Chinese Policy

Why Portugal?

Cynics in the EU answer this by pointing to diversified Chinese investment worldwide. Their claim is that China, long on the ascendancy, yet checked by the US, pursues overseas acquisitions to expand its political, as well as commercial, scope of influence. Indeed, strategic investments in energy, real estate, and finance have been massive, not least in Portugal.
A more prosaic answer points to commercial expediency in what was effectively the fire-sale of post-crisis Portugal. Lisbon, economically gutted by the 2008 crisis, received an USD89 billion EU-IMF bailout conditional upon austerity and a comprehensive privatization of state assets to reanimate growth. Meanwhile, the wealthy Chinese population in Portugal was boosted by the popular money-spinning solution of the golden visa, whereby investment of USD600,000 provided foreign nationals a welcome foothold in the European market. Whichever way you slice it, in the 2010-2016 period Chinese investment (roughly USD8 billion to date, mostly in energy, banking, and insurance sectors) had come to account for 3.6% of Portugal’s GDP, with China Portugal’s 11th-largest trade partner in the 10 years since the crisis, at which time ranked 28th.

Premium Spender

Listed on the Hong Kong stock exchange, China’s Fosun International has a market capitalization north of EUR6 billion. In 2016, this war chest enabled the purchase of a 16.75% stake in Portugal’s biggest listed bank, BCP, with roughly a 30% market share. Fosun, chaired by majority major shareholder Guo Guangchang, China’s own Warren Buffet, had spent over EUR1 billion two years earlier on its preeminent insurance company, Fidelidade. In fact, it had purchased the three insurance firms Fidelidade-Companhia de Seguros, Multicare-Seguros de Saude, and Cares-Companhia de Seguros, formerly wholly owned by Portuguese state-owned bank Caixa Geral de Depositos (CGD). The latter deal streamlined the Portuguese group by narrowing the focus to core banking activity, in step once again with Portugal’s commitment to the Financial and Economic Assistance Programme signed with the European Commission, the ECB, and the IMF. The deal was southern Europe’s largest insurance acquisition in three years, but the largest ever for Portugal, leaving the insurer in comparable financial health to that of its European peers. In a two-way street, while Fosun leverages the well-established reputation and commercial acumen of CGD, privatization of the latter has lent its insurance units fresh vitality and long-term competitiveness. Fosun had identified insurance as one of its core future interests ahead of the huge acquisitions. The claim has been borne out in the fact that while back in 2012, the sector accounted for a mere 4.8% of its total assets, its value skyrocketed 1,182% post acquisition.

All Part of the Deal

With the financial sector explicitly connected to all others, diversified Chinese buyouts have effectively been downstream acquisitions. It is no fortunate coincidence that in 2014 Fosun also purchased Luz Saude, Portugal’s largest healthcare provider by hospital number, for EUR460 million.

The Wider View

Portugal is not a passive observer of Chinese influence and has recently pledged cooperation on the unfolding new silk road project, the Belt and Road Initiative. A related MoU was penned in December 2018 by Chinese President Xi Jinping and Portuguese Prime Minister António Costa. Indeed, 17 bilateral cooperation MoUs of the type Beijing has in place across Asia, Africa, and Europe were signed in a bid to bridge the space between. Portugal also seeks to benefit from China’s call for deeper cooperation across culture, education, tourism, science, and technology.

The EU’s Knitted Brow

In a bid to check “predatory“ Chinese inroads to key European industries, the EU in 2017 recommended a non-binding screening mechanism for member-state debate on Chinese expansion. Approved by the European Parliament, the law will scrutinize would-be deals and where the bloc feels it necessary, attempt to persuade individual member states to rethink. Predatory in business however, as China would doubtless argue, is just another a term for sour grapes.
Be it silk road or spider’s web, then, Chinese investment has proven to be a valuable solution to Portugal’s post-crisis commitments, testament also to China’s new status in the global order.