A report by PwC shows Chinese investments in Europe are set to grow despite the downturn, and Chinese investment in Ireland is likely to increase.
China Deals: A Fresh Perspective, by PwC’s emerging markets group, shows there has been a steady rise in the value and volume of mainland Chinese investments in Europe over the past six years, increasing from 11 deals in 2006 to 61 in 2011.
While European investors have tended to be more acquisitive in China than the other way round, the gap in deal flow between Europe and China is narrowing, and despite having done fewer deals, Chinese companies have invested more in European targets than vice-versa.
“The volume and value of Chinese MA activity in Europe and in Ireland will rise. We expect to see an increase in more conventional transactions whilst the practice of taking minority stakes is likely to continue,” said Andrew O’Callaghan of PwC Ireland’s China Practice.
Deal flow in the opposite direction, from Europe to China, shows a decline from a peak of 163 deals in 2006, to a low of 85 in 2009, although since then they have recovered somewhat as European investors have pushed for growth through deals in China’s faster-growing market.
“The main point of the report is that it shows that Chinese investment into Ireland now exceeds that in the opposite direction. China really is an engine of growth,” he said.
The report notes that in the first quarter of 2012 there were 32 Chinese investments in Europe and 26 deals made by European companies in China. Chinese state-owned enterprises have led the way in investing in Europe, but the country’s privately owned businesses are now also looking to acquire overseas.
“One of the challenges for Chinese companies is to spend the excess money they have and to spend it wisely. They are looking for deals and companies to do business with. They want the right fit,” says O’Callaghan. “Technology is an area they want to invest in.”
He says the appointment of Xi Jinping as China’s leader is a tremendous opportunity. “Of all the countries he’s visited, he visited Ireland, he liked us, he got on with our prime minister. He was here,” he said.
Chinese companies are beginning to realise the potential Ireland can bring.
