The Rise of Chinese Firms in Europe: Motives, Strategies and Implications
China’s success in attracting foreign direct investment (FDI) inflows has been well documented and the growing role of China in world trade in goods and services – driven in part by multinationals from neighbouring economies or from OECD countries – is now widely recognised. What is less apparent but with possibly greater long-term consequences for the competition faced by European firms is the growing presence of Chinese firms in Europe. Although outward direct investment (ODI) is still very much a developed country phenomenon (with developing countries accounting for a mere 17 per cent of global flows), ODI from the South is gaining ground in industrial economies, with China ranking among the most active outward investors, together with India and Brazil.
In Europe, the response to Chinese investment has been mixed, with variations both by host country and according to the type of investment. Chinese investors have been met on the one hand by economic nationalism (as had already been the case for Japanese and Korean firms in the past) and on the other by ad hoc initiatives and policies designed to attract them. This ambivalent stance suggests that the precise nature of these flows, as well as their impact, are still poorly understood.
Prima facie, the rise of Chinese investment in Europe differs from earlier waves of investment from the United States and later from Japan. Many Chinese firms are going abroad to become globally competitive rather than to exploit advantages developed at home. In this respect, they resemble in behaviour Korean multinationals more than they do either US or Japanese investors. While many Chinese investments in Africa and Latin America are seeking to secure energy resources, those into Europe or North America are more likely to be market or strategic asset- seeking. This new paradigm of multinational enterprise raises the question of whether the economic impact on Europe will be deeper than that of American and Japanese investment.
The purpose of this paper is to investigate the motives and strategies behind the outward expansion of Chinese firms, with a particular focus on their direct investments into Europe. The first section provides an overview of Chinese involvement worldwide. It surveys the trends and patterns of Chinese ODI as well as the role of public policies. The next section focuses on Chinese ODI in Europe, highlighting its magnitude and empirical characteristics (in terms of sector, form of investment, etc.) as compared to Chinese ODI in other regions of the world. The emphasis is further placed on the drivers behind the expansion of Chinese firms into Europe. The concluding section assesses the performance of Chinese firms in Europe and suggests possible implications of the rising Chinese presence for European host countries as well as for China.
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