Currencies, Emerging Markets, Stocks

While Greece Shakes Global Financial Markets, China Needs A Strong Euro As Its FDI Into Europe Has Been Growing Exponentially

China investment is pouring into Europe and that’s why it needs a strong euro and the Old Continent united as the latest Greek financial crisis may undermine its credibility.

China Europe

Chinese companies are buying European assets like crazy. It looks like Europe is a very popular destination for China’s large caps. This shift reflects a new trend from buying in emerging commodity exporting countries to advanced economies.

Here are some numbers by Bloomberg:

Annual investment by Chinese companies into European Union member states has surged from around zero in the mid 2000s to 14 billion euro in 2014, according to a new report by Rhodium Group and the Mercator Institute for China Studies. And it’s set to grow as China — with almost $4 trillion in foreign currency reserves and $21 trillion in savings — opens its capital account.

China FDI Outward

Courtesy of Bloomberg

Only between 2000 to 2014 there were more than 1,000 Chinese greenfield projects (including acquisitions) in the EU. Their total value was above 46 billion euro, Bloomberg reports.

Chinese tycoons are particularly interested in the following sectors:

  • food,
  • real estate,
  • energy
  • and automotive.
China FDI Europe

Courtesy of Bloomberg

According to Bloomberg:

The European investments are spread across the region with more than 50 percent having gone into the UK, Germany and France. Asset purchases in Portugal, Ireland, Italy, Greece, Spain and Cyprus have risen from 10 percent of the total before 2011 to over 30 percent between 2012 and 2014.

Courtesy of Bloomberg

Courtesy of Bloomberg

This hot cash influx from China is obviously very attractive for investment projects spread across Europe. However, European politicians will need to be more careful and balance what they say about China’s politics which will make their life even more difficult with respect of their policy approach towards both Russia and the U.S. Informally, China gradually takes Europe into economic hostage and this only confirms the old truth that money rule the world.

About ETFalpha

Chief ETF Strategist & Co-Founder at EMerging Equity


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