China is Portugal’s fifth largest investor, overtaking the US

China’s stock of foreign direct investment (FDI) in Portugal is the fifth largest, accounting for 6.8% (€10.6 billion) of the total (€154.9 billion). A new Bank of Portugal statistic released Tuesday that identifies the ultimate investor, rather than the location of the investment, shows a greater weight of Chinese investors, compared with the previous statistic in which they were in ninth place (2% of the total, €2.9 billion). Meanwhile, the United States is ranked in eighth place (previously it was in 12th).

The Chinese economy is the one that most uses subsidiaries in Luxembourg and Hong Kong to make investments in Portugal, which reduced its weight in previous statistics that looked at the origin of the investment rather than the ultimate investor. France and the US also benefit from this change: “New statistics show that China, the United States and France invest in Portugal via other countries,” states the Portuguese central bank.

With the change of optics, China is now in the top 5, only behind Spain (€23.6 billion), the largest investor, Portugal (€23.5 billion) – refers to Portuguese companies that have subsidiaries outside the country -, France (€17.1 billion) and the United Kingdom (€13.3 billion). The data is for 2021.

In Portugal’s, this phenomenon is called “round tripping (ultimate investor coincides with the country that receives the investment) and is associated with the investment with origin and destination in Portugal going through intermediaries residing in the Netherlands and Luxembourg (59% and 17% respectively),” the Bank of Portugal explains.

China is followed by the Netherlands (€8.7 billion), Germany (€7.6 billion), the United States (€7.1 billion), Brazil (€5 billion) and Luxembourg (€4.3 billion). In total, the foreign direct investment corresponded to €154.9 billion in 2021.

“Foreign direct investment is the investment made by an entity residing in one economy for the purpose of controlling or influencing the management of an enterprise residing in another economy,” says the central bank, noting that “the new statistics on foreign direct investment by ultimate investor make it possible to identify the origin of the investment.”

On the other hand, countries such as Luxembourg and the Netherlands, which were in second and third place as the largest investors in Portugal, are no longer in the top five in this new perspective, as they were used by other countries to invest. The two countries remain in the top 10.

Data from the Bank of Portugal also shows that China’s weight is greater in the electricity, water and gas sector, which should be related to China Three Gorges’ stake in EDP and Fosun’s position in REN.

In manufacturing, the UK dominates, followed by Spain and Germany. In construction, Spain leads, with Brazil close behind. In services (which includes financial services such as banking and insurance), Portugal has the highest FDI, followed by Spain and France.