Chinese Investment in Germany Soars

Chinese direct investment isincreasing remarkably inGermany with more frequentM & A activities, accordingto a recent report by Deutsche Bank.

The report, released by HannahLevinger, Deutsche Bank economist,shows that with the upgrading of Chi-nese government's support for enter-prises' going global and the progressof investment agreement negotiationsbetween China and Europe, Chineseinvestment in Germany is expected toenter a new phase.

Building on these well-establishedtrade ties, China and Germany arenow embarking on a concerted push tostrengthen investment relations in syncwith a surge in Chinese M&A activityinto Germany. China's foreign directinvestment (FDI) stockin Germany hasrisen sharply over the past decade or so,according to the report.

Over the years, the apparent ob-jective of Chinese M&A activity inGermany has evolved from gainingaccess to the EU market to acquiringtechnology by buying into the machin-ery, renewable energy and automotivesectors. Purchases included severaldeals with "hidden champions", whichare global market leaders in their re-spective fields.

Besides an interest in high-endtechnology, component supply and en-ergy efficiency, investments are likelyto be increasingly fuelled by demandfor quality products, as Chinese firmsseek to develop global brands and gaincompetitiveness beyond the homemarket. Private firms are the main en-gine of China's renewed cross-borderM&A push, accounting for the bulk ofoutbound M&A transactions into Ger-manyin 2008-14. The report finds that in recentmonths, Chinese authorities have beenswift to relax the limits for outboundinvestment projects that require officialapproval, paving the way for China'soutbound direct investment (ODI) tolikely surpass foreign direct invest-ment into China as early as this year.Chinese outbound investment willcontinue to increase, boosted by large-scale projects such as the creation of afund to invest along a new "maritimesilk road" linking coastal countriesacross the Pacific, the Indian Oceanand the Mediterranean.

With the internationalizationof the RMB gaining traction glob-ally, the currency will become morerelevant for financing investment. Sofar, a handful of China's M&A dealsin Germany have been settled in theChinese currency.