Asian FDI in Europe

In this article, we’ll talk about the Asian Outbound FDI in Europe, detailing the most attractive industries and countries to invest in. What are the top sectors in the EU to invest in now?

China's FDI Policies in Europe

There are a few relevant policies investors should consider regarding FDI in Europe:

The 14th five-year plan: China targets to boost innovation and be at the frontier of the global technology and science industry. The main focus is to strengthen the engagement of China’s tech enterprises in the global supply chain
Belt & Road: The B&R initiative is China’s core global infrastructure development strategy to encourage development collaborations. Member countries in Europe including Czech Republic, Estonia, Hungary, Poland, Romania, and other central European countries.
Comprehensive Agreement on Investment: The Agreement, originally drafted to promote trade deals between China and Europe, has been suspended due to geopolitical reasons, which may impact investments prospects for Asian investments in Europe.

What are the top industries to invest in Europe?

1) TMT (Technology, Media, Telecom) and digital technologies

The TMT and digital tech sectors are highly favored in recent years as a result of the world’s increased reliance on high tech and the internet, especially post COVID. While technologies in Europe are relatively mature, Asian tech companies are rapidly growing and expanding. Mass digitalization is in progress; thus, these sectors may be ideal for Asian investors.

Turkey: Turkey’s digitalization and technology industry have been growing at a fast pace with promising progress, its E-commerce penetration and gaming start-ups have also greatly grown. Recently, Trendyol (E-commerce start-up) has become Turkey’s most valuable company ($16.5bn valuations) (2021, Daily Sabah). Since the digital sector in Turkey is a young industry, there is plenty of room for growth and investment.
Czech Republic, Hungary, and Serbia’s tech industries are also growing very fast (2020, Financial Times).
Germany: Though traditionally Germany had been a popular investment destination, many high-tech sectors were newly added to the Foreign Trade and Payments Ordinance in May 2021. This signals increasing scrutiny over foreign investment in technologies in Germany, showing a tougher prospect for investors.

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2) Life Sciences, Medical &Pharmaceutical

Similarly, the pandemic has triggered a higher global demand and a bigger focus on life sciences and healthcare. Firstly, despite COVID, the living standard and life expectancy of the global population is increasing; secondly, life sciences and biological technologies are highly developed in Europe, therefore this could also be an ideal sector to invest in.

Hungary: Hungary has been well-known for its advanced medical and pharmaceutical expertise in central Europe, with its heavy investment in medical R&D, cost-efficient and professional labor workforce, and a solid infrastructure base for medical supplies production. Hungary attracts many big biotech companies: BD (U.S.A), B.Braun(Germany), and Hoya (Japan), and many other multinational biotech companies have had successful returns from their investment in Hungary.
Netherlands, UK, Spain are also FDI hotspots for life sciences and medical supplies for their consistent expertise; however, costs in these countries tend to be more expensive than in central European countries.

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3) Advanced Manufactures & infrastructure

Manufacturing and infrastructure are among the top sectors of Asia’s FDI outflow. Currently, an increased focus on green production has been set as a goal by countries around the world, with a promising prospect.

Serbia: Manufacturing is a key sector in Serbia where most of its FDIs flow into. As a result, employment in this sector has grown by 50% over the past two years. Firstly, Serbia has a young and cost-effective workforce which is advantageous for innovation and productivity. Secondly, its technological stability ensures a good manufacturing capability. Green energy and sustainability are also at the core of Serbia’s development plan, echoing with the global ESG focus and China’s ambition on infrastructure.

Conclusion - Outbound FDI from Asia to Europe

As for now, TMT and technology, life sciences and biotech, advanced manufacturing appear to be relatively suitable for investment, with European emerging countries such as Turkey, Hungary, and Serbia being good destinations. These countries have reasonable tax rates (see our articles: Company Taxation in Hungary, Taxation in Turkey, Company Taxation in Serbia), labor costs, and stable technology capabilities, and can be a starting point for Asian investors interested in the rest of the European market by virtue of their geographical locations.

In the short term, there seem to be some hurdles and tighter compliance issues on foreign investment in European companies. However, outbound investment from Asia is rapidly growing and encouraged. In the long term, since the European and Asian economies are complementary to each other, there could be more opportunities for investment.

References

UNCTAD, 2021. World Investment Report 2021.

DEIK, AMCHAM, ICC, AHK

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All rights reserved. All rights of Asian FDI in Europe article belong to Gurcan Partners. The author has no responsibility for the information in this article. This article is prepared just to inform.

Pingyao Zhu

Gurcan Partners Budapest Office