Chinese foreign direct investment into Europe hit US$18bn in 2014, almost double 2013’s level. Over the past four years, the average spend in the region by Chinese investors has been US$12bn a year, suggesting a slowdown in Chinese growth has not dented that country’s appetite for international exposure.
Given the recent down-to-the-wire nature of negotiations between Greece and its eurozone creditors, it is not surprising that China has been cited as a possible financier-of-last-resort for Europe’s peripheries in the event of a euro breakup. In one such scenario, China could provide financial assistance in return for ownership in vital infrastructure such as ports and/or use Greece for geopolitical advantage. If that happens, Portugal and Spain might consider going down the same route, as the fear of being able to fund themselves dissipates.
As things stand, we believe by far the most likely outcome is for Greece to achieve an element of debt forgiveness without the need for a euro exit. Nonetheless, the potential China angle may serve to focus minds around the negotiating table in the coming weeks and months.
Nick Clay, Newton