China Investment In Europe Gained In 2021 From Low Level; VC Flows Doubled

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China’s direct investment in Europe in 2021 picked up from a year earlier though from a low level, according to a report by Rhodium Group and MERICS released today. The two research organizations aren’t expecting a rebound in 2022.

China investment in Europe rose by 33% to EUR 10.6 billion from EUR 7.9 billion in 2020, the report said. However, the increase was accounted for by one big project – a EUR 3.7 billion acquisition of the Philips home appliance business by Hillhouse Capital, a Chinese investment firm controlled by billionaire Zhang Lei. Last year’s direct investment by China in Europe was the second-lowest since 2013 and less than a quarter of its annual peak of EUR 47.4 billion in 2016, the report said.

China’s investment mix in Europe is shifting towards greenfield projects and away from mergers and acquisitions, part of a global decline in overseas M&A last year by Chinese companies. In 2021, greenfield investment reached EUR 3.3 billion, the highest ever recorded value, the report noted. Venture capital investment last year doubled to a record EUR 1.2 billion; top recipients were the UK and Germany and leading sectors where e-commerce, fintech, gaming, AI and robotics, the researchers said.

“Chinese investment in Europe is unlikely to rebound in 2022,” the report predicted. “The Chinese government is expected to stick to strict capital controls, financial deleveraging and Covid-19 restrictions. The war in Ukraine and expanding screening regimes and scrutiny of Chinese investment in the (European Union) and the UK will create additional headwinds. ”

Click here for the full report.

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