Last year, Yili Group, one of China's largest dairy producers, established a R&D center in association with Wageningen University in the Netherlands, the first of its kind for a Chinese dairy company.
"To become a global diary giant, the EU market will play a key role in Yili's research and development strategy," Pan Gang, President of Yili Group, said at the opening ceremony for the research center on February 25, 2014.
By and large, both governments and business leaders in EU countries have welcomed Chinese investment. In January, French Prime Minister Manuel Valls led a business delegation comprising over 50 French business leaders to China. During his visit, the prime minister stated that his country wishes to attract more Chinese investment.
Chinese investment has been particularly welcomed in Italy. Over the past year, four major Chinese enterprises had invested near 10 billion euro ($10.97 billion) in the country. In late December last year, Shanghai Electric Power Co. Ltd. announced its decision to buy a number of power plants and energy facilities in Italy and Italian Prime Minister Matteo Renzi even attended the signing ceremony for the deal.
Ding Chun, a European studies researcher at Fudan University told Global Times that assets in European countries have been accorded low valuations in recent years.
The EU needs to shake off its economic malaise and foreign investment may prove the remedy. Therefore, China increasing investment in Europe is not only building market momentum, but is also a phenomenon that benefits both sides.
Concerns
While Chinese investments boost local economies, some have met with opposition or even panic from some Europeans. For example, the news that Chinese investors intended to buy Club Med, a global chain of resorts, and acquire shares in Airport Toulouse in France, aroused concerns among French media, who feared the acquisition would lead to loss of assets and job cuts.
In March, Sinochem, China's largest chemical production giant, paid 7.1 billion euro ($7.7 billion) for 26 percent of Pirelli, the world's fifth largest tire producer. The news caused a sensation in Italian media outlets which argued that the Chinese bought the pride of Italian industry. In fact, the price offered by Sinochem was much higher than the actual value of the shares, given the downward spiral of the EU economy.
Furthermore, the merging of Sinochem and Pirelli will make the resulting entity the world's fourth largest tire producer and help to expand Pirelli's business in Asian market.
In spite of those acquisitions, unforeseeable challenges lie in wait for Chinese investors to overcome after they have bought European brands or assets.
Cases of failed Chinese investment in Europe are not uncommon. Risks perennially hide behind opportunities. The legal systems and business environments in the EU countries are vastly different from those in China. Chinese investors should be aware of the difficulties and potential risks before they bid for targets.
