2016 was by far the biggest year for Chinese dealmaking in Europe, when China National Chemical Corp., also known as ChemChina, announced it would purchase Swiss pesticide maker Syngenta AG for $46.3 billion. (For the purposes of this analysis and the following graphic, Bloomberg looked at the announcement dates of deals. The Syngenta takeover, for instance, was finalized only in January 2018.)
Excluding the sizable increase produced by the Syngenta megadeal, there is a clear upward trend in recent years, with less than $20 billion in relevant investments annually prior to 2014 but more than that in each year since. And yet the average size of deals for which financial information is available looks to have fallen. In 2008 and 2009, the average deal was worth almost $740 million, compared to a little more than $290 million for 2016 and 2017 (when discounting ChemChina-Syngenta). So far this year, the average deal is clocking in at $127 million.
More than half of the known investment total is concentrated in Europe’s five largest economies: The Chinese have participated in deals worth $70 billion in the U.K. alone. But it is at the periphery where China has made some of its biggest infrastructure plays, such as purchasing Greece’s largest port, in Piraeus. There’s also an important core-periphery divide when it comes to Europe’s openness to Chinese investment. At the same time that Germany, France and Italy are pushing for an EU-wide investment screening mechanism, governments in Greece, Portugal and Cyprus are skeptical of such a move, saying it would hamper their countries’ ability to attract much-needed capital.
The money will flow to where it is most welcome. Until a European review mechanism is put in—the U.S. has one, Australia has one—Europe is likely to win the lion’s share of Chinese investment. I expect a move in Europe to regulate Chinese investment, but right now it is the number one destination.—Derek Scissors, China researcher at the American Enterprise Institute
Whether it’s buying up London commercial real estate, German technology companies such as industrial robot maker Kuka AG, Scandinavian carmakers like Volvo Personvagnar AB, or such energy producers as Switzerland’s Addax Petroleum Corp., Chinese investments have clustered in a few key industries.
A consortium led by Shandong Hi-speed Co., a Chinese infrastructure-management company, purchased a stake in France's Toulouse-Blagnac airport in 2015.
Knowing who is doing all this buying is crucial to understand how such activity fits into China’s official and unofficial foreign policy aims. In all, more than 670 Chinese or qualifying Hong Kong-based entities have invested in Europe since 2008. (Assets invested in or bought by Hong Kong entities without significant ties to mainland China are excluded from this analysis.) Of those, almost 100 are state-backed companies or investment funds, which collectively had a hand in transactions worth at least $162 billion, or 63 percent of the total reported deal value, as compiled by Bloomberg.
Yet the line between state and private enterprises is far more blurred in China than in Europe: The Cosco group of companies, which is challenging Europe’s domination in container shipping, consists of publicly traded branches of state-owned China Ocean Shipping Group Co., and has bought stakes in, or operate in, ports from the Bosphorus to the Baltic Sea. Eight of the 10 largest acquirers we identified were state-owned or -backed, including China Investment Corp. (a sovereign wealth fund), Aluminum Corp. of China Ltd., and Silk Road Fund Co. (a sovereign wealth fund connected to China’s Belt and Road Initiative).
There is no backroom deal; everything is transparent. There is no ‘winner takes all’, but every project delivers win-win results.—Wang Yi, China’s foreign minister, in March
State-backed enterprises dominated Chinese mergers and investments in Europe over the past decade
The picture of China’s financial interests in Europe wouldn’t be complete without taking a look at two additional types of transactions: large stock purchases on the open market, such as Ping An Insurance Group Co. of China Ltd.’s $10 billion stake in bank HSBC Holdings Plc, and greenfield developments, or construction projects on previously undeveloped or underutilized land.
Bloomberg’s analysis of data from Derek Scissors, a China expert at the American Enterprise Institute, plus research conducted by the European Council on Foreign Relations (ECFR) identified at least nine large greenfield projects, mostly in the London area. The exceptions: the $24 billion Hinkley Point C nuclear power station, of which China is funding one-third, and a massive $3.4 billion mall outside Paris that Chinese real estate developer Dalian Wanda Group Co. is pursuing alongside French supermarket chain Auchan Holding SA.
The U.K.'s $24 billion Hinkley Point C nuclear power plant is one-third funded by state-owned China General Nuclear Power Corp.
Looking ahead, Chinese companies have expressed interest in a slew of European deals that haven’t been officially announced yet, based on Bloomberg data and reporting, as well as a recent ECFR report. These include building nuclear reactors in Romania and Bulgaria, buying a Croatian container terminal and building a Swedish port, taking over Czech carmaker Skoda Transportation AS and an Ireland-based oil and gas producer, investing in French ski-lift firm Compagnie des Alpes and a German electricity grid operator and providing financing for a bridge in Croatia and a Budapest-Belgrade rail link.