The number of Chinese takeovers in Europe has fallen to its lowest level since 2012. Last year, investors from the People’s Republic bought a total of 119 companies in Europe, according to a new analysis by the management consultancy EY. That was 20 fewer than a year earlier, and in the longer term trend almost 200 fewer takeovers than in the record year 2016, as EY announced on Tuesday.
According to EY estimates, the investment amounts have also shrunk significantly: in 2023 there were still two billion dollars, less than half as much as in 2022. However, EY expressly pointed out that the purchase prices for the majority of Chinese company acquisitions and investments in Europe are unknown are.
At the height of China’s short-lived investment boom in 2016, EY estimated Chinese investors’ spending on corporate acquisitions in Europe was nearly $86 billion. Since the trend reversal in 2017, both the number of company takeovers and the sums invested have been steadily declining.
Political tensions between China and the West
Experts see several reasons for this: Beijing’s leadership has been slowing capital outflows from China abroad for several years, and there are also the political tensions between China and the Western world, and more recently the weak Chinese economy compared to past record growth.
Germany, Switzerland and Austria were slightly out of the ordinary at a low level because the number of Chinese takeovers and investments actually increased: In Germany, EY counted 28 Chinese company acquisitions, two more than in the previous year. According to EY, the investment volume was at $202 million, the lowest level since 2010. This figure does not include venture capital investments in German start-ups in which Chinese companies participated.
In Switzerland, Chinese companies bought six companies last year, twice as many as in 2022. In Austria, two companies were taken over by Chinese, in 2022 there was only one.
More investments in own factories than takeovers expected
In Germany, China therefore only plays a subordinate role in the investment activities of foreign companies: Chinese buyers took ninth place in the international investor rankings with 28 takeovers and investments. Even Swiss, Austrian and Luxembourg-based companies bought more German companies than investors from the world’s second largest economy. US companies took first place with 225 takeovers in Germany.
EY expert Sun Yi sees one reason for the development in the political mistrust that Chinese companies encounter in Europe: “Potential Chinese investors are checking very carefully whether the choice of certain takeover candidates could lead to resistance from governments and discussions in the public,” said the head of China Business Services for Western Europe.
For the next few years, the EY expert expects Chinese companies to invest more heavily in building their own factories in Europe than in major company takeovers. For Chinese car and battery manufacturers, Hungary, Spain, France and northern European countries are particularly attractive investment locations due to low energy costs, higher subsidies and quick approval processes. “Germany is not preferred here.”