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Chinese investors play key role in Portugal success

Portugal, like other crisis-hit euro zone countries under pressure to sell off state assets, has sold large minority stakes in utilities and infrastructure operators to Chinese companies.

As much as a gateway to Europe, these Chinese investors are also buying into what they see as a strategic hub for expanding across Brazil, Angola, Mozambique and other former Portuguese possessions.

“It makes sense to have a base in Portugal to train Chinese managers, gain experience and build networks for expanding into other, much bigger Portuguese-speaking countries like Angola and Brazil,” says Francisco Veloso, dean of the Católica-Lisbon School of Business and Economics.

Chinese investment has played a crucial role in the success of Portuguese privatizations, accounting for 45 per cent of the €9.2bn the country has raised from state sell-offs over the past three years, a total that is almost double the target set as part of the country’s international bailout program. Taking future investment commitments into account, China has become Portugal’s most prominent source of foreign direct investment.

China’s big acquisitions in Portugal began in 2011 when Three Gorges Corporation paid €2.7bn for 21 per cent of Energias de Portugal, the country’s dominant power utility. Three months later, China’s State Grid invested €1.4bn to acquire 25 per cent of Ren, the National Grid operator.

This year, the Chinese conglomerate Fosun spent €1bn to acquire 80 per cent of Caixa Seguros, Portugal’s largest insurance group, and is now bidding for assets put on the market by the distressed Espírito Santo group.

All these groups plan to expand in Angola, Brazil, Mozambique or other former Portuguese colonies. The link was made particularly clear in 2011 when Sinopec, China’s state oil company, paid $4.8bn for a 30 per cent stake in the Brazilian subsidiary of Galp Energia, Portugal’s dominant oil and gas utility.

Huawei, the Chinese telecoms equipment maker, is already active across the Portuguese-speaking world, with operations in Brazil, Mozambique, Angola and Portugal, where it has invested €40m and runs a technology center.

As João Ferreira Machado, dean of Lisbon’s Nova School of Business and Economics, puts it: “Chinese capital is giving Portuguese companies the muscle and deeper pockets they need to expand overseas.”

Source: Peter Wise in Lisbon, Financial Times

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