The Growing Interest of Chinese Companies in Europe

In recent years, after the stagnation due to covid and the following period, Chinese corporations' interest in investing in Europe has increased significantly.

This trend has been fueled not only by the Chinese government's "going global" plan, but also by a slowdown in the internal economy, which has pushed businesses to seek new markets in order to exploit fully their manufacturing capacity.

"Going global" incentivizes Chinese enterprises to seek overseas investment opportunities, opening the door to a steady flow of Chinese investment overseas, also in Europe, which range from the acquisition of existing companies to the creation of new subsidiaries and business partnerships, as well as greenfield investments.

In this way it is possible to diversify risks and ensure a constant flow of resources and technologies.

The slowdown in the Chinese economy has certainly contributed to this trend. Companies have faced less robust domestic demand and increased competition in the domestic market, pushing them to look for opportunities abroad to maintain their growth and profitability.

For European companies this trend represents an important opportunity if managed and addressed in a structured way. There are several European entrepreneurs who are facing challenges related to generational transition and difficulties in accessing the vast and promising Chinese market. The arrival of Chinese investors can offer solutions to these challenges, through strategic partnerships for joint development of multiple markets, acquisitions or direct investments.

Considering the European companies, it’s mainly about strategic partnerships with complementary skills to gain access to the Chinese market and channels, infrastructure sharing, risk reduction. The types of strategic partnerships vary in terms of forms and structures; therefore, not only M&A, but also JVs or strategic businesses.

Mergers and acquisitions (M&A) in some cases represent an opportunity in this context. European companies can capitalize on the interest collected from Chinese enterprises by offering advantageous partnerships and getting access to the Chinese market.

Although, we are also aware of requests raised from European companies, not only listed companies, that intend to accelerate their development path in China through acquisitions of medium-sized Chinese companies that have a situation similar in terms of generational change. Many Chinese entrepreneurs have developed successful companies from scratch that are now looking for international outlets, also opening up their capital to international partners, since their children do not intend to carry on the business. 

Europe has become an important target for Chinese investments due to its strategic geographical position, its solid industrial base and its human resources and technological wealth, and indeed also because of the situation with the United States. Countries such as Germany, the United Kingdom, France, Spain and Italy have become particularly attractive to Chinese companies, thanks to their political and economic stability, the presence of advanced industrial clusters and the ease of access to the whole European market.

Key sectors of interest for Chinese companies include for instance the automotive industry, electronics, renewable energy, information and communications technology, as well as infrastructure and logistics.

Volvo Cars is an example; in 2010 it was acquired by the Chinese car manufacturer Geely Holding Group. This partnership has led to a number of investments and synergies, allowing Volvo to access the fast-growing Chinese market and benefit from Geely's resources and technical knowledge. Since the acquisition, Volvo has experienced significant sales growth both in China and globally, cementing its position as a premium automotive brand.

Another example is the joint venture agreement between BMW and Great Wall Motors to produce electric vehicles in China. In 2018, BMW signed an agreement with Great Wall Motors to form a joint venture with the aim of producing electric vehicles for the Chinese market and mutually strengthening its strategic position in the global automotive market.

B-ON and China's Chery, as another example, have announced a joint venture for electric vans that gives the European automaker access to financing and Chery's production base, while the Chinese automaker gains access to the European and U.S. markets. Chery is a Luxembourg-based investor in B-ON and will provide working capital to help fund the joint venture. B-ON is an innovative company uniquely positioned to supply the nascent and rapidly expanding commercial vehicle market in its local geographies, but it does not have the production base to meet the full mass market demand. The Chinese automaker will also provide engineering support to B-ON as part of the joint venture.

In recent years, there has been a significant shift in the leadership of large Chinese companies, with the emergence of a new generation of managers who have received training in the United States and Europe. These managers, often educated at prestigious Western universities, are bringing a global perspective and multicultural skills that are fundamentally changing the way Chinese companies operate and relate to the world.

One of the main differences from the past is the entrepreneurial mindset and customer-oriented approach that these managers acquired during their studies abroad. Rather than slavishly following traditional Chinese business models, they are inclined to adopt innovative and market-oriented management practices, often influenced by international experiences.

In addition, the training they received in the U.S. and Europe exposed these managers to a culture of collaborative work, change management, and competency-based leadership. These skills have become crucial in an increasingly complex and globalized business environment, allowing Chinese companies to adapt more nimbly to changing market conditions and compete effectively internationally.

Another factor to consider is the increased focus on corporate social responsibility and environmental sustainability. Chinese managers trained in the U.S. and Europe are more aware of the importance of integrating ethical and sustainable business practices, not only to meet the expectations of consumers and international investors, but also to address global challenges such as climate change and social inequality.

The presence of Chinese managers trained in the U.S. and Europe is truly revolutionizing the Chinese business landscape, bringing innovation, global expertise and a future-oriented perspective. If managed effectively, this new generation of leaders could play a key role in fostering the growth and sustainable development of Chinese enterprises in the global context.

However, despite the opportunities offered by Chinese investment, there are also challenges and hurdles to be addressed.

Concerns about geopolitical tensions between China and Europe have led to increased vigilance and regulation of Chinese investments in the old continent.

The growing interest of Chinese companies to invest in Europe represents a significant opportunity for both parties, but it requires careful management and constructive cooperation in order to maximize the economic benefits and mitigate the associated risks and seek to reap the benefits related to the expansion of our products in that increasingly attentive and open market.

​​​​​​​Contact us if the topic is of interest to you and you want to know more about how Jesa, with its team of experts, is able to support entrepreneurs and company management at 360 degrees, from the definition of the type of operation and the necessary resources, to the search for the best Target to acquire up to the management of the post-acquisition phase.