Investment into Europe by Chinese manufacturing companies is set to reach record levels in the second half of 2011, according to Deloitte, the business advisory firm.
The total value of the five transactions announced in the first six months of the year was well over $1 billion, and this figure is expected to increase by the end of the year. It will be the largest volume of deals announced in a decade, surpassing the record of eight deals into Europe that completed in 2010.
A recent survey of over 1,000 Chinese businesses revealed that manufacturing is the most common Chinese sector to make overseas investment (33%), followed by wholesale and retail (17%), agriculture, forestry and fishery (17%), and mining (13%).
Ross James, manufacturing M&A partner at Deloitte, said: “Chinese investment steadily increased through the economic boom period, although it tailed off somewhat between 2007-2009. If the current trend continues, 2011-2016 will see greater Chinese investment into the EU, with deals exceeding $1billion becoming commonplace. Significant domestic demand, fuelled by China’s burgeoning middleclass will play a key role in acquisition activity.”
Chinese manufacturing companies have accounted for a large proportion of the global mega deals exceeding $1billion that have emerged in the last decade. In 2010, the number of such manufacturing deals rose to six, from one in 2009. An example of the growing trend of Chinese companies investing into developed markets is Geely, the Chinese car manufacturer that acquired Volvo in 2010.
James continued: “Recent trends indicate that China will continue to invest heavily in the UK and wider EU region. Industrial intellectual property, manufacturing know-how and strong brand names will continue to be the main incentives for Chinese manufacturing companies pursuing overseas acquisitions.”