Chinese investment in Spain is under pressure after a golden decade

The Chinese investor that bet on Atlético de Madrid, Espanyol, Madrid's España building, Redexis' gas networks, La Mancha's photovoltaic plants or Urbaser's waste management is in the doldrums. After a golden decade of investments in Spain and other European countries, the tension has gone down.

According to data from the Secretary of State for Foreign Trade, Chinese investments in the first half of 2022 stood at just 49 million euros. They are equivalent to a fraction of the 435 million for the whole of 2021, the more than 3,000 million reached in 2017 or the 9,585 million of the sum of the last ten years.

Sectors

Automotive is now the star investment, after the decline of real estate, leisure and infrastructures

The sharp drop, like everything related to China, has something of mystery and surprise about it. It comes as promises of new investments arrive periodically. The Chinese Amazon, Alibaba, is opening a store in Madrid, and the low-cost clothing giant Shein is showing signs of life in this city and in Barcelona. From time to time, a Chinese electric car brand shows up in Spain and the Envision group wants to invest 3.8 billion in a battery factory in Extremadura.

However, the general trend is very different. The firm GBS Finance, which has accompanied Chinese investors in operations in Spain such as Mediapro or GBFoods, detects several causes for the drastic drop in investment. They have to do with a change in the attitude of both China and Western countries.

"They used to come to invest in all sectors, but with the new one belt one road strategy some sectors have been blacklisted", as they are considered "speculative", among them real estate and those related to leisure. "In addition, Europe and the United States are protecting their strategic assets" in areas such as infrastructure, defense, water and technology, which is what China likes the most, according to GBS.

The consequence is that the Chinese investor "has changed the pace" and now, rather than buying a business, "thinks of a strategic partner, with local management teams, that will open up the European market and to which it can open up the Chinese market". Another derivative is Latin America, since as the door in Europe and the United States closes, Chinese investors are turning to that region, where they do not find "obstacles".

China has made its presence felt in Europe. It bought the German robotic arms of Kuka -they are the ones that appear in any modern factory scene-, part of the Portuguese electricity company EDP -it allowed it to enter Spain- and even Volvo, through Geely. European governments have been frightened and are restricting movements, although not too aggressively. The German Chancellor, Olaf Scholz, is forging commercial alliances with China and has just allowed it to invest in the port of Hamburg.

The New York analysis firm Rhodium, an expert in following China's steps around the world, agrees in declarations to La Vanguardia that "restrictions, together with a stricter analysis of investments and the impact of the pandemic, have left Chinese investments in Europe quite low".

There was, he says, a "first wave" of purchases of assets and companies in Europe that has now given way mainly to "investments from scratch in very capital-intensive projects". The best example is the automotive industry, not only because of the Extremadura project, but also because of the battery factories planned in Germany and Hungary.

Geostrategy expert Pedro Baños, who has just published La encrucijada mundial (Ariel), relativizes any Chinese disconnection. "They are still very aware of the Spanish and European economy", despite the fact that "the United States has exerted a lot of force so that some Chinese products are not acquired in Europe, such as the 5G, for fear of espionage". "With the confinements, the situation is also somewhat strange; there is even talk of a possible loss of 20% of GDP," he adds.