Europe's crisis is China's opportunity
By Antonaeta Becker
LONDON - When China designed the 2010 Universal Expo in Shanghai as a showcase
for its new public diplomacy, it probably did not envision the exhibition would
play a much bigger role as a magnet for recession-hit European businesses.
A series of trade missions has traveled to Shanghai in the past two months,
wooing Chinese investors in an attempt to boost Europe's weakened economies.
The Belgian trade mission was among the first to visit, hoping to persuade
Chinese car manufacturer Geely to add beleaguered Opel Antwerp to its
collection of European acquisitions, such as Volvo.
Then Greek Economy Minister Louka Katseli used the Expo to
hail China's commitment to inject billions of dollars into the country's
debt-ridden economy and to invite Chinese companies to set up businesses in
Greece. Earlier, Romanian business envoys discussed with Chinese bankers and
investors a series of projects to allow Chinese money to flow in and buoy up
the country's struggling industries.
"If China had wanted to go into Greece in such a big way before, Greek
politicians and the public may have objected, using the pretext of these
standards and those requirements but because of the sovereign debt crisis the
situation has changed," says Lu Feng, researcher with the National School of
Development at Beijing University. "The European crisis has brought some
definite opportunities for Chinese investors."
Beijing's response has been quick and bold. Chinese Vice Premier Zhang Dejiang
signed 14 deals worth several billion euros during his visit to Athens this
month. The investment package, reportedly the biggest by China in Europe, will
enable Chinese corporations to secure controlling stakes in major
telecommunications, real estate and shipping organizations.
China's aggressive foray came at the same time as credit rating agencies were
downgrading Greek bonds to junk status. Commerce Minister Chen Deming said
Beijing would encourage Chinese companies to invest in Greece.
Cosco, China's powerful shipping group, has pledged to proceed with plans to
build a new container-handling terminal at Piraeus port - Greece's biggest. The
company intends to turn Piraeus into a regional entry hub for Chinese goods and
commodities.
"This is a strategic investment on our part and the sovereign debt crisis will
not affect the project," Wei Jiafu, president of Cosco told China's 21st
Century Business Herald newspaper.
Initial fears that the European crisis may give rise to protectionist
sentiments in some of the affected countries have not materialized. Greece is
not the only EU member looking to tap Chinese money to bolster its economy.
Ireland's business community is said to be working on obtaining an approval for
a 50 million euro (US$61 million) project to create a Chinese manufacturing hub
in Athlone, central Ireland.
The attractions for Chinese investors in the Athlone project are numerous. A
manufacturing center operated inside the euro zone will bypass a range of
tariffs and quotas levied by the EU on imported Chinese goods while benefiting
from a developed infrastructure network and low corporate tax rates.
While the sovereign debt crisis has triggered a plunge in the value of the
euro, which has made Chinese exports to the zone more expensive, it has also
brought some advantages to investors.
"The slide of the euro has slashed business operation costs in Europe and has
made investing there much more attractive to Chinese businesses," says Zhou
Jizhong, professor at the Shanghai University of Finance.
Before the crisis China has made only modest investments in European states.
The Chinese "feared the business environment here is too hostile and that there
are too many regulatory aspects they are not familiar with", says Duncan
Freeman, senior research fellow at the Brussels Institute of Contemporary China
Studies. "They have had some spectacular failures before as with TCL's takeover
of French electronics firm Thomson, which went bankrupt."
Individual Chinese businesses have been coy about making inroads into European
markets, preferring to enter under the umbrella of bigger economic entities.
The Shanghai economic partnership with Hamburg has been one of the few
successful examples of Chinese investment in Europe on a larger scale.
Chinese mergers and acquisitions in Europe have grown in proportion with the
rise of Chinese investments globally. Chinese investments into foreign
companies are projected to exceed $35 billion this year, driven by big
purchases within the resource sector.
In March, 13-year-old Chinese carmaker Geely paid $1.8 billion for Ford's
ailing Volvo unit. The deal was the largest acquisition of an overseas carmaker
by a Chinese company and the first time China had acquired a major luxury
brand.
In Sweden - Volvo's homeland - the acquisition triggered some negative comments
in the media about China encroaching on European icons, but that did not stop
the Belgians from courting (unsuccessfully) Chinese investment to rescue Opel
Antwerp.
Chinese observers believe that by deploying hard currency to buy assets in
depressed European markets China is getting more than just favorable deals.
They argue China is setting an example of a responsible global player helping
Europe ride out the crisis through its increased consumption of European goods.
The plunge in the euro has made European goods cheaper in China, resulting in a
jump in EU exports to China. In the first quarter of 2010 European exports to
China grew 47.3%, reversing a long-standing trend of soaring imports from
China.
"We have not been sitting idly as the crisis in Europe has unfolded," said Lu
Feng. "We have bought more cars from Germany and more goods from other European
countries. We have created demand much-needed in Europe."
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