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When Italian financier Andrea Bonomi withdrew his interest in buying Club Med earlier this month, the iconic holiday brand’s board of directors voted unanimously to welcome a bid led by Shanghai-based private-equity giant Fosun International . The Chinese consortium is now the sole bidder for Club Med, valuing the 65-year-old leisure company at €939 million ($1.09 billion). For European markets, the implications go far beyond that price tag.
France used to be Europe’s last bastion against Chinese takeovers of domestic brands. Now its companies are cozying up to investors from the Middle Kingdom. Another Chinese consortium, Symbiose, last year bought a 49.9% stake in the Toulouse-Blagnac Airport, a stone’s throw from Airbus Group ’s French headquarters. Months before, China’s state-owned Dongfeng acquired a 14% stake in car-maker PSA Peugeot-Citroën .
With France’s attitude shift, Europe now seems united in at least one thing: doing business with China. China’s eagerness is clear. Chinese outbound investment surpassed inbound investment for the first time last year. Deutsche Bank estimates that Chinese investment in Europe grew to €27 billion last year from €6.1 billion in 2010. Expect more to come.
China’s European presence blossomed in 2008 in debt-ridden Greece, where Beijing-owned shipping giant Cosco started building a European hub around the Pirea Harbour, near Athens. Even in Germany, the eurozone’s largest economy, medium-size companies such as manufacturer Putzmeister and electronics firm Medion now have Chinese owners.
In the infrastructure sector, Chinese power giant Three Gorges Corp. purchased a 21.3% stake in Portuguese national grid Energias de Portugal in 2011, and last year China State Grid invested €3 billion in Italy, including a partial purchase of CDP Reti, Italy’s national grid agency. In October, Beijing-based IZP Technologies came to the rescue of the medium-size Parma Airport in order to build a logistics center for Haixuan, an e-commerce platform for bringing global goods to China.
Recent currency fluctuations have only increase the likelihood of Chinese involvement in Europe’s troubled economies. With the euro in freefall, Beijing is even better equipped to financially support overseas investment.
China’s future investment in Europe will likely center on three trends:
Brands. With Club Med, Fosun has pocketed one of the best-known European labels in the tourism sector. Rather than buying land or an estate, it is acquiring a concept—and a potential magnet for China’s estimated hundred-million-plus tourists heading overseas each year. Consumer brands are critical for a nation whose reputation has been effected by the lack of strong names. Europe has plenty of them.
Energy and transport. Chinese investments in Britain, France, Italy and Portugal have underlined the strategic dimension of gas, water and other utilities. The opportunities for China to invest in highways and toll roads are also high, especially in Eastern Europe.
The European Fund for Strategic Investment. An important question is whether China could—perhaps through its sovereign fund, China Investment Corp.—contribute to Europe’s new €315 billion long-term reconstruction plan. As conceived by the European Commission, the package seeks to jumpstart the European Union economy after years of recession. Further Chinese investment, especially in European infrastructure, could help.
While China appears guaranteed to expand its investments in Europe, the ultimate commercial success or failure of those investments remains to be seen. China’s massive currency reserves and policy of subsidized lending for state enterprises could yield great investment returns overseas, or wasteful overinvestment in dubious projects. What is certain either way, however, is that Europe will see greater Chinese commercial and therefore political influence in the years to come.