[In 2010,
the most recent year for which data is available, Chinese direct investment in
the 27 European Union countries totaled 900 million euros, or about $1.2
billion at the current exchange rate. That was only a fraction of the 28.5
billion euros ($38 billion) of American direct investment in Europe . But
it was three times China’s level of only a year earlier — while the United
States figure was shrinking.]
By Paul Geitner
Fabian
Bimmer/Reuters
Prime
Minister Wen Jiabao of
of
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After all, Germany is the one European Union country that has a trade surplus with China . And it has also been a focus of Chinese investment in Europe — so
much so that analysts say some Germans are growing wary as Chinese businesses
have been snapping up German engineering companies.
Mr. Wen, making his sixth visit in eight years, and the
German chancellor, Angela Merkel, on Sunday opened the annual trade fair in Hanover, billed
as the world’s leading showcase for industrial technology.
They plan to witness the signing of an economic agreement
at the Volkswagen headquarters, in Wolfsburg , on Monday. According to German media reports, the deal
will include the opening of a new car plant in the far western Chinese region
of Xinjiang.
Mr. Wen’s agenda, as with a follow-up trip planned by his
likely successor, Vice Prime Minister Li Keqiang, seems aimed at presenting an
aura of business as usual, even as trade tensions flare with the West and the
Communist Party at home is embroiled in its biggest scandal in years, involving
the deposed Politburo member Bo Xilai.
“We shouldn’t be complacent about the stability of China ’s leadership,” said Kerry Brown, head of the Asia program
at the Royal Institute of International Affairs in London .
To do business and expand access to markets, “you need more
predictability in the system,” he said in an interview. “There’s too much
uncertainty at the moment.”
One thing that does seem certain is that neither Mr. Wen
nor Mr. Li will be bringing open checkbooks to help shore up Europe ’s
shakiest economies.
While China has offered moral support and promised to help in global
efforts to back the euro zone, Mr. Wen has not made specific promises to invest
in a European bailout fund or in bonds from the hardest-hit countries.
Instead, the Chinese seem to be going for German bonds, or
bunds, helping to drive Berlin ’s borrowing costs to record lows, despite the mounting
cost of rescuing its euro zone partners.
“It can be summarized as helping Germany to help the euro
zone,” Jonathan Holslag, a researcher at the Brussels Institute of Contemporary
China Studies, said in a telephone interview from Washington, where he
testified Thursday before the U.S.-China Economic and Security Review
Commission.
But Chinese investment in European business is growing. And
while much of the effort remains focused on setting up trading companies,
Chinese companies have started to shop for industrial technology and brands
that can help them become more competitive, at home and globally.
In 2010, the most recent year for which data is available,
Chinese direct investment in the 27 European Union countries totaled 900
million euros, or about $1.2 billion at the current exchange rate. That was
only a fraction of the 28.5 billion euros ($38 billion) of American direct
investment in Europe . But it was three times China ’s level of only a year earlier — while the United States figure was shrinking.
“China is catching up quickly, especially during the current
financial crisis,” Zhang Haiyan, director of the Euro-China
Center at the Antwerp Management
School , wrote in the “Euro-China Investment Report
2011-2012.”
The Chinese investment has been concentrated in a handful
of countries: Luxembourg , mainly because of its reputation as an international
financial hub, followed by Russia , Germany , Sweden and Britain .
Mr. Li will be stopping in Russia . There, as in other parts of Eastern Europe ,
“Chinese companies know how to fill the empty place in the market that used to
be filled by the government,” especially in consumer goods, Mr. Zhang said in
an interview.
But China seems particularly intent on Germany . Chinese companies were the No. 1 investor in Germany last year, with 158 projects, or almost 20 percent of the
total, according to Germany Trade and Invest, the government’s economic
development agency. It was the first time China had surpassed the United States by that measure.
Just last week, the Xuzhou Construction Machinery Group
announced it would buy a majority stake in the German machinery maker Schwing,
whose concrete pumps are being used to build the new European Central Bank tower
in Frankfurt, as well as 1 World Trade Center in New York.
The price was not disclosed. But a rival of Schwing’s,
Putzmeister, was sold to the Chinese company Sany Heavy Industry in January for
360 million euros, now worth about $480 million. The same month, the Chinese
energy company LDK Solar bought the German group Sunways for about 24 million
euros ($32 million). In March, another German company, Kiekert, the world’s
biggest supplier of car door latches, was bought by a Chinese competitor, Hebei
Lingyun, for an undisclosed price.
“It’s certainly true that German companies have most of the
goodies and know-how that the Chinese are looking for,” Mr. Holslag said.
Such companies are hardly household names. But they are
part of the country’s Mittelstand, the roughly 3.7 million small- and
medium-size companies, many family-owned, that are the backbone of the German
economy and export engine.
Some have had cash flow troubles made worse by the global
financial crisis. And their privately held structure makes them attractive to
Chinese buyers, who can deal directly with family owners rather than corporate
boards and shareholders.
Mr. Holslag said he expected to see German policy tilt more
in favor of protecting the Mittelstand’s interests, rather than promoting
industrial giants like Siemens and Volkswagen, out of concern that the rapid
expansion in China by the big conglomerates might lead to overcapacity and
job cuts at home.
“This is certainly an evolution to watch,” Mr. Holslag
said.
The bulk of China ’s outward investment is still aimed at securing natural
resources, largely in the Southern Hemisphere. And Mr. Brown noted that the
total level of investment was still relatively small, despite China ’s having the world’s second-largest economy.
“The idea that the Chinese are coming to ‘buy Europe ,’ it’s
really overblown,” he said. “That such a massive economy has so little
prominence, it’s really a mystery.”
Mr. Wen began his tour Friday in Iceland , which Chinese officials last week pointed out is the
first Western European country to grant China market economy status. The European Union and the United States have yet to do so, largely because of concerns about
subsidies that China gives its exporters. Such a designation would make it much
harder for Western companies to win trade disputes in which they accuse China of dumping goods below cost.
European Union officials say the market economy talks with China have been moving at a glacial pace, and the political
transition in Beijing may slow it further. Mr. Li will meet in Brussels on May 3 with the presidents of the European Council and
the European Commission, with talks mainly focusing on energy and urbanization
instead. European Union officials said that also reflected a widening of the
agenda from traditional foreign policy and trade issues.
The issues being discussed may end up being overshadowed,
however, by the scandal in China surrounding Mr. Bo and his wife, Gu Kailai, who is under
investigation in the killing of a British businessman.
A prolonged split in the party leadership would be
problematic not only for China, Mr. Brown warned, but also for the global
economy, and could stymie progress in efforts to gain greater access to China’s
vast domestic market as well.
“We cannot waste all that effort because of a bunch of
squabbling politicians,” Mr. Brown said.