Along with the deepening of globalization, the entire world sees an unprecedented booming expansion of Foreign Direct Investment (FDI). FDI has become a crucial factor for the strategic development of enterprises all over the world. In the recent 30 years, many Chinese enterprises have started to realize the importance of international markets and foreign investment opportunities. In the meantime, the increasing FDI has also enabled Chinese enterprises to further internationalize themselves and consequently they start to participate in overseas investment operations. The most important economic integration in the world, European Union, is now beginning to attract the attention of Chinese investors.
According to the “2009 Statistical Bulletin of China’s Outward Foreign Direct Investment”, which is issued jointly by the Chinese Ministry of Commerce, National Bureau of Statistics, and State Administration of Foreign Exchange (SAFE), by the end of 2009, 12,000 Chinese enterprises have engaged in investment projects in over 13,000 foreign firms in 177 countries around the globe. The net outflow of Chinese FDI is 245, 75 billion US dollars, and the total value of overseas assets has gone beyond 1 trillion dollars.
As is shown in Table 1-1, the proportion of China’s FDI (non-financial) to EU is not
high in the total amount. But we could still see a general trend of upward growth.
Table 1-1 Non-financial direct investment of China, net amount (Billion USD).
2004-2009
FDI Flow FDI Stock
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 China’s
Total FDI
5.5 12.3 17.6 26.5 55.9 56.5 44.8 57.2 75.0 120.0 184.0 245.8
China’s FDI to EU
0.16 0.40 0.60 1.54 0.88 2.97 0.68 1.27 2.27 4.46 5.13 6.28
Source: 2004-2009 Statistical Bulletin of China’s Outward Foreign Direct Investment
This paper takes European Union as the study target market for China’s FDI operations.
Currently EU has 27 member states. The term new EU member states used in this paper refers to countries which joined EU in the EU enlargement in 2004 and after, namely Malta, Cyprus, Estonia, Latvia, Lithuania, Poland, Czech, Slovakia, Slovenia, Hungary, Bulgaria and Romania. The term old EU member states used in this paper refers to countries which are already members of EU before 2004 enlargement, including Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and UK. Statistics of recent years indicates that China’s FDI to EU mainly concentrate in European traditional powers, such as Germany, UK and France.
Source: 2009 Statistical Bulletin of China’s Outward Foreign Direct Investment
Source: 2009 Statistical Bulletin of China’s Outward Foreign Direct Investment 2270.49
192.17 179.21 101.45 59.86 46.05 45.19 23.62 20.99 15.6 0
Chart 1-2 Top 10 EU Member States of Flow Amount of FDI from China in 2009 (Million USD)
Flow Amount of FDI from China in 2009 (Million USD)
2484.38
1082.24 1028.28
335.87 221.03 205.23 191.68 120.3 111.89 106.82 0
Chart 1-3 Top 10 EU Member States of Stock Amount of FDI from China in 2009 (Million USD)
Stock Amount of FDI from China in 2009 (Million USD)
In 2009, the inflow FDI of Luxembourg reached 88 billion Euros, accounting for 40% of the EU member statestotal FDI inflow of the year. UK and France follow behind with shares of 15% and 5% respectively.
The lion share of Luxembourg owes to its important role as a financial intermediary in international investment transactions.1
1 Source: Eurostat, Statistical Office of the European Commission
From chart 1-2 and 1-3, we could see that China’s FDI to Europe still concentrates mainly in traditional European powers. Old EU members account for the majority in both China’s FDI flows (9 out of 10) and stocks (9 out of 10) rankings. Moreover, an overlapping part, which consists of seven countries (Luxembourg, UK, Germany, Netherlands, France,Spain, and Italy), can be easily noticed. On the contrary, China’s investment toward new EU members still remains at the beginning stage. Although the amount of overall investment in Czech hasreached 15 million US dollars, the size of FDI to other new EU members does not see a significant growth. New EU members will sooner or later become a target region of great potential and opportunities for Chinese investors.
From the current statistics, China’s FDI in EU has a strong feature of industry concentration but with a trend of becoming diverse. Trade and other commercial service, transportation, and finance are China’s three investment focuses in EU. Some investment projects also take place in other industries like mining industry, high-tech industry, and process manufacturing industry. At present, although FDI from China has not been involved in industries with far ranges, those industries mentioned above turned out to be wise choices where advantages of enterprises of both host country and China are closely combined together.
Source: 2009 Statistical Bulletin of China’s Outward Foreign Direct Investment
About the composition of the investors, as is shown in chart 1-4, we could clearly see that state-owned enterprises are the main body of the investors in the case of China, which accounts for 69.2% of the entire amount of FDI stocks. For instance, in the transportation industry, Chinese state-owned enterprises, like China Ocean Shipping Company (COSCO), China Shipping Company, China National Aviation Holding Company (CNAH) and etc., have not only established branches and wholly owned subsidiaries in Germany, UK, Greece, Italy, Austria and Netherlands, but also begun to seek for opportunities of merger with companies in the host country. If we look at the financial sector, major investors are composed of state-owned commercial banks and
69.2
Chart 1-4 Investing Body Structure of China's Non-financial FDI Stock by the end of 2009 (%)
insurance companies. All of the four major Chinese commercial banks (Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China) have investments in EU.