The fanatical attraction of Portugal
Portugal accounts for only 1.3% of the European Union (EU) economy, but the country has received more investment from China in recent years than any other EU member state except Britain, Germany and France.
Prior to 2011, 9 countries including Austria, Belgium, Denmark, France, Germany, Luxembourg, the Netherlands, Sweden and the United Kingdom received 77% of China’s investment in the EU. A recent report by Baker & McKenzie, using data compiled by Rhodium Group, shows that the situation has changed drastically since then.
According to the report, “Chinese investors are increasingly deploying capital in economies that have been severely affected by the financial crisis, (and) seizing opportunities brought about by the privatization of public utilities and transportation facilities.”
In Portugal, China Three Gorges (China Three Gorges) invested 2.7 billion euros to acquire 21% of the Portuguese power company (Energias de Portugal, referred to as EDP), and the State Grid Corporation of China invested 387 million euros ( And promised to provide a 1 billion euro credit line from a Chinese bank) to acquire a 25% stake in the Portuguese National Grid (Redes Energéticas Nacionais).
The two buyers mentioned above are both Chinese state-owned enterprises, but in 2014 it was Fosun International, a private company, that acquired 80% of Portugal’s largest insurance group, the state-controlled Caixa Seguros, for 1 billion euros. The group acquired the medical company Espírito Santo Saúde for 460.5 million euros.
In other areas, Huawei invested 10 million euros to establish a technology center in Lisbon, and Beijing Enterprises Water Group acquired Veolia Água. Although there is almost no money to enter the "greenfield project" (greenfield project, refers to the new project-translator's note), but the acquisition often marks the beginning, not the end.
"For a country in crisis, it is important to convert weaker funders who have repayment and debt problems into strong funders who have the ability to invest and explore the market," said the chief executive of MillenniumBCP in Portugal. According to economist José Brandão de Brito, “China is a good fit for this role.”
As part of the 2011 agreement, the Three Gorges Group pledged to inject 2 billion euros into EDP's renewable energy companies. The latest development is that in June 2014, the two companies jointly established Hydroglobal, a new company for the South American and African markets.
State Grid of China and State Grid of Portugal have also established joint ventures in Angola and Mozambique (and helped the company obtain a 1 billion euro credit line provided by China Development Bank in 2013). Fidelidade, a Portuguese insurance company under Fosun, continued to expand in the African market and established a branch in Mozambique.
"They have shown a model that they will nurture these companies and let them grow," said Beatriz Araújo, a partner in M&A at Baker & McKenzie. "So these investments will start growth."
According to Pedro Ortigão Correia, executive director of the Portuguese Economic, Trade and Investment Promotion Agency (AICEP), the inflow of investment "not only proves the quality of our assets, but also the strength of China and Portugal. Intimacy". At a recent meeting in Lisbon, he added that Portugal “provides a platform to the Portuguese-speaking world and its 250 million consumers”.
More and various investments are expected in the future. “There is huge potential in areas such as tourism, food processing and ports,” said João Marques da Cruz, chairman of the Portuguese-Chinese Chamber of Commerce and Industry.
The bilateral trade volume between China and Portugal has quadrupled in six years. "Not only cars and minerals, but also food and footwear," Correa said when referring to Portuguese exports. "China's huge middle class is increasingly focusing on consumption."
Xu Weili, Economic and Commercial Counselor of the Chinese Embassy in Portugal, stated that the bilateral trade volume between China and Portugal reached US$4.8 billion in 2014, a year-on-year increase of 23%. He said: "More and more companies are cooperating." He also promised to "support all projects that help deepen relations between the two countries." Portugal's "Golden Visa" project-Residence Permit for Investment Activities (ARI)-has recently been revised to increase support for urban renewal projects, many of which are related to tourism. Investing 350,000 euros in this area can apply for residency, while the purchase of real estate must reach 500,000 euros to apply for residency.
Golden visas have been enthusiastically favored by Chinese citizens. As of the end of October, of the 2,621 golden visas issued by Portugal, 2087 were obtained by Chinese citizens.
The Golden Visa program has attracted nearly 1.6 billion euros of investment in three years, almost all of which are real estate investments. Although the project was suspended for a short period of time in 2015, real estate agents report strong demand. "Chinese investors are well-funded and experienced," said Shen Hao, CEO of Noble Fortune. "A lot of people have a clear understanding of southern Europe: there is a lot of potential there." Noble Fortune is in Lisbon , Rome, Barcelona and Athens have offices.
Given the importance of China to Portugal, some people are wondering how the sharp slowdown in China's economic growth will affect Portugal. Others believe that such concerns are unnecessary. The reason is that China's economy is now significantly internationalized, the Central Bank of China has huge foreign exchange reserves, and the World Bank predicts that China's economic growth will still reach 6.9% and 6.7% this year and next.
"How come there is a discussion about whether it is a hard landing or a soft landing?" Da Cruz said thoughtfully. "You won't land at all."