Europe gaining importance in China's foreign investment

MILAN - Chinese investments are expected to increasingly target Europe, driven by business synergies, high-tech content and the need for diversification in terms of currency and geography, Dagong Europe said in its latest report.

The European branch of Chinese rating agency Dagong Global said investments in Europe are driven partly by China's aspiration to transform its local dominant players into global leaders and partly by its need to upgrade its domestic production base.

"Investments in Portugal, Italy, Greece, Spain, Poland and Hungary were primarily made to provide financial support to local infrastructure projects and facilitate trade, whereas deals in Britain, France, Germany, Sweden and Norway were mainly driven by China's desire for technology," the report said.

Dagong Europe estimated that in the short to medium term, a strong focus on sectors with high technological content, thorough know-how and strong brand recognition, will continue to drive Chinese investors' interest in the automotive, engineering, machinery and utility sectors.

In the longer term, the Milan-based rating agency sees the focus moving to renewables, environmental technology and lifestyle sectors, as the environment and living standards gain importance in China.

"We expect to see an increasing focus on European infrastructure, energy, pharmaceuticals, automotives, telecommunication and manufacturing," the report added.

China's investments in Europe hit a record high in 2014, Richard Miratsky, head of the Corporate Analytical Team at Dagong Europe, highlighted.

"Utilities and high-tech sectors are definitely holding the attention of Chinese investors, but we see food and agriculture, commercial real estate and leisure and luxury gaining momentum in the medium term," he said.

The increasing investments in European sectors and countries where assets no longer appear underpriced due to the prolonged adverse macroeconomic development over the past half-decade suggested that this is "a structural trend, not just a cyclical phenomenon," the report added.

Sizable Chinese investments in Italian utilities and the recent agreement on the Chinese entrance to tyremaker Pirelli ranked Italy as the second most attractive country in the European Union after Britain, according to Dagong Europe.