Chinese language outbound investments fell to an eight-year low in 2022. The decline is particularly steep in Europe: Chinese language international direct funding (FDI) within the 27 EU member states and the UK plunged to a decade low, in line with information compiled in a brand new report by the consultancy Rhodium Group and the German assume tank Mercator Institute for China Research (MERICS).
However that doesn’t imply China has taken its eyes off of Europe. Whereas the drop in Chinese language FDI in Europe was largely pushed by a lethargy in Chinese language mergers and acquisitions (M&A), greenfield investments by Chinese language corporations have remained comparatively steady. And, for the primary time since 2008, the worth of Chinese language greenfield investments have exceeded that of M&A flows.
EV battery vegetation are driving Chinese language funding in Europe
The rise in greenfield investments was primarily pushed by a number of large-scale initiatives by Chinese language battery giants to construct factories in Germany, Hungary, the UK, and France. Final yr, for instance, main Chinese language battery makers together with CATL and Svolt introduced main expansions of their European manufacturing capability.
“Europe has change into a key a part of China’s international electrical automobile enlargement,” the Rhodium report discovered. “Battery investments at the moment are the mainstay of Chinese language funding in Europe.”
For Europe, these come as a double-edged sword. The ramp-up in EV and battery manufacturing capability will assist the bloc meet surging demand for electrical vehicles and ultimately section out inner combustion engines. Nevertheless it additionally deepens Europe’s dependence on Chinese language know-how and manufacturing, even because the EU works to construct its personal battery provide chain.
China is witnessing a “magnificent transition” in its auto trade
In the meantime, Beijing is celebrating the rise of its EV and battery trade as a vindication of the previous decade’s industrial insurance policies focused on the home automotive sector. That the EU is welcoming battery vegetation constructed by Chinese language firms is seen as an indication that Chinese language automakers have overtaken legacy incumbents like Volkswagen and Mercedes-Benz.
China’s auto trade, the state-run Folks’s Each day stated in an editorial final month (hyperlink in Chinese language), has “overtaken on the bend” and is making a “magnificent transition” from “utilizing its market in trade for know-how, to utilizing know-how in trade for market.”