Investment does not come directly from the Chinese economy, but in fact, China is Portugal’s fifth largest end investor – not the ninth, as a simpler analysis of FDI statistics suggests. The data was revealed on Tuesday by the Bank of Portugal, which has developed new statistics, and showed that China is using Luxembourg, and other countries, to reap most of its investment in the Portuguese economy.
Looking at the final investment data in a simpler way, considering only the direct destination of funds, China is the ninth direct investor in Portugal, with a very short share of foreign direct investment in the country, amounting to 2% of the total shares in 2021.
But with more complex corporate structures, formation of multinational corporations and large groups, there are countries where investment is made in passing and does not have its final destination there. This is the case for most investments that pass through Luxembourg. New statistics from Banco de Portugal make it possible to understand the final destination of the investment. In the case of China, only 28% of investment in Portugal comes directly from the Chinese economy. 41% of what I invested in the Portuguese economy did so through Luxembourg and 22% through Hong Kong – always taking into account stocks, not flows.
Looking at this analytical perspective, China became the fifth largest investor in Portugal, with 6.8% of the total shares invested in 2021 in the country.
Looking at specific sectors, China’s position becomes more dominant. 38% of direct investment in the electricity, gas and water sector in 2021 is Chinese. France 17% and Spain 7%.
Spain remains the largest investor in the country
The data shows that even when correcting for FDI inflows to reveal the final destination of the funds, Spain remains the largest investor in the country, even though it has a less dominant position in total equity.
The second largest investor, in fact, is the Portuguese economy itself, which also turns to third countries to direct investment back to Portugal. Among other reasons, this strategy diversifies risks, obtains tax gains, and accesses other markets. Portugal mainly uses the Netherlands and Luxembourg to carry out these operations.
France is the third largest end investor in Portugal, which also uses Luxembourg to direct 28% of its investment to Portugal, followed by the United Kingdom in fourth place. The data shows that the UK has a leading position in the manufacturing sector, accounting for 31% of investment.
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