European FDI in China shows trend of resilience, report says

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European FDI in China shows trend of resilience, report says

A business report shows that foreign direct investment FDI from Europe to China is showing a trend of resilience with larger companies doubling down investment as the market environment becomes more competitive and with more firms spearheading localization strategies on a wide range of sectors, from supply chain to employee teams and administrative capacities. According to the report titled The Chosen Few: A Fresh Look at European FDI in China released by New York-based research firm Rhodium Group on Friday, European FDI into China has been resilient in volume and is focused on such sectors as automotive, food processing, pharmaceutical and biotechnology, chemicals and manufacturing, which will be a hotspot for investment during 2018 to 2021. The concentration is also manifested in the portfolio of investors and source of countries. The top 10 European investors, for example, accounted for 71 percent of the annual FDI transaction volume between 2000 and 2021, and four economies in the continents Germany, the UK, France and the Netherlands, together representing 89 percent of European FDI in China during the same period. In the first eight months of 2022, EU companies investment in the world's second largest economy went stratospheric because of the bullish momentum built in the past years. According to data released by China's Ministry of Commerce on Thursday, EU FDI inflow into China increased by an astonishing 123.7 percent year-on-year from January to August. The construction of new plants by German multinational chemical company BASF in Zhanjiang, South China's Guangdong province is part of the rosy data. The site, with a total investment of 10 billion euro $10 billion, will be the largest single investment by a German enterprise in China. Most of the major investors in the Chinese market are large international companies, and many of them have a long experience in China, so they feel comfortable investing, re-investing and doubling down on the market, said Agatha Kratz, a director at Rhodium Group who leads the China corporate advisory team at an online report launch event hosted by the EU Chamber of Commerce in China. She said that a lot of investors are scaling up through greenfield investment. The Chinese market is under increasing competition pressure, and a host of European enterprises are speeding up localization strategies as a result of policies and growing geopolitical risks, according to Kratz. The president of the EUCCC, J Rg Wuttke, told the Global Times that the European businesses hope they can do more given the size of the Chinese economy and its potential.