FDI into China from Europe shows ‘resilience’: report
Investment defies decoupling calls, underscores ties
Foreign direct investment (FDI) from Europe into China is showing a trend of resilience, with larger companies doubling down on investment as the market environment becomes more competitive and with more firms spearheading localization strategies in a wide range of sectors ranging from supply chain to employee teams and administrative capacities, a business report showed.
Observers said the report underscores indispensable and strengthened economic ties between China and Europe, which defies decoupling calls in Brussels and some discord in bilateral relations. The importance of the Chinese market to European firms could grow further, they said, given the country’s standing as the world’s largest manufacturing powerhouse and its resilient supply chain, which has withstood the test of three years of disruption from the pandemic.
Also, as rising geopolitical tensions and runaway energy costs lapsed into growing anxiety among European companies over “de-industrialization” in the European continent, a host of European companies have been considering supply chain relocation. China could be one of the most promising destinations, analysts said, predicting that certain energy-intensive and manufacturing sectors will continue to record stellar FDI inflow in the coming years.
According to the report titled “The Chosen Few: A Fresh Look at European FDI in China” released by New Yorkbased research firm Rhodium Group, European FDI into China has been resilient in terms of volume, and is concentrated in such sectors as automotive, food processing, pharmaceutical and biotechnology, chemicals and manufacturing, becoming a hotspot for investment from 2018 to 2021.
This concentration is also demonstrated in the portfolio of investors and source of countries. For example, the top 10 European investors accounted for 71 percent of the annual FDI transaction volume between 2000 and 2021, and four economies in the continent – Germany, the UK, France and the Netherlands – jointly represented 89 percent of European FDI in China during the same period.
Riding on the bullish momentum built over the past years, EU companies’ investment in the world’s secondlargest economy also soared in the first eight months of 2022. According to data released by China’s Ministry of Commerce on Thursday, EU’s FDI inflow into China jumped an astonishing 123.7 percent year-on-year from January to August.
The rosy data is partly fueled by the construction of new plants by German multinational chemical company BASF in Zhanjiang, South China’s Guangdong Province. The site, with a total investment of 10 billion euros ($10 billion), will be the largest single investment by a German enterprise in China.