China’s takeovers and Foreign Direct Investment statistics

China’s takeovers and Foreign Direct Investment statistics

Chinese state-owned enterprises (SOEs) are playing an increasingly significant role in foreign takeovers in Europe.

It is important to have a complete overview of all Foreign Direct Investment (FDI) data in order to be able to understand this development and respond accordingly. However, the available data shows discrepancies.

The European Commission reported that Chinese SOEs were involved in 57 foreign takeovers of European companies in the period between 2010 and 2017. However, Dutch Consulting firm Datenna identified 160 deals with significant Chinese state influence and 100 more with moderate influence within the same timeframe. Layers of ownership, shareholding structures and deals through European subsidiaries hid the reality of Chinese state influence. This highlights that the FDI statistics from the Commission have limitations.

The European Court of Auditors also concluded that European Commission official information on FDI is not up to date and that it is fragmented and incomplete.

On 01 October 2020, Members of the European Parliament Bart Groothuis and Liesje Schreinemacher from The Netherlands representing the Renew Europe Group, tabled a parliamentary question to the European Commission. The MEPs asked “how does the Commission explain the difference between the number of Chinese SOEs involved in foreign takeovers in the official information and the number in the data from Datenna?” and “does the Commission agree that the effectiveness of FDI instruments depends on complete and reliable data on FDI?”

In a final question, the MEPs enquired if the Commission and the Member States will “improve the quality of FDI statistics?”

On 10 November, Executive Vice-President Valdis Dombrovskis, Commissioner for ‘An Economy that Works for People’ responded on behalf of the European Commission. In his answer, he informed the parliamentarians that “the screening of foreign direct investments (FDI) requires a maximum of reliable information on foreign investors”.

Executive Vice-President Valdis Dombrovskis explained that “official statistics only provide information on FDI in EU by the direct investor, which may differ from the ultimate owner”. He stated that “in view of this, in 2017 the Commission has developed a new database using firm-level data” and added that “this database, also used for the report on FDI in the EU is based on commercially available sources and it covers all countries or origin”.

The Commissioner clarified that the new system “provides fact-based information on the nationality of the final owner and its type (including state ownership)” and that “the analysis by the consulting firm Datenna appears to cover only China, its sources of raw data are unclear and it seems to use an undisclosed algorithm to determine the degree of ‘state influence’ in private companies, in ways that might not be directly equal to state ownership”.

Executive Vice-President Valdis Dombrovskis underlined that “Eurostat follows up on the quality of the FDI data delivered by the EU Member States in the annual quality report including the completeness and timeliness of the data”. He also expressed that “in cooperation with the Member States, Eurostat has conducted a pilot study on annual FDI statistics based on the ultimate ownership concept and FDI statistics distinguishing greenfield FDI transactions from takeovers”. Executive Vice-President Valdis Dombrovskis highlighted that “the project also provides for collecting data on FDI positions by an ultimate investor” and that “the first release of such data is planned for 2021”.

Finally, Executive Vice-President Valdis Dombrovskis declared that “the Commission continues monitoring FDI trends and the FDI Screening Regulation provides that Member States report annually to the Commission on FDI in their territory”.

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