European foreign direct investment in China was significantly increased in the 1st quarter of 2015 according to the report of the China-EU Monitor by Rhodium Group. European companies’ spending on Foreign Direct Investment (FDI) transactions in China fluctuated between $1-3 billion per quarter in past two years. In the first quarter of 2015 Rhodium Group recorded the highest level of investment in two years ($3.4 billion). 18 new greenfield projects worth of $1 billion constitute an example. They include three new plants by Volkswagen and two factories by Renault. The biggest deals were Volvo AB’s 45% stake in Dongfeng Commercial Vehicles for $670 million and Royal FrieslandCampina’s $101 million investment in a Huishan Dairy plant in connection with a new baby formula joint venture.
Although Germany had emerged as the most important driving force of European FDI into China in recent quarters, it was surpassed by France in the first quarter of 2015 because of several large deals by French companies. Sweden, Austria, and the Netherlands were also significant sources of FDI for China. Sectors with historically strong European interest such as automotive and chemicals dominated investment. At the same time consumer goods and service sectors are receiving growing interest from European multinationals. Investment in the food industry alone reached $663 million in Q1, including Danone’s $490 million acquisition of a 25% stake in dairy giant Yashili. Health and biotech received $360 million in total investment, including JLT’s investment in Essential Healthcare Network.
After reaching an all-time high of $18 billion in 2014, Chinese FDI transactions in the EU were off a strong start in 2015 as well. 16 greenfield projects ($370 million) and nine acquisitions ($3.1 billion), for a total value of $3.5 billion are counted. While investment in past quarters mostly targeted energy and food assets, the focus in Q1 was clearly services. Investment in hotels and hospitality added up to $2.1 billion, including Fosun’s acquisition of Club Med ($527 million) and Shanghai Jin Jiang’ investment in Louvre Hotels ($1.5 billion). Real estate was the second largest sector, primarily through a $495 million investment by Ping An Insurance in London’s Tower Place.
The UK, Germany and France have emerged as the top three recipients of Chinese investment in recent quarters. In Q1, France was by far the largest recipient because of two major hospitality investments. The UK came in second due to Ping An’s real estate investment, and Germany was ranked third.
Konstantinos Papanicolaou
