Rich pickings in Europe for Chinese firms, say experts

Chinese companies in Europe are probably looking at the best time to expand investments on the continent as several European nations are facing pressure to maintain a people's welfare system and create new growth avenues in trade, services and financial sectors, experts said on Wednesday.

The comments came after Greece defaulted on a 1.6 billion euros ($1.8 billion) payment to the International Monetary Fund earlier this week. The European Central Bank has already warned that other members of the European Union including Italy, Portugal and Ireland need to take decisive measures to avoid a Greece-like situation.

Fan Chunyong, secretary-general of the Beijing-based China Industrial Overseas Development and Planning Association, said the debt crisis in Europe has presented Chinese companies with prime opportunities to acquire European businesses at bargain prices.

"Chinese companies should focus on buying consumer brands, high-end manufacturing, infrastructure, power supply, utilities and healthcare firms in countries troubled by fiscal difficulties," said Fan.

Fan said such businesses are good buys as they not only retain their current value, but also have room for considerable price appreciation in the future. The Chinese government has been encouraging more companies to invest abroad as part of its efforts to broad-base growth, rather than rely on just exports to drive growth. Over the past five years, both the US and Europe have surpassed Asia to become the most sought-after destinations for overseas investment from China, and accounted for over 60 percent of the outbound merger and acquisition deals by Chinese companies in 2014.

He Jingtong, a professor of economics at Nankai University in Tianjin, said: "Unlike the United States, Europe is not that opposed to Chinese investment, especially on security grounds."

Within China, a loosening policy environment and a rising cash-rich private sector have spurred companies to learn from their rivals in developed markets through outbound mergers and acquisitions.

Previously, State-owned enterprises sought to acquire resources in emerging markets such as Southeast Asia and Africa. But now domestic companies are more interested in gaining market share and core capabilities from developed European markets such as the United Kingdom, France and Germany.

German Ambassador to China Michael Clauss said as exports are still one of the pillar sectors that support the Chinese economy, manufacturing and technology could be attractive investment options in Europe for Chinese investors.

"Germany has plenty of appeal due to its strong industrial base, and the country's fast-growing medium-sized companies present several attractive opportunities for investors," said Clauss.

Outbound direct investment from China to the European Union rose by 367.8 percent on a year-on-year basis during the first five months of the year, according to data from the Ministry of Commerce.