Europe’s investment in China limited

According to a recent analysis by the research firm Rhodium Group, European investment in China is becoming more concentrated, with a few large corporations, mainly from Germany, increasing their stakes while hardly any new players attempt to enter the market.

A third of all European investment into China from 2018 to 2021 was made by the three major German automakers, Volkswagen, BMW, and Daimler, as well as chemicals company BASF, the research states.

Over those four years, foreign direct investment (FDI) from all of Germany, where former Chancellor Angela Merkel actively promoted and assisted businesses to enter the Chinese market, totalled 43%, up from 34% in the previous decade.

The decision by Germany’s new government to lessen reliance on China was influenced by growing concerns about the Communist Party’s tightening control over Chinese society and the economy. Ironically, it is these indications of geopolitical unrest that are causing some businesses to boost their investment in China in order to localise their supply chains and workforce and thereby ringfence their markets.

“European investment has grown much more concentrated, both in terms of the companies that are investing there, the countries they come from, and the sectors in which they operate,” the authors wrote.

Based on the survey, 87 percent of investments were made in Germany, the Netherlands, Britain, and France over the past four years as opposed to 69 percent over the previous ten years. In comparison to 57 percent in 2008-2012 and 65 percent in 2013-2017, five industries—automotive, food processing, pharmaceuticals/biotech, chemicals, and manufacturing of consumer products—now account for about 70 percent of all FDI.

According to the research, local stakeholders claim that since the pandemic’s outbreak, hardly any new European investors have made direct investments in the nation.