Chinese firms snub debt in European spending spree

BEIJING: Chinese companies and funds have ramped up investment in crisis-hit Europe, buying utilities, energy firms and even luxury yacht makers, but are steering clear of eurozone debt.

Analysts say bargain-hunting ? and not the secret hand of Beijing ? is driving the recent wave of acquisitions as Chinese companies seek to expand overseas and the country?s sovereign wealth fund diversifies away from US bonds.

Chinese direct investment in Europe more than doubled to $6.7 billion in 2010 from the previous year, latest official figures show, and analysts expect the recent flurry of deals to continue as eurozone economies deteriorate.

?At a time of severe economic and financial stress in the eurozone there are inevitably some great buying opportunities for cash-rich Chinese firms,? said Alistair Thornton, an analyst at IHS Global Insight in Beijing. Chinese firms have been targeting a range of sectors, including engineering, high-tech, energy, finance and utilities, as intense domestic competition forces them to look for new markets around the world.

The investment has fuelled concerns in Europe that Beijing could gain too much influence over debt-stricken economies. But Premier Wen Jiabao said on Friday China had neither the ability nor the intention to ?buy Europe?.

China is ?willing to cooperate with Europe to fight the current crisis. Some people say this means China wants to buy Europe?, Wen told a German-China business forum in the southern city of Guangzhou. ?This a concern and doesn?t fit reality. China doesn?t have this intention and doesn?t have this ability.?

Mark Williams, an economist at Capital Economics in London, said the recent deals were fuelled by cheap credit offered by Chinese banks and the fact that China?s foreign asset managers were ?stuffed to the gills with bonds?.

?This isn?t China Inc ordering the overall strategy,? Williams told AFP. ?Most of China?s recent purchases are exactly the sort of deals you?d expect any big investors to be doing.? In the latest deal, China State Grid has agreed to pay 387 million euros ($508.2 million) for a 25 per cent stake in the national electricity grid of debt-stricken Portugal, Treasury Secretary Maria Albuquerque said Thursday.

Earlier this week, Chinese construction equipment giant Sany Heavy Industry agreed to acquire German family-owned engineering firm Putzmeister for an undisclosed sum.

That came hot on the heels of China Investment Corp, the country?s $400-billion sovereign wealth fund set up in 2007 to invest some of China?s huge foreign exchange stockpile, buying a stake in British utility Thames Water.

China Three Gorges in December beat competitors to a 21.35 per cent stake in Energias de Portugal, paying 2.7 billion euros as Portugal sold assets to bolster state coffers. Shandong Heavy Industry agreed last month to pay 374 million euros ($491 million) for a 75 per cent stake in debt-laden Italian luxury yacht maker Ferretti Group.

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Source: http://www.timesofoman.com/innercat.asp?detail=54389

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