China makes record purchase as eurozone puts assets up for sale
| Beijing
China鈥檚 Three Gorges Corp. has bought a 21 percent share in Portugal鈥檚 largest power producer from the country鈥檚 debt-burdened government, in a clear sign that Beijing may help bail out cash-strapped European nations, but only if it gets something worthwhile in return.
The Chinese government has responded coolly to pleas that it use some of its $3.2 trillion in foreign reserves to buy bonds from struggling governments in Greece, Italy, and Spain. But officials here have said they are interested in picking up European assets.
This week鈥檚 $3.5 billion deal by Three Gorges, which operates the world's largest hydroelectric project, is聽 the largest-ever Chinese investment in Europe. It comes only weeks after Trade Minister Chen Deming told Chinese businessmen that 鈥渟ome European countries are facing a debt crisis and hope to convert their assets into cash and would like foreign capital to acquire their enterprises. We will be watching closely and pushing forward progress.鈥�
The Portuguese government had been forced to sell off its share in Energias de Portugal as part of a 鈧�78 billion bailout package from the European Union and the International Monetary Fund. Lisbon is also selling a 40 percent share in its national power grid operator, and another state-owned Chinese company, China State Grid Corp., is bidding for it.
鈥淭he European economy needs blood, but not in the form of a transfusion asking for us to buy their bonds,鈥� said Wang Yiming, a senior economic policymaker, at a meeting in Brussels last month. 鈥淲e need to create new blood by promoting investment.鈥�
Not always welcome
Such investment is not always welcome. Last month the Icelandic government nixed a $200 million plan by a Chinese businessman to buy 115 square miles of land to build a tourist resort.
Chinese Deputy Foreign Minister Fu Ying lashed out earlier this month at such reticence, saying she hoped that 鈥渙ur economic activities are not interpreted from a political perspective and are not imbued with political interests.鈥�
Beijing is encouraging its state-owned enterprises, many of which are flush with cash, to seek opportunities abroad, and Europe is a promising destination.
Britain, for example, is seeking foreign investors to fund the lion鈥檚 share of a $310 billion plan to upgrade the nation鈥檚 roads, railways, utilities, and Internet systems, and is looking to China, among others.
鈥淲e are looking for short-term projects to invest in almost immediately, and that could mean next year,鈥� Qi Yue, an executive at CITIC Construction Co., told the official China Daily on his way to the first meeting of the UK-China Infrastructure Taskforce last week.
Chinese corporations are growing increasingly adventurous in Europe. The Shanghai-based automobile manufacturer Geely bought Volvo in 2010, and earlier this year the China National Chemical Corp. paid $2.2 billion for Elkem, the Norwegian manufacturer of key components in solar panels.
Still, China鈥檚 total non-financial investment in European Union member states is still tiny 鈥� around $15 billion according to a recent report by the Rhodium Group, a consultancy in New York, which is only 0.2 percent of all the foreign investment in Europe.
