Increasing Chinese investment in Portugal

Jorge Costa Oliveira

According to the 2022 statistics from the Bank of Portugal, China ranks as the fourth-largest exporter of goods imported by Portugal. However, there is ample room for further growth in foreign trade between the two countries.

For several years, Portuguese business entities have been attempting to place Portuguese products on Chinese online sales platforms. AICEP has established a dedicated virtual pavilion on JD.com for the sale of Portuguese products. However, this endeavor is unlikely to yield immediate results due to the lack of scale of Portuguese products, uncertainties in after-sales service in a distant and different market, and historical delays in certification and other procedures required to enter the Chinese market.

In the services sector, particularly in tourism, there is significant potential to increase sales by Portuguese entities.

Chinese authorities have already indicated their willingness and that has been reiterated during the current visit of Chinese Vice President Han Zheng to Portugal. It is crucial for the institutional bodies of the Portuguese State (such as the Tourism Board of Portugal) and business entities (Chambers of Commerce and sectorial associations) to adequately prepare for this tremendous opportunity.

However, the area with the greatest economic potential in the relations between Portugal and China lies in investment.

Historical circumstances are highly favorable. On one hand, an increasing number of Chinese companies are internationalizing, and the European market is the most desirable, especially as the US market becomes increasingly closed to Chinese companies. The US government keeps adding more Chinese companies to blacklists and prohibiting “US Persons” from any relation with them.

Although there is some European legislation regarding strategic sectors where European authorities reserve the right to restrict the entry of foreign companies (read: Chinese), there is no comparison to the aggressive persecution seen in the United States. This is likely because the EU, albeit a significant economic and commercial power, does not aspire to be the dominant global superpower.

However, even within the EU, China and Chinese companies in the process of internationalization are seeking countries where they feel secure, where their investments will not be endangered by anti-Chinese governments or public opinion.

Portugal, due to its longstanding friendship with China, largely stemming from the Macau Question, as well as its traditional neutral position combined with current realpolitik, is a natural destination for numerous Chinese companies that wish to establish themselves in the European market. Many established Chinese companies in Portugal, both state-owned and private, can attest to operating in Portugal with confidence in the future.

It is possible to substantially increase Chinese investment in Portugal.

To achieve this goal, it is essential to strengthen institutional mechanisms. AICEP should significantly increase its efforts in investment scouts in China, either directly or by engaging third-parties, particularly those with a presence and the ability to penetrate the Chinese business network. It is unrealistic to expect Portuguese technocrats with limited knowledge of China and no local network to achieve results in the highly competitive market of attracting Chinese investment.

For those who have doubts, the best example of this is the failure to attract entities producing electric vehicles (EVs) or gigafactories by the Portuguese government and its agencies. It is not due to a lack of political commitment (primarily verbal, as successive governments maintain Hong Kong – an exit platform for significant foreign Chinese investment – on the list of jurisdictions with privileged tax regimes) or a lack of effort by AICEP.

It so happens that nobody at AICEP has the access or status to convince the relevant Chinese companies in these sectors. CALB, one of the world’s largest producers of EV batteries, decided to invest in a gigafactory in Portugal because a Chinese businesswoman and investor in Portugal, Mrs. Ming Chu Hsu, has that access and status. Lessons should be drawn from this.

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