The wave of investment money emerging from China can be more uncertain than it first appears.
Although various types of Chinese investors have splashed-out on a selection of assets, including agri-chemical producers and car manufacturers, logistics assets have been of particular interest. For example a Chinese State-owned shipping line has bought the Port of Piraeus in Greece and hopes to develop it into a logistics hub for Central and Western Europe, although past experience at the port suggests this may require substantial management resources.
The latest deal on the horizon was supposed to be the purchase of Hahn Airport in Germany. This facility is owned by the State of Rhineland-Palatinate and has suffered over the past ten years from falling air freight volumes and less passenger business from budget airlines. The airport has been loss making for several years and the Rhineland-Palatinate government has been looking to sell it.
However, despite its central location, a small airport just a few tens of kilometres from Frankfurt International Airport with further large airports not so far away in Koln and Dusseldorf was always going to be a difficult proposition. Yet those enthusiastic buyers of hard to move assets, the Chinese, once again made a winning bid. The Shanghai Yiqian Trading Company offered to buy 82% of the equity of the company for an undisclosed sum, beating two rival proposals.
Yet after several weeks of rumours the deal has fallen through, possibly as a result of the politics of investment in China. Although the Rhineland-Palatinate Government has stated that it carried due-diligence on Shanghai Yiqian Trading Company, it is reported by the news agency Reuters that the purchaser had not informed the Chinese authorities of their intention to make the investment early enough leading to the authorities preventing Shanghai Yiqian Trading Company from moving the funds across the Chinese border. The Chinese economy has strict controls over the export of capital and any investment outside the country that does not have the approval of the government is unlikely to succeed.
The government of Rhineland-Palatinate states that it is pursuing other offers for the airport.
Although the deal for Hahn Airport is not huge, it does suggest that Chinese investment can be highly complex and driven as much by internal Chinese politics as any long-term corporate strategy. Although the investments around the ‘Belt and Road’ may have political blessing at the moment, this could change if the politics in Beijing shifts, as could other major projects such as the scheme to build a competitor to the Panama Canal.
Source: Transport Intelligence, July 13, 2016
Author: Thomas Cullen