There will be more foreseeable acquisitions made by Chinese companies in Germany as they continue to embark on their outbound investment journey around the globe, according to the newly published investment guide to Germany by Deloitte.
The long standing trade and investment partnership between the two countries has provided a solid foundation for Chinese companies to invest in Germany, and merger & acquisition (M&A) activities of Chinese investors in Germany have increased significantly since 2010.
According to the investment guide, titled “Investing in Germany – A guide for Chinese businesses,” Sino-German economic relations have evolved into a strong trade and investment partnership over the past 25 years.
China’s largest European trading partner
Since 2002, China has been Germany’s second largest export market outside Europe; on the other hand, Germany is China’s largest European trading partner. In 2015, Germany exports to China reached EUR 71.2 billion, while Germany imports to China hit EUR 91.5 billion.
“For many years, a lot of Chinese companies have already established their presence in Germany, either through greenfield investments or M&As,” says Rosa Yang, Chairlady, Global Chinese Services Group, Deloitte China.
“The motivation to tap into the global market will continue to drive outbound M&A activities by Chinese companies, and Germany will remain a major investment destination for Chinese companies because of the long-term trade and investment relationship between the two countries.”
From regional perspective, the investment guide highlighted that Dusserldorf, Frankfurt and Hamburg have recorded the highest amount of investment from China, moreover other cities and regions in the country might accommodate the individual needs of Chinese investors.
Shift in focus
In recent years, Chinese investors have also shifted their focus from the acquisition of troubled assets to strategic investment into multinational companies with ownership of leading technology.
When it comes to industry sectors, the automotive supplier industry and industrial companies have traditionally been the focus areas for Chinese investments in Europe, particularly in Germany. This is mainly due to the fact that China’s auto industry has extended its ambitions to a global scale and requires international know-how, talent, production footprint and access to European Original Equipment Manufacturers (OEMs).
Meanwhile the real estate industry in Germany shows steady performance in recent years, both for residential and commercial properties caught the attention of Chinese investors. Also capturing the interest of Chinese investors are logistic-related properties, which continue to benefit from strong market demand, but limited supply.
“With regard to foreign investment, there are sometimes concerns about job losses and whether the acquired companies will be dissolved with its technology being taken away,” said Dirk Hällmayr, Chinese Services Group Leader, Deloitte Germany.
“In fact, foreign investments create jobs and promote growth and that is why they are economically important to Germany. For instance, many Chinese investors have taken over some financial distressed automotive suppliers in Germany, which have subsequently undergone successful restructurings and regained their competiveness.”
According to the investment guide, a successful takeover in Germany is more than generating potential financial income for investors, who can also obtain access to a new and important market – a pivotal driving force for future growth.