Chinese investment in Europe drops, except for EV-batteries
CHINESE investment in Europe plunged by more than a fifth last year to a decade low as a shift towards greenfield investments in electric-vehicle (EV) batteries only partially offset a steep decline in mergers and acquisitions, a survey showed.
Foreign direct investment in Europe from China sank to 7.9 billion euros (S$11.5 billion), a 22 per cent decline from the previous year, according to a report published on Tuesday (May 9) by the Berlin-based Mercator Institute for China Studies and New York-based Rhodium Group. It was the first year that greenfield investments, which increased by 53 per cent, outpaced deals.
A range of factors contributed to the plunge, the authors said, including rising interest rates, growing strategic risks linked to Russia’s invasion of Ukraine, China’s constraints on capital outflows and Beijing’s zero-Covid strategy, which was in place for most of 2022. Globally, China’s investment activities fell 23 per cent.
In Europe, nearly 90 per cent of the investment flowed to just four countries: Britain, France, Germany and Hungary. Each received major greenfield investments by Chinese battery makers, which are expected to dominate the industry in Europe.
Rhodium Group director Agatha Kratz said there is a “major shift” in how Chinese companies are investing in Europe.
“After years where investment volumes were driven by acquisitions, they are now being dominated by greenfield investments, above all in battery plants,” Kratz said. “Chinese firms are ploughing billions into the electric-vehicle supply chain in Europe. They have become major players in Europe’s green transition.”
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Contemporary Amperex Technology, the world’s biggest cell manufacturer, this year started output at its first European plant in eastern Germany and it’s adding a 7.3 billion euros facility in Hungary with Mercedes-Benz and Volkswagen among its customers. Chinese-owned Envision AESC plans to build battery plants in Spain and France, and EVE Energy, BMW’s second supplier for cells produced in Europe, has bought land in Hungary.
Chinese battery maker SVolt Energy Technology is set to expand its footprint in Europe to as many as five factories, with talks to supply the region’s carmakers well underway.
Max Zenglein, chief economist at MERICS, said the changing investment patterns underline the competitiveness of Chinese companies, particularly in EVs.
“Greenfield investments also face less regulatory scrutiny as acquisitions in critical infrastructure or the tech sector are more contested,” Zenglein said.
The authors said that the end of China’s zero-Covid policy could boost Chinese outbound investment in 2023, but uncertainties about the economic outlook and geopolitical pressures make a rebound to mid-2010 levels unlikely. BLOOMBERG
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