China’s Southern European Spending Spree
Image Credit: REUTERS/Hugo Correia

China’s Southern European Spending Spree


As the world marks the 500 year anniversary of the arrival of the Portuguese people to China, a wave of Chinese investment and capital is pouring into Portugal.

Portugal was the first European power to establish a permanent settlement in China and was the last to leave when it returned Macau to Beijing in 1999. Now, suffering from a severe economic crisis, Portugal is making a strong push to attract foreign investment. China, despite its own economic slowdown, is taking advantage of the opportunities offered by the crisis in Portugal – and in other southern European countries like Spain and Greece.

To begin with, a growing number of Chinese investors have also been taking advantage of the drop in Portuguese property prices by buying new luxurious apartments in Lisbon’s best districts. The Portuguese government is trying to attract this investment as well by offering Portuguese citizenship to any Chinese willing to invest a minimum of US$800,000 in the country. The “Golden Passport” plan is attracting an increasing amount of Chinese companies and private citizens to buy real estate and set up offices in the country. Chinese businesses have also expressed interest in acquiring several struggling vineyards and olive farms in southern Portugal too. This makes sense since China is quickly emerging as one of the world's major destinations for European wine exports.

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Meanwhile, over the past two years, Chinese state-owned enterprises (SOEs) have been acquiring major shares in strategic sectors of the Portuguese economy, such as the water, electricity, and communications industries. One example of such a purchase occurred in late 2011, when China’s Three Gorges Corporation acquired a 22 percent stake in Portugal’s national energy company, Energias de Portugal (EDP), for US$3.5 billion (nearly twice EDP’s actual market value). This was also followed by a loan of US$1 billion by the Bank of China to EDP. 

Another example of Chinese business acquisitions in Portugal includes China State Grid’s 2012 purchase of 25% of Redes Energeticas Nacionais’ (REN) shares for a total of US$524 million. China State Grid paid the Portuguese power company 2.9 euros for each share, which was 40 percent over the value of the stock at the time of the agreement. 

Also, in March of this year, Beijing Enterprise Water Group acquired Veolia Water Portugal from its French parent company for US$123 million. Veolia provides water to four districts in Lisbon, supplying approximately 670,000 people. That same month, China Mobile announced that it was considering acquiring an unspecified stake in Portugal Telecom too.

These acquisitions not only allow China to establish a strong foothold in Portugal; they also facilitate Beijing’s expansion into Portuguese-speaking countries in South America, Africa and Asia, since many Portuguese companies already have a strong presence in these regions. For instance, last March, the Three Gorges Corporation and EDP both announced they were planning major investments in hydropower and solar parks in Brazil, Angola and Mozambique. In April 2012, China’s Sinopec bought 30 percent of the operations of Portugal’s state-owned oil company, Galp Energia SGPS, in Brazil for US$4.8 billion. Also, China Mobile’s interest in Portugal Telecom is highly motivated by the strong presence the company has in Angola, Mozambique and Timor-Leste. In Angola, for instance, Portugal Telecom has 25 percent of the cell phone market and provides 40 percent of internet communications, while in Timor-Leste, it virtually controls the whole market.

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