The great haul of China: Is Chinese investment good for Ireland?

Some might raise an eyebrow at the idea of Chinese money flooding into Ireland, but entrepreneur Maurice Healy has no truck with the naysayers. When it comes to Chinese foreign direct investment here, he welcomes it "100 per cent". "We should be doing our utmost to encourage more of it," said the founder of the Healy Group, a food ingredients and chemicals distributor which has been doing business in China for many years.

Chinese foreign direct investment (FDI) into the Republic jumped by 75 per cent to $142 million (€128 million) in the first six months of the year. Judging by a spate of announcements made in recent months, it looks as though it will end 2019 at a new record high.

This might seem a cause for celebration, but there are concerns over the close links between Chinese companies and the ruling Communist Party in China and by the possibility that attempts to attract FDI from China might upset Ireland’s relationship with the United States.

The US is stuck in a protracted trade war with China and has also restricted US companies from doing business with Huawei, the world’s largest telecoms equipment maker, over national security concerns.

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At the New Economy Forum in Beijing on Wednesday, former US secretary of state Henry Kissinger said the US and China were in the “foothills of a Cold War,” and warned that the conflict could be worse than the first World War if left to run unconstrained.

Cold War

“That makes it, in my view, especially important that a period of relative tension be followed by an explicit effort to understand what the political causes are and a commitment by both sides to try to overcome those,” Kissinger told a session of the New Economy Forum. “It is far from being too late for that, because we are still in the foothills of a Cold War.”

Kissinger said China and the US were countries of a magnitude exceeding that of the Soviet Union and America, and that the world’s two largest economies “are bound to step on each other’s toes all over the world, in the sense of being conscious of the purposes of the other”.

That hasn’t stopped the flow of Chinese investment into Ireland. This week brought news that the Chinese biopharmaceutical company WuXi Biologics, which last year announced 400 jobs as part of plans to build a €325 million plant in Dundalk, is upping its investment locally. Its subsidiary, WuXi Vaccines, is planning to build a €216 million vaccine production facility on the newly-established Dundalk campus, bringing 200 additional jobs to the town over five years.

This news follows a number of other big announcements over the past few weeks.

On Monday, Shanghai Newbaze Industrial Group opened a new dairy formula plant in Carrickmacross, Co Monaghan, a €20 million investment leading to the creation of 60 jobs. Bank of China, meanwhile, last week finally confirmed it was taking over Goodbody Stockbrokers in a deal valued at an initial €150 million.

These announcements also come shortly after Huawei said it would create 100 jobs and invest €70 million in research and development (R&D) locally over the next three years. The company, now the world's largest telecoms equipment maker, also recently transferred many of its mobile software services to an Irish subsidiary called Aspiegel.

As Eileen Sharpe, the woman charged with leading IDA Ireland's efforts to lure more investment from the Far East to the State makes clear, the rise in Chinese FDI here in recent years has been nothing short of impressive.

"It hasn't just come from a low base. It has grown from a zero base with IDA Ireland only going into the Chinese market in 2006, first through the opening of an office in Shanghai and then later on also in Shenzhen and Beijing," she says.

Sharpe said IDA Ireland initially targeted Chinese investment in areas such as technology and financial services, with a particular focus on the aircraft leasing sector. However, she added that many other industries have benefited from increased FDI in the past few years, citing life sciences as a good example of this.

“This week’s WuXi announcement is, in the world of Chinese FDI, a mega coup for Ireland,” she claims.

Direct route

Even with Hainan Airlines recently axing its Dublin to Shenzhen direct route and Cathay Pacific having put its Dublin to Hong Kong route on hold, Ms Sharpe doesn't anticipate any lessening of investment from China.

“Chinese FDI to Ireland has been growing well and I would expect that to continue,” she says.

Given that 67 per cent of all investment to the State came from the US in 2018, Chinese FDI here is still relatively low but there are many who expect it to continue to ramp up in the coming years.

While some might have misgivings about increased Chinese investment here, it has largely been welcomed.

“By being here, the Chinese get to see how well we do things and that only makes it easier for us operating there,” adds Healy, whose group has a turnover of about €100 million a year.

He makes a good point. In 1979, when Ireland and China opened diplomatic relations, bilateral trade totalled $5 million (€4.5 million), according to figures from the Chinese embassy in Ireland. This grew to $14.5 billion (€13 billion) in 2018 and, in the first eight months of this year, bilateral trade increased by a further 24.5 per cent.

According to the embassy, there are more than 20 companies from China in the State, employing about 2,000 people in total.

In a recent interview in The Irish Times, the Chinese ambassador to Ireland, He Xiangdong, said Chinese companies find Ireland an attractive location for investment with people finding the Irish to be “very friendly, very outgoing. They feel very comfortable here in Ireland”.

“We hope that Ireland will play a role as a bridge between China and the EU,” he added.

Martin Murray, executive director of Asia Matters, the independent think tank, which is holding its annual business summit and awards in Dublin this week, is dismissive of concerns that cosying up to China could be at the expense of our close relationship with the US.

“Increased investment from China is a very positive thing as you don’t want to put all your eggs in one basket, particularly at a time of increased trade tensions at the global level. The reality is that we have to move beyond legacy markets as 40 per cent of the world economy is now in Asia and two-thirds of consumers,” says Murray.

The jump in Chinese FDI to Ireland has come as investment into Europe as a whole fell by 26 per cent to $9 billion (€8.1 billion) in the first half of the year, the lowest figure since 2015. It also comes as China is increasingly focused on pulling investment from the US on the back of the trade war.

"China has a lot of money to invest, and engages in a lot of trade so I think that other countries are in a position to benefit from the US-China economic tensions. If Chinese companies have trouble investing in the US, they will be looking for other opportunities and Ireland makes sense as a possible partner," says Simon Lester, a trade policy analyst with Cato's Herbert A Stiefel Center for Trade Policy Studies in Washington DC.

“China seems to have a number of purposes with its foreign investments. Sometimes it’s about access to natural resources; sometimes about agricultural products; sometimes about geopolitics and making alliances; sometimes about proximity to a strategic area. I can see how Ireland would fit with the last three,” he adds.

Murray also sees that Ireland could benefit from US-China tensions. “Chinese investment to the US has clearly nose-dived and so Europe looks more appealing. Traditionally, the UK would be in line to benefit from this but in the light of Brexit, the Chinese view is that the market there is primarily a good way to acquire assets cheaply. Ireland is certainly attractive to investors who see the same benefits as others do, good access to markets, to talent and technology,” he says.

Concerns

As is well known, the US and to a lesser degree other nations, have raised concerns about Chinese companies close links to the ruling Communist Party. There have also been fears that some Chinese firms are implicated in human rights violations.

Taoiseach Leo Varadkar said during US president Donald Trump's visit here in June that the Government shares the US' concerns about Huawei. However, he also claimed to be keeping an "open mind" on the issue.

Concerns have also been raised about the work of Genomics Medicines Ireland (GMI), an Irish company owned by WuXi Nextcode that is collecting DNA data on 400,000 Irish volunteers as part of a database project costing up to €800 million.

Two senior US politicians voiced fears over GMI’s parent during the summer on the back of concerns over China’s access to American citizens’ genetic data. In addition, the Data Protection Commissioner this month began an inquiry into GMI following complaints about the way it gathers information.

While Huawei has come under the most focus for its closeness to the Chinese government, there are plenty of others also willing to follow the lead of Beijing.

One need only look at the mission statement of Goodbody’s new owner for evidence of this. “As a large state-owned commercial bank, the bank will follow Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era,” it proudly proclaims.

It goes on to promise to “strengthen party leadership and party building” at the institution while also saying it should build the bank “into a ‘financial mainstay’ of the strong modern socialist China”.

Lester says it would seem foolhardy to simply ignore the concerns that have been raised about Chinese companies and their links with the country’s ruling party. “I think a certain wariness about dealing with Chinese companies is justified. I would just make sure Ireland approaches these issues with some objectivity,” he says.

“At this point, there is a lot of fear-mongering going on in the US in relation to China and it’s important to examine critically with each potential investor what exactly the concerns are and how serious they are,” he adds.

Notable Chinese investments in Ireland

2019

November 22nd: WuXi Vaccines announces additional $240 million (€216 million) investment with plans to build a vaccine production facility in Dundalk, leading to the creation of 200 new jobs.

November 18th: Shanghai Newbaze Industrial Group opens a new dairy formula plant in Carrickmacross, Co Monaghan, a €20 million investment leading to the creation of 60 jobs.

November 14th: Bank of China confirms takeover of Goodbody Stockbrokers in a deal valued at an initial €150 million.

October 25th; Huawei announces 100 new jobs in Ireland.

August 27th: Huawei unveils plans to invest €70 million in R&D in Ireland over the next three years.

April 2nd: Emeri Nutrition opens a $60 million (€54 million) infant formula facility in Co Meath.

2018

December: China Reinsurance’ acquires the Irish unit of Chaucer Insurance in a $40 million (€36 million) deal.

May: FLI Group secures €10 million investment from China Minsheng Jiaye Investment Corporation.

March: State-run Ireland Strategic Investment Fund (ISIF) joins forces with CIC Capital Corporation for a €150 million technology investment fund.

2016

December: Gaelectric sells 14 Irish wind farms worth an estimated €400 million to China General Nuclear Power’s European energy arm.

January: HNA acquires Dublin-based aircraft lessor Avolon in $2.5 billion (€2.25 billion) deal.

2013

August: Chinese hotelier family the Kangs acquire Fota Island resort from Nama for €20 million.