In 2011, Chinese firms invested $10 billion in Europe, more than triple the $3 billion they invested in 2010, according to a recent report by economic research firm Rhodium Group.

Chinese firms have now invested in more than 30 sectors across Europe. Communication equipment and services, industrial machinery, and renewable energy are among the industries with the most Chinese investment. Geographically, Chinese investments are concentrated in Western Europe’s largest economies like France, the United Kingdom, and Germany.

Firms investing in the European Union seek European businesses’ brand equity and technological edge, Europe’s more advanced and business-friendly regulatory system, and price advantage from a weak Euro to compete in China, according to the study.

The study says that Chinese firms’ direct investments today are driven mostly by commercial, not political, motives. The authors conclude that Chinese businesses are less affected by government and politics than many observers believe.

While total Chinese overseas foreign direct investment (OFDI) is still small compared to US or European OFDI—Chinese OFDI is $300 billion compared to the United States’ $4.8 trillion—the study projects that China will invest $1-2 trillion internationally from 2010 to 2020. (For more on Chinese OFDI in the United States, see The Rise in Chinese Overseas Investment and What It Means for American Businesses.) Through new investment projects in particular, Chinese OFDI is predicted to create significantly more jobs for workers in the European Union. Chinese companies in Europe currently employ 45,000 EU workers. By comparison, US firms in Europe count 4.3 million EU citizens on their payrolls.

Jennifer Sun

Posted by US-China

The China Business Review (CBR), published since 1974 by the US-China Business Council, and online since 1997, is the leading voice on commercial relations with China.