Editor's Note: Greetings! A report from the European Commission suggested that Chinese investors seemed to step up their expansion in the EU this year, though on a very modest basis. North American companies remained the bloc's biggest source of foreign investment. This edition of the CCCEU Weekly Update keeps you up-to-date on China-EU dynamics. Enjoy reading and have a restful weekend. 

Weekly updates: Focus

Brussels recently released an analysis of the EU's foreign deals and greenfield investment in the first quarter of this year, saying that Chinese mergers and acquisitions in the EU stayed active despite the overall decline in foreign deals and greenfield investment in the EU.

Foreign deals plummeted in Q1 2023. The Joint Research Centre (JRC), the European Commission's science and knowledge service, concluded that in a recent report. Foreign deals decreased from a peak of 564 in 2021Q3 to 317 in 2023Q1. Compared to the same quarter last year, in 2023Q1, the number of foreign deals decreased by 40.1%, it said, adding that the decline in year-on-year foreign deals' values was even more pronounced (-71%).

North America was still the biggest source. North American companies saw a decrease of 34.9% in transactions in Europe but remained the main source of foreign investments in the EU, accounting for 39.4% of all foreign mergers and acquisitions in the first quarter of 2023.

Chinese M&As in the EU showed strength. The report stated that in the first quarter of 2023, mergers and acquisitions in Europe were strong ONLY for China (including the Chinese mainland and Hong Kong), increasing by 25% compared to the first quarter of 2022. The growth, however, was partly due to lower transaction numbers in the previous year. 

However, Chinese investors were involved in less than 5% of the EU's foreign deals. According to the report, Chinese investments accounted for 4.7% of the total foreign transactions in this quarter. Germany and Spain attracted two-thirds of Chinese transaction investments, with five transactions each. More than half (8 out of 15) occurred in the fields of professional and scientific and electricity sectors.

From the perspective of member states, the countries with the largest year-on-year contractions in foreign deals in the first quarter of 2023 were the Netherlands (-63%) and Italy (-81%), while Poland (+10%) and Finland (+250%) experienced significant growth.

Foreign greenfield investments in the EU declined as well. The report stated that the value of foreign greenfield projects in the first three months of 2023 was 9.5 billion euros, significantly lower than the fourth quarter of 2022 and especially the third quarter of 2022 (11.8 billion euros and 21.5 billion euros, respectively), with a decrease of 19.4% compared to the previous quarter and an 84.3% year-on-year decrease.

Consistent with the decline in the value of foreign greenfield projects, the number of these projects also decreased by 48.7% year-on-year, with declines in various aspects, including their source countries, industries, and destination countries.

By industry, the wholesale sector had the largest share (32%) among all foreign greenfield projects. The ICT sector followed, but it also saw a significant decline in project numbers, with a negative year-on-year change of 57.6%.

North America remained the most important source of foreign greenfield projects entering the EU, accounting for 39%. However, foreign greenfield projects from the Chinese mainland and Hong Kong, which saw the largest year-on-year decline (-71.4%) in the first quarter of 2023, accounted for 2.5%.

Spain had the largest share (22.3%) of foreign greenfield projects in this quarter, while France had the largest year-on-year decline (-64.2%).

Weekly updates: Hot Topics

Eurozone inflation stays hot in August, ECB rate debate rages on

Eurozone inflation remained stable at 5.3 percent in August, defying expectations of a decline, and raising concerns that further interest rate hikes may be necessary to beat racing prices and send the economy into recession in the process. ECB officials will meet in two weeks to decide whether to raise interest rates for the tenth consecutive time to 4 percent or pause at 3.75 percent to see how growth and inflation develop. Politico reported.

Eurozone economic sentiment drops in August

Economic sentiment in the eurozone fell a touch more than expected in August, according to a survey released on Wednesday. The Sentix economic sentiment indicator fell to 93.3 in August from 94.5 in July, versus expectations for a reading of 93.7.  

EU purchases of Russian LNG up 40%: study

According to new findings released by Global Witness, an environmental watchdog organisation, the EU bought 21.6 million cubic metres (mcm) of Russian LNG between January and July of this year, a small increase compared to the same period in 2022, when imports totalled 21.3 mcm. 

Car show IAA will highlight China's lead in electric cars

Chinese firms' widening lead in the global shift to electric vehicles is set to be on open display at the biennial fair in Munich. The number of Chinese exhibitors will double, underlining their ambition to challenge brands like Volkswagen, BMW, Peugeot, Renault and Fiat on their home turf.  

'Uninvestable' not a term to describe China, says EU Chamber of Commerce

The European Union Chamber of Commerce in China said on Wednesday that it would not use the term "uninvestable" to describe China, in response to a comment from U.S. Commerce Secretary Gina Raimondo, who said late Tuesday that American firms had increasingly used the term to describe China, prompting Beijing to defend its business practices and approach to foreign investment. Reuters reported.

Weekly Updates: What are experts talking about？

China's Global Security Initiative will help Europe tackle security dilemma

Source: China Institutes of Contemporary International Relations

Author: Zhang Jian, Vice President, China Institutes of Contemporary International Relations

At present, Europe is "facing a war on its borders", and the Russia-Ukraine conflict is regarded by Europe as a "turning point of the times", the outbreak of which still leaves Europe in a state of shock and has completely changed the security environment of Europe. Europe is facing an unprecedented security dilemma, and to get out of this dilemma, we need the spirit of cooperation, inclusive thinking, and also need to let go of prejudice and obsession, and the Global Security Initiative (GSI) provides the new thinking and direction necessary for Europe to get out of the security dilemma.

The core concept and principle of the Global Security Initiative is "six commitments", which is similar to the concept and principle of Europe's security strategy. The intertwining of traditional and non-traditional security issues, as well as the difficulty of integrating the two major areas of development and security, are common problems faced by China and Europe. The new era urgently calls for a new security framework to better safeguard the security of all countries, enhance mutual trust and jointly address global issues.  

The story of China's electric vehicle industry

Authors: Giuseppe Porcaro, Alicia García-Herrero and Zeyi Yang

Source: Bruge

China has become a world leader in making and buying Electric Vehicles (EV), somehow under the radar. In fact, China today produces 54% of total EVs globally and with an even higher share for EV batteries. China's EV industry is not just about rapid growth and success; it involves intricate geopolitical dynamics that could put its success at risk.