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Movement Of Outbound FDI To EU By Chinese Investors

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As per recent reports by the CoinDesk, Chinese investors continue to buy properties overseas, mainly, due to the new regulations restricting investments in digital currency. There are many Chinese cryptocurrency millionaires who are diversifying in real estate outside China and they are trading through cryptocurrency. It includes the investors who want to buy properties through bitcoin to move money overseas through trade deals. The US and UK real estate markets are in highest demand in such deals, as the highest number of such traders are from Asia, mostly China who want to move money through the Hong Kong route outside.

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Chinese government imposed restrictions on property buying overseas but buyers are still seeking options outside as China’s real estate growth is negative and in the last 6 months, real estate in China had weakest growth due to tighter fund regulations and imposition of new rules on property developers. In June 2018, growth was 8.4 per cent (9.8 per cent in May) as per Reuter’s calculations (NBS). The government authorities claimed they will reduce subsidies on property buying in leading cities of China to diversify funds to other underdeveloped regions, and also to impose restrictions on buying overseas.

FDI outbound to Europe

In the year, most investors from China are shifting investment from North America to EU where the statistics reveal the FDI from China to EU was $16.63 billion in the first half of 2018 as compared to $2.5 billion in North America. Baker Mackenzie – the global law firm claims the new mergers and acquisitions by China shows divesting trends from North America of worth $9.6 billion where most investments went to top locations of EU. At least $1.6 billion went to the UK and $1.5 billion to Germany, Sweden, and France. These investments were made into real estate, hospitality, automotive sector, health and various other areas.

MSCI Real Estate market report claim the property market, globally, grew 15 per cent to $8.5 trillion last year. In the UK and Germany, market size increased over $100 billion and Germany become the 4th largest real estate market in the world replacing China in 2017. Some of the upcoming growth markets in Europe are Sweden, Switzerland, Spain and Norway – as measured by the GDP. Spain has the highest growth where the currency impact capital value growth and residual impact is extensively seen. US was the largest growing market in the world in 2017 but China is now investing at least 9 times more in the Europe. The outbound FDI of China reduced 92 per cent in North America from US$24 billion to US $2 billion and the investment in EU was up to $20 billion in the first six months itself.

Trade policies and global trade tension is also responsible for low investment. Sweden is the leading investment location of China in 2018 followed by the UK. The Brexit uncertainty has lowered pound rates and this has increased the cost of imports and increased opportunities in overseas UK investment. Germany and France are other key locations of China’s FDI.

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