Ireland must have a strategy for inbound Chinese capital

China may see Ireland as a valuable base from which to establish and develop its interests across the so-called western world, writes Joe Gill.

I have been reading a history of China recently. It seemed apt, given the clear indications that China’s role in the global economy is becoming ever larger and its presence is being felt in many countries, including Ireland.

That presence is currently visible in sectors including aircraft leasing and renewable energy. But all major sectors abroad of relevance to Ireland — including financial services, agri-food, and travel — are subject to extensive and active acquisition activity by a range of Chinese companies. The scale of this corporate expansion is breathtaking but must be measured as a reflection of China’s emergence as the world’s second largest economy. With that market presence, it is inevitable that many billions will be deployed to build networks, market access, manufacturing capabilities, and service businesses which can project China’s interests around the world.

Any cursory review of China’s history reveals a dark side to how the western world engaged with that emerging market. Between 1870 and the 1930s, China was subjected to harsh and aggressive actions by forces representing Russia, Japan, Britain, the US, Germany, and France. Many troubling events took place as the West imposed a world view on China which treated locals as in need of cultural, social, and economic education.

It should not surprise anyone against that backdrop that China’s leaders are cautious the love-in that has erupted since it began to open its markets to outside interests during the latter part of the 20th century. As China boomed, it became a huge source of business for global corporations as they sold products and services into a rapidly advancing society. In recent years, while that momentum continued, China’s indigenous sector began to prosper and after positioning itself within the long Chinese borders it has since began a journey of international expansion.

This is why Ireland needs to think cleverly and strategically about Chinese capital. For decades, Irish companies have been working on ways to sell products into China but now they must weigh up the opportunities and challenges posed by capital coming in the other direction. For some companies, it may be a welcome development as a route to selling out to bidders who are prepared to pay full prices for quality assets. For others, it can be a means to access capital that can be tapped to further expand and grow across many borders.

Ireland has some natural advantages in his context and that may explain why, relative to our actual economic size, we are receiving a disproportionate amount of attention from China and its corporations.

Ireland, firstly, has no history of conflict with China. That may sound trite but it is an important calling card for a small open economy that relies on global trade. Second, we have unique connections with America, the UK, and the EU. America was part built by the Irish and its corporations value Ireland as a strategic base for markets outside the US. The UK has deep and obvious links with us, while the EU and Ireland have a long-established set of relationships.

All of these ties are under currently pressure from strong geo-political forces presently but Ireland is better placed than most to navigate its way through. These are the reasons why China may see Ireland as a valuable base from which to establish and develop its interests across the so-called western world. I note that already Chinese investors are acquiring and building a presence in the Irish aircraft leasing industry, itself a politically sensitive sector that manages assets worth over $100bn each year around the world.

It is likely other investments will take place in different sectors as this process develops further. Agri-food, IT, property, and tourism are some of the sectors that Chinese investors value for both their international exposure and knowledge which can be transferred back into the vast domestic market.

  • Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.


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