The Special Issue “Chinese Investments in Europe’s Energy Sector: Risks and opportunities?” in the renowned journal Energy Policy is the culmination of two years’ of research by the Dahrendorf Working Group on Europe and China relations. It is edited by the co-chairs of the Working Group, Björn Conrad and Genia Kostka.
The nine papers included in this special issue analyse Chinese investments through a variety of methods that include survey analysis, content analysis, interviews and in-depth case studies of different energy sectors and regions in Europe. By studying Chinese investments in different parts of the energy sector and in different European countries, the contributions shed light on the benefits and costs of Chinese investment in this sensitive sector. On the one hand, the benefits can be substantial, as China’s new role as a global investor offers significant economic benefits and political partnership. Yet, the findings also point to growing concerns among policymakers and business managers in Europe, ranging from worries about unfair competition and economic risks to concerns about national security.“
Editorial: Chinese Investments in Europe’s Energy Sector: Risks and Opportunities?
by Björn Conrad and Genia Kostka, Chairs of the Dahrendorf Europe-China Working Group
This paper analyses recent trends in Chinese investment in the European energy sector. These investments have increased in size, targeted a wider number of countries and entered multiple energy sectors, in particular fossil, renewable energies and energy infrastructure. We highlight the significant opportunities for, as well as the political and economic risks of, Chinese investments in the European energy sector. On the one hand, the benefits can be substantial, as China’s new role as a global investor offers substantial economic benefits and political partnership. Further benefits might potentially emerge from backward linkages of Chinese investments to improve access to China’s restricted markets. Yet, our findings also point to growing concerns among policymakers and business managers in Europe, ranging from worries about unfair competition and economic risks to concerns about national security. We conclude with policy recommendations for the European Union and its member states.
by Olivia Gippner, Dahrendorf Postdoctoral Fellow, and Diarmuid Torney, Member of the Dahrendorf Europe-China Working Group
Shifting energy policy priorities both in China and the EU (European Union) have transformed their bilateral relationship. In order to assess the impact of domestic policy priorities on bilateral energy cooperation and climate policy, this comparative study traces the evolution of EU and Chinese approaches to energy policy – and their relative emphasis on factors and frames such as availability, efficiency, affordability and environmental stewardship. Drawing on government documents and a data set of interviews with Chinese policy-makers, experts and academics in 2015–2016, the article argues that while the EU started with a strong emphasis on environmental stewardship and moved towards a focus on affordability and availability, China started with a strong emphasis on availability and has moved towards a greater emphasis on environmental stewardship. This shift in frames on the Chinese side and subsequent changes in subsidy structures and targets can partially explain the increase in investments in renewable energy technologies. The article concludes that the Chinese and EU perspectives have become more aligned over the past ten years, coinciding with an increasing trend towards renewable energy in Chinese energy investments in the EU, for example in Italy and the UK.
Chinese energy investments in Europe: An analysis of policy drivers and approaches
by Stephan Liedtke
Enhancing the understanding of China-EU energy relations, the article examines Chinese energy investments in Europe from 2008 to 2015 and analyzes the energy interests and policy approaches underpinning them. Analysis of this data shows that within the EU, 30 Chinese investments largely focused on the oil and gas sector, especially through the acquisition of company shares. Chinese energy investments in Europe reflect a clear political and commercial strategy that addresses the PRC’s need to balance supply chain security of fossil fuels, environmentally friendlier energy production and use as well as to enhance the market position and energy-industrial capabilities of Chinese state-owned or state-supervised energy companies. Based on a comprehensive set of domestic incentives for international investment the Chinese penetration of the European energy sector is embedded within two levels of political cooperation. The first level revolves around bilateral investment agreements between China and 27 EU member states. On the second level, China and the EU have established a variety of formats that guide their energy cooperation. The conclusion of the proposed bilateral investment agreement between the PRC and the EU would create a uniform investment environment across the continent and facilitate mutual economic benefits for both parties.
Chinese investment in the EU renewable energy sector: Motives, synergies and policy implications
by Louise Curran, Ping Lv, Francesca Spigarelli
This paper addresses three questions: how have trade and investment in wind and solar sectors evolved between the EU and China in recent years? Is there a link between rising trade conflicts and trade and investment trends? And what wider motivations and synergies can be identified in Chinese investments in the EU’s RE sector? To address these questions we analyze trade and investment data, as well as qualitative data, including information from media and company reports. Large increases in trade and investment were followed by rapid falls since 2012–13. Trade tensions have not led to increases in investment, rather the inverse. We find that Chinese investment in these two sectors is very concentrated in Germany. The key motivation for investment is market seeking, although R+D is also important, especially for wind. Most investments are greenfield, a preference that has persisted over time. Our qualitative analysis of several key acquisitions indicates that technology integration and the consolidation of capacities across the supply chain were key motivations in most of the cases studied. We conclude with some policy orientations.
China’s nuclear export drive: Trojan Horse or Marshall Plan?
by Steve Thomas
China’s civil nuclear industry expanded strongly from 2008 onwards and nearly half of reactor construction starts worldwide since then are accounted for by the Chinese home market. Increasingly China is turning its attention to the export market using its own designs, which it claims emulate the safety standards of the latest designs of the established nuclear reactor vendors. Its export efforts would be greatly strengthened if it were to win an order from an established user of nuclear power and its best opportunity appears to be the UK where it is at the early stages of negotiating the construction of nuclear reactors. The financial collapse of the French nuclear company, Areva, gives it the opportunity to take a stake in the rescued companies giving it access to important fuel cycle technologies and perhaps the large French reactor service market. Its other export prospects in Europe are in Romania and Turkey. There are a number of issues European governments need to examine before committing to allow in Chinese nuclear companies. These include national security concerns about dependence on China for key infrastructure, issues of quality control and regulatory competence and the lack of construction experience with China’s modern reactor designs.
China’s supply of critical raw materials: Risks for Europe’s solar and wind industries?
by Wiebke Rabe, Genia Kostka, and Karen Smith Stegen
This article examines the dependence of the European Union’s solar and wind industries on Chinese supply of five critical raw materials: tellurium, gallium, indium, and the rare earths neodymium and dysprosium. Based partly on interviews with experts, this study reviews China’s industrial policies that shape the supply of these materials abroad. We also assess the short- and long-term strategies of the European Union and European solar and wind industries to ameliorate potential supply bottlenecks. While these strategies adequately address short-term challenges, we find they pose several long-term risks, such as increasing the dependence on China and hampering European competitiveness in global markets. There is also divergence in the extent to which these two industries are vulnerable to supply bottlenecks and price volatility; because more options are open to them, European solar manufacturers are less exposed to these risks than their counterparts in the offshore wind sector.
by Pablo Pareja-Alcaraz
China’s Foreign Direct Investment in Europe has experienced a significant surge over the last decade. Southern European countries have not missed out on this trend and have gradually consolidated as important recipients of Chinese investments. This has allowed them to accumulate 23.5% of all Chinese FDI to Europe between 2000 and 2014 (10.8 billion Euro). The energy sectors of all four countries have been primary beneficiaries. Chinese entities have carried out impressive acquisitions in the Italian and Portuguese energy markets. In contrast, their presence in the Greek and Spanish energy markets has been discrete. In parallel, the penetration of Chinese investments in Italy and Spain’s subsectors of renewable energies has been more prominent than in the Greek and the Portuguese ones. The former two countries have received significant investments in solar-related greenfield projects, whereas the latter have mostly benefited from operations in wind-related ones. The influence of Chinese ergy policies and promoting foreignntities has had an impact on the markets of all four countries. This trend is not consolidated. Data suggests that Chinese investments have been highly opportunistic. Athens, Rome, Lisbon and Madrid should see China’s penetration in their markets as a mix bag of opportunities and challenges that demands better informed analysis.
by Richard Q. Turcsanyi
This article builds on Europe-wide knowledge of EU-China energy investment relations and discusses the cases of three Central European countries’ attitudes towards Chinese energy investments. It focuses on how Chinese investments are perceived compared to investments from other countries, and how the energy sector is perceived compared to other sectors. Media analysis, interviews with experts, and semi-structured questionnaires were used as data sources. It was discovered that these three countries dislike foreign control over strategic assets and Chinese energy investments are seen as falling into this category. The discourse frames on the general level fluctuate between beneficial and threatening at both the political and economic levels, yet the benefits are seen as greater than any potential threats in all three countries. Energy security frames are only just beginning to be discussed within national discourses about Chinese energy investments. In Poland, the Chinese presence in the energy sector is framed as an issue of availability, affordability, and efficiency, and is related to Polish plans for maximizing efficient use of local coal resources. In the Czech Republic and Slovakia, China is often perceived ideologically and only the energy frame of environmental stewardship is present in a minor way.]
Chinese FDI and psychic distance perceptions on regulations in the German renewable energy sector
by Katiuscia Vaccarini, Christoph Lattemann, Francesca Spigarelli, Ernesto Tavoletti
Countries vary in dimensions such as culture, language, business practices, policy-making, regulations, etc. Research shows that distances between countries concerning these dimensions affect foreign direct investment (FDI) flows. The higher the distances, the higher the difficulties for businesses, as managers’ decision-making is based on their perception of those distances. This paper analyzes the perception of distances between China and Germany by surveying Chinese managers who invested in Germany in the renewable energy (RE) sector, using Child et al.’s (2009) measure of psychic distance (PD) as a guide. The RE sector is young and highly dynamic, and the dimensions of PD are constantly changing. Mismatches in the perception of PD ex ante and ex post the decision to engage in FDI may lead to possible FDI failure.
We use a five-company multiple case study to analyze if Chinese managers perceive distances in various dimensions, particularly regulation-based, and if there is a mismatch of perceptions between the pre-market and post-market entry period to investigate if managers’ perceptions change over time. Our findings lead to recommendations for practitioners and international business scholars, and policy making in the RE sector, by showing that operationalizing the PD construct should be complemented by dynamic analysis.
Sovereign Wealth Fund investments in Europe as an instrument of Chinese energy policy
by Tomasz Kamiński
Chinese Sovereign Wealth Funds (SWFs) are new instruments of Chinese ‘Go Global’ strategy and the politics of maintaining raw materials and energy security. Europe has lured 60% of the total USD 27.3 billion invested by Chinese SWFs in the energy sector globally, which provokes the question as to how important SWF investments are in the political sense and what security concerns they bring. This paper is the first that presents a comprehensive picture of Chinese SWF investments in the European energy market and one of the very few papers about SWFs based on multiannual, comprehensive empirical data. The author argues that Chinese SWFs are different players on the energy market than private investors, could be potentially harmful for some European interests. By installing representatives on the company boards, China gains access to sensitive information that could be then transferred to Chinese competitors. Moreover, through its SWFs China could take control over energy companies or critical infrastructure and increase its political influence in European countries, making them more vulnerable to political pressure. Therefore, the European policy-makers should consider taking special steps to monitor and maybe limit Chinese SWFs expansion in the energy sector.
