Page 34 - BNE_magazine_10_2019 kolomoisky

34 I Central Europe bne October 2019
When Chinese deals turn sour
Clare Nuttall in Glasgow
The Central, Eastern and Southeast Europe regions have been targeted by Chinese investors along with other parts of the European continent and other world regions as Beijing rolls ahead with its multi-continental Belt and Road Initiative (BRI).
This has brought billions of euros into the region especially in areas such as energy and transport infrastructure, often where countries have struggled to get financing from other sources. Increasingly, Chinese investors have also snapped up indus- trial and commercial assets.
However, as investment rationales often differ from pure market interest, and business cultures clash, some of the many deals in the region have flopped.
A report published by Rhodium Group (RHG) and the Mercator Institute for China Studies (MERICS) earlier this year found that Chinese investment in eastern
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EU member states only accounted for a tiny share (1.5%) of Chinese investment in the EU, and the volume of investment declined in 2018, as did investment across the EU as a whole, by a startling 40%.
In addition, says the RHG/MERICS report, “in 2018, for the first time, Chinese investors sold European assets on a significant scale. We estimate that Chinese firms divested at least €4bn worth of assets in the EU”.
There are a variety of reasons for the abrupt slowdown in Chinese investment in Europe, and indeed the downward trend in China’s global outbound FDI, which RHG/MERICS attributes to “con- tinued capital controls and tightening of liquidity in China as well as growing regulatory scrutiny in host economies”.
Caught in the crossfire
As the trade war between Washington and Beijing escalates, countries around
the world are getting caught up in
the standoff. In one of the latest such incidents, a diplomatic spat has broken out in Ukraine over Chinese plans to buy a controlling stake in Motor Sich, the world’s largest producer of aeroplane and helicopter engines.
If the deal gets the go-ahead from Ukraine’s Antimonopoly Committee, Chinese firms Skyrizon Aircraft and Xin- wei Technology Group will control more than 50% of Motor Sich, according to reports in the Ukrainian media. As part of the deal, the Chinese firms will grant $100mn to Ukraine’s aviation industry.
This worried US officials, with US President Donald Trump’s recently sacked national security advisor John Bolton warning – not long before his dismissal on September 10 – that the US administration will prevent Ukraine from cooperating with China and offer- ing military technologies. "Ukraine will