Wednesday, 17 April 2013

China's red capitalists cashing in on the economic mess created by Europe's failed political leaders

The owners of Volvo Car Corporation are nowadays Chinese.

"First they took our jobs by inundating Europe with cheap plagiarized products made by slave workers. Now they are buying up what is left of formerly profitable companies." 

The economic mess - a deadly cocktail of a failed common currency, insane climate change policies and disastrous tax payer subsidized wind and solar energy programs - created by Europe's political leaders is an open invitation for China's ruling red elite to come and take over what is left of once profitable industries in the European Union

Europe has become the world's largest recipient of foreign investment by Chinese firms. While North America largely views them with suspicion, China's state-owned corporations have been largely welcomed in a continent plagued by recession and in desperate need of cash.

Chinese state-owned companies are expanding their influence in Europe, investing more than $12.6 billion (€9.6 billion) in the Continent last year, according to a study by the Hong Kong-based private equity firm A Capital.

The amount represented an increase of about one-fifth in comparison to 2011, and was all together larger than investments in North America and Asia combined. About 86 percent of the investments were in the service and industrial sectors.

"Many Chinese investors regard Europe's current weakness as an opportunity to jump in," said A Capital CEO André Loesekrug-Pietri. "They're looking for technology, know-how, high-value brands -- and they find them here." Many European firms are world leaders in sectors like industrial manufacturing, auto manufacturing, the environment and health care.

The Chinese leadership is setting these key sectors as a top priority in their newest five-year plan. The State Council is supporting companies' expansions abroad with cheap credit and tax breaks, with 93 percent of Chinese investments in Europe coming from state-owned corporations.

"In Europe, the resistance to these kinds of investments is lower than in other places," Loesekrug-Pietri said. Reservations about the opaque interests of Chinese state companies are greater in the United States, where the government Committee on Foreign Investment in the United States (CFIUS) essentially blocked the sale of US aircraft manufacturer Hawker Beechcraft to a Chinese buyer for national security reasons. In 2008, the committee blocked the now-defunct electronics maker 3Com from being partially sold to Chinese state corporation Huawei.

In contrast, Europe has been a largely welcoming place for Chinese buyers. State fund CIC acquired a 10-percent stake in London's Heathrow Airport late last year, and a 7-percent stake in the French satellite provider Eutelsat. And Portugal's government negotiated its largest-ever privatization in late 2011, agreeing to sell its 21-percent stake in the massive power company Energias de Portugal to China's Three Gorges. The sale was Lisbon's first privatization mandated under its bailout program earlier that year.

The man interviewed by German Der Spiegel, A Capital CEO André Loesekrug-Pietri, must be a rather naive person, or - more probably - have a personal interest in Chinese foreign investment activities:

"The Europeans see things more pragmatically than the Americans," said Loesekrug-Pietri. The economies of recession-plagued Southern Europe are particularly in need of fresh capital. In addition, many small and mid-sized companies -- the so-called Mittelstand that are the backbone of the German economy -- are hoping their new shareholders will provide easier access to the booming Chinese market.
"What we're seeing with these deals is just the beginning," Loesekrug-Pietri said, adding that the coming years show tremendous potential.

Read the entire article here

If there really are German and other European business leaders, who believe that Chinese government investors will save Europe from the failures created by the political leaders, they will soon be in for a huge disappointment. 

While the Chinese are buying European companies and technology, the European Union - in spite of being in the middle of a seemingly endless recession -  continues to pour European taxpayers' hard earned money into dubious climate change projects in China:

The EU will help China in meeting its environmental, energy- and carbon-intensity targets and in the long run, contribute towards achieving a global reduction of greenhouse gas emissions. The EU support will result - through pilot projects - in providing technical assistance, training and fostering exchanges of experience, best practice and know-how in areas like the low-carbon economy and the green economy. The three projects -for which the EU contribution amounts to €25 million- will be implemented over a period of 4 years and focus on areas like water, waste and heavy metal pollution, emission trading system (ETS) and sustainable urbanisation. 

China's ruling communist autocrats of course accept the EU development aid with a polite smile. But behind Barroso's and Hedegaard's backs, they must be laughing. 


It took less than five seconds to find out about Loesekrug-Pietri:

André Loesekrug-Pietri is the founder of A Capital, the first private equity group focused on Chinese outbound investments, and has fifteen years of private equity, automotive and aerospace industry experience. The most recent transaction conducted by A Capital was China's largest private conglomerate Fosun's strategic investment into Club Méditerranée.

(image by wiki)

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