The Euro-China connection

A few short years ago, several countries in the Western world were wary of the growing Chinese investment in Europe. Concerns over China’s direct investment in Europe were voiced over security, over unfairness in infrastructure investment and a number of other issues.

However since then relations have moved rapidly in the opposite direction and the European Union and China are negotiating a ground breaking investment agreement. Contrary to the perception of many observers, the surge in Chinese investment is not driven by a grand ideological strategy, but by commercial motives.

Over the last five years, China’s foreign direct investment in Europe grew from less than $1 billion in 2008 to over $10 billion annually. China’s asset value in the EU stood at around $6 billion in 2001 and this grew to nearly $27 billion by 2012, and it is set to grow further.

According to a report published in the Financial Times, there is heavy involvement in Chinese investments and contracts in major European countries. The UK heads the list with $23.6 billion, followed by France, Italy and Germany.

The sector that benefitted most from these investments was the energy sector. In France the Chinese investment in this sector totalled $6.6 billion. China also invested $4.9 billion in the energy sector of Great Britain and $3.5 billion in that of Italy. In Portugal, Chinese investors paid over $4 billion by purchasing 21% of the country’s dominant utility company in 2011, and 25% of the national grid operator only months later.

Malta should be no exception. We cannot sit and watch the world go by. The government is actively following up all leads and we know that there are various sectors that could be developed further with the participation of Chinese investors. Malta is discussing energy-related projects, several business ventures linked to aviation and related services as well as cooperation in the educational sector.

Malta and China are also considering projects related to waste-to-energy plants, cooperation on the development of renewable energy resources as well as the production of energy-saving equipment.

We need to exploit our strategic position at the centre of the Mediterranean, and not only as a transhipment hub. Chinese investors are buying into Portugal as they see it as a gateway to former Portuguese colonies in Africa and as a strategic hub for expanding into Portuguese speaking states, such as Brazil. Luxembourg, with a population only marginally higher than that of Malta, is the largest recipient of Chinese investment in Europe.

Companies often choose to incorporate legal entities there to take advantage of tax and corporate requirements. Even Italy’s business elite are courting Chinese companies. China’s Investment Corp. has bought a 9% stake in Thames Water, the UK’s largest water and wastewater services company. This shows that the Chinese industries are seeing Europe as a natural partner and not considering such strategic alliances would mean losing valuable potential for our economy.

During the financial crisis, investors fled Europe whereas Chinese firms surged in with cash flowing from China into some of the hardest hit companies in Europe. These investors are here to stay – the Chinese are renowned for their long-term commitments. China’s outbound investment was $108 billion in 2013 and it is expected to exceed $200 billion in 2017, with a growing share destined for Europe.

 The Maltese are a dynamic people – throughout history we have built relationships with peoples from all corners of the world and continue to do so today. Our country has a lot to offer. Together we should identify and use our potential as Europeans, as a Mediterranean people and as a competent workforce to ensure that we can build on the excellent relationship that Malta enjoys with China and position ourselves as strategic partners in this Sino-European investment programme.