China as Key Player in foreigns investments

The current business landscape and dynamic of companies around the world is being triggered by the wave of globalization and investments of China. China has become a key player on the market with its increasing economic presence around the globe.

Regardless of the cultural differences, language barriers, financing difficulties and regulatory issues, China has positioned itself while expanding its footprint.

Wealthy Chinese families and entrepreneurs and de Chinese government itself, no longer want to keep their wealth invested in the country, they are seeking either for mergers abroad with the view of acquiring know-how to change the world’s view from “made in China” to “designed in China” or to invest in order to position themselvesworldwide as new economic key players.

China’s portfolio of investments is very broad but with a special interest in the following fields: infrastructure, minerals and in particular copper, real estate, energy, agriculture.

Economics forecast that China will become one of the world’s biggest cross-border investor by the end of this decade. Its global offshore assets will be tripling from $6.4tn now to nearly $20tn by 2020 and China’s outbound investment will soon surpass the amount invested inside the country, marking a new step in the rise of this new economic power.

 

China and Europe

China’s investments in Europe have mainly exploded in 2008-2009 after the global financial crisis and with a preference for energy, automotive, food and real estate sectors. Since then Europe has become one of the favorite playgrounds for China. Between 2000 and 2014, Chinese companies spent €46bn on 1,047 direct investments in the 28 EU countries.

The UK is by far China’s favorite spot and the biggest recipient of Chinese direct investment, with a cumulative total of €12.2bn between 2000 and 2014. Germany comes second with €6.9bn and France third with €5.9bn.

 

China and Latin America

China is a big lender to Venezuela and Argentina, the two most troubled countries of the region. By these means, China’s current and potential investments  may change the face of Latin America. From a politic perspective, ambitious goals have been set by China’s President Xi Jinping for exchange with the Latin American and Caribbean region (LAC). For the period between 2015 and 2019, an estimated target of $500 billion in trade and $250 billion in direct investment has been foreseen.

 

China and Chile

China’s presence in Chile is completely different than in the rest of Latin America. Although China is helping to boost the weak economy of certain countries in the region, in Chile, China is playing a different role and acts as business partner in a well-established Chilean economy. Hence, Chile is lucky to position itself as a unique and strong partner for China in Latin America.

Besides the economic stability Chile has to offer, it has become a powerful actor in the market due to historical and political decisions taken. Chile has established strong diplomatic ties with China mainly through its free trade agreements since 1970.Chile was the first South American country to establish a diplomatic relationship with China, the first in 1999 to support the entry of China in the World Trade Organization and the first country in Latin America to recognize China as a market economy.

Thanks to the above and the entry into force in 2006 of the free trade agreement between China and Chile, a fundamental bridge between these two nations was set: China became the main and first commercial partner of Chile.

Many other agreements have been taken to strengthen the commercial and economic relationship and amongst others, agreements of financial cooperation between the Central Banks in both countries, double tax treaty and agreements to promote and facilitate tourism.

While China is Chile’s first trade partner, Chile is China’s second largest South American trade partner.

 

What’s next?

Not only China is on the verge of becoming a net exporter of capital, it has already overtaken its Western counterparts as a primary source of credit for the developing world. And from this financial prominence, one day it will likely want to exercise political influence, too.

Although it remains to be seen if this degree of integration can be achieved, the investment target is certainly plausible, as China is likely to emerge in the next few years as the world’s largest supplier of capital. Hence, China is a current and strong future key player in the Chilean economy, no one can neglect anymore.

 

EDN’s China Desk

At EDN’s, jointly with our strategic allied Vermehren Abogados, we are working in the development of our China Desk (which also includes transactions with other countries of the Asia-Pacific Basin) in order to provide our clientswith  contact opportunities for their business interest both in the region and in Chile as well as the legal advisory necessary to succeed whether in the Asia Pacific countries or in Chile.