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SPOTLIGHT • BENELUX European headquarters,” said Nicolas


Mackel, consul general for Luxembourg in Shanghai.


The final outing


China's interest in the region isn't a recent development. What's new is the kind of investment moving into Europe's Low Countries, and the volume in which it is arriving. Chinese companies, starting with


state-owned firms, have invested in Ben- elux since China opened its doors to the world in the late 1970s. BoC estab- lished a branch in Luxembourg in 1979. COSCO, one of largest shipping compa- nies in the world, docked in the Nether- lands in the 1980s. Early last decade, China's turbo-


charged growth sent commodity prices skyrocketing worldwide. In an attempt to better control the prices of raw materi- als such as iron and oil, Beijing pushed state-owned firms into a global hunt for natural resources, a so-called “going out” strategy. China's annual outbound for-


eign direct investment (FDI) leapt from US$2 billion in 2004 to about US$50 bil- lion in 2008, a compound annual growth rate of 130%, according to research and advisory firm Rhodium Group. Foreign acquisitions didn't stop with


resources. An increasing number of pri- vate Chinese enterprises joined an inter- national buying spree of technology and name brands. Equity was another tar- get on the government's list of interests abroad. During the past two years, China's


“going out” process has matured. Te new wave of companies moving onto the global market is searching for not coal or technology, but consumers. Unlike previ- ous outbound efforts, the trend is driven by private enterprise, not government policy.


Finance magnet


Chinese FDI to Europe swelled to US$10 billion per year in 2011, or about 25% of China's global outflow, according to the Rhodium report. But the inflows


Chinese foreign direct investment, 2010


have entered Europe unevenly. Eastern Europe has attracted the


largest share of manufacturing invest- ment, with Chinese factories producing machinery and cars in countries such as Poland and Slovakia. Technology buyouts have targeted Germany, as have com- panies looking to quickly tap Europe's biggest consumer market. Compared to Germany or France, far fewer Chinese companies have targeted Benelux as a manufacturing hub or major consumer market. Official FDI data on Benelux as a


bloc is almost non-existent, but data pieced together from the three countries indicated the vast majority of inflow from China – about 97% – was headed toward Luxembourg's financial sector. Luxem- bourg is the world's second-biggest man- ager of investment funds after the US, as well as the EU's largest wealth manage- ment center. Te country of little more than 2,500


square kilometers absorbed US$3.2 bil- lion in Chinese FDI in 2010, or just over 50% of the EU's total FDI intake from China, according to the most recent data available from China's Ministry of Com- merce (MOFCOM). Te trend is set to continue. Although


ICBC and BoC have had a presence in Luxembourg for decades, only in past three years did both banks establish EU headquarters in the country. CCB will be the next mammoth financial institution to follow suit. Chinese companies and banks look-


Britain Germany


Chinese FDI into Belgium


$45.3m France


42 China Economic Review • November 2012


$3.2b $65m


Chinese FDI into Netherlands


Chinese FDI into Luxembourg


Source: MOFCOM


ing to grow in Europe are also attracted to the 64 double-taxation agreements Lux- embourg has signed with other jurisdic- tions, Mackel at the Luxembourg consul- ate said. “We see Luxembourg more and more being used by Chinese investors for investments in other European countries, or much further on in Canada or Russia. A lot of big Chinese gas and oil deals are being structured through Luxembourg,” he said.


Gateway to Europe


It's not just Chinese cash that is flowing through Benelux, it's also Chinese wares. More than 65% of shipping containers passing through major European ports will enter or exit the Netherlands or Bel- gium. Te port of Rotterdam in the Neth-


erlands, Europe's largest, accounts for by far the largest share. About 40% of all shipments headed to Germany, the EU's


Benelux


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