The Chinese Foreign Direct Investment in the European Union and the attractiveness of the geographical European Regions

Details

Supervisors

Defraigne, Jean-Christophe

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

In a couple of decades of institutional and domestic economic reforms, China has evolved to become a major worldwide investor. During these years, the patterns of the investment, as well as the motivations behind them, have changed. Due to imbalances in the 2000s, the government had the willingness to switch to a more sustainable economic growth with a focus on the final consumption, innovation, services and high value added products (Lemoine, 2007). This has been more encouraged since the financial crisis and especially since 2013 with several initiatives (Seaman, et al, 2017). The Belt and Road Initiative (BRI) has also pushed the investment in infrastructure, transport and logistic. The real increase of Chinese investments in the European Union (EU) is still recent, began only one decade ago, and it is still significantly increasing and evolving. This thesis showed that Chinese investment in the EU is a mix of motivations, which are evolving, depending on the Chinese policies and focus. The four main Dunning MNE activity are present, with some less important than others. The resource seeking is the less significant motivation, as it is focused on developing countries. The market seeking one, both for the access to the local market and to Europe, is still a main motive and is increasing in some countries, mainly in Eastern Europe, pushed by the BRI, as well as in the South. The strategic asset motivation for the advanced technology, know how, distribution network and brands, is also increasing mainly in Western and Northern Europe, and is becoming a main motive due to the Chinese focus on innovation. The efficiency seeking one is also slowly recently increasing with the growing interest in economies of scale with M&A notably in the West and the displacement of production in Eastern countries for the lower costs. Other motivations to invest in Europe are notably the profit, the low risk, the desire of diversification, the tax incentive, the institutional and economic stability. It also showed that China does not see the EU as a single entity but as separate markets. The motivations in the countries are not the same and Chinese firms analyse and evaluate the advantages of each host country comparatively to decide in which one they should invest. Some countries have received big investment from China, for instance the core EU countries, while some have received barely nonexistent investment (Rhodium Group, 2017). The different geographic regions of Europe can be a good regroupement of countries for their motivations. Indeed, the Chinese investment motivations are, with some exceptions, the same for each country within the same European geographic region and different between the European geographic regions. Moreover, the evolution of the Chinese investment motivations is the same within the European geographic regions. However, this can be biased and due to other factors.