Is Catalonia attractive enough for China?

From http://www.leconomic.cat/neco/article/4-economia/18-economia/417194-som-atractius-per-a-la-xina.html (in Catalan, by Anna Pinter)

The Asian giant has stopped being a country that only received foreign investments, to transform itself into a powerful investor abroad. In order to adequately compete for these Chinese resources, Catalonia has to improve its current low international visibility.

China, a country that until recently mostly received foreign investments, now has adapted to its new role of investor. As Chinese companies grow, they need to set themselves near the markets they target and they look for places where to establish. Santi Santamaria, director of the Shanghai chapter of the agency for the international promotion of Catalan economy, ACC1Ó, thinks that because of the measures currently undertaken by Chinese government, investments abroad can be booming in three years time.

According to date from Invest in Catalonia, a public organization to promote foreign investments in the country, as of today 30 companies with Chinese capital have recently established in Catalonia, such as the producer of home appliances Haier or the shipping and logistics company Hutchinson, that operates in the Barcelona port.

Apart from these companies, negotiations are open with two car makers. One of them is Huachen Automotive Group, producer of Brilliance cars, that on May 14th, 2011, signed an agreement with Catalan government to evaluate the possibility of opening a factory in Catalonia as a base camp for a later expansion to other European markets. This option is not to be dismissed, since this is one of the ten largest car makers in China and that also produces cars for BMW. The other ongoing process is that of Chery group, that in September 2010 showed interest in opening a car factory in Catalonia that could create some 3,000 new jobs.

Some of the most important investments that have been made in Europe recently are those of the brand Haier, a truly giant of home appliances that has its European headquarters in Italy, or those of technological companies such as Huawei or Lenovo. The latter is the main computer brand in China and it also has a portion of the IBM shares. According to forecasts, many others may follow their steps soon.

With so many possibilities in sight, Catalonia wonders whether it is attractive enough for China.

All the experts have coincided that the Achilles' heel of Catalan economy is its lack of visibility in China. Diao Minyou, president of the China Council for the Promotion of the International Trade (CCPIT), has declared to L'Econòmic that this lack of visibility is severe. According to Pedro Nueno, professor at IESE and expert on China that has helped to attract some investments, "the most usual situation is that Chinese people can't even locate Catalonia on a map". This diagnosis was shared by Carlos Hernández, general manager of a consulting company established in China for the last 4 years and that is helping Spanish companies. He states that "not even Spain is well known" and that the few things that Chinese people identify are the stereotypes of bull fighting and flamenco, which are not so good when it comes the time to attract industrial investments.

The biggest problem becomes that the industrial possibilities of Catalonia are largely ignored, which means that in many cases it is not even listed when potential locations are considered. And something that adds to the difficulties is the bad opinion that many foreign people have nowadays about the Spanish economy, as reflected by the specialized press. According to Carlos Hernández, "it is necessary to work harder to increase the visibility of our country". Santi Santamaria says that visibility is a key subject, because Chinese companies want to carefully evaluate their potential partners and, if the country is not well known, "then there are no investments to be done".

Now it seems to be the moment to start a marketing campaign for the promotion of Catalonia in a country like China, with 1.3 billion inhabitants and that has been one of the few in the world that in the midst of the recent economic crisis has been able to steadily grow at a minimum 9% rate -and has no plans to decrease. Despite so, Leilei Ma, a Chinese consultant living in Catalonia for the last two decades and that is helping Chinese companies to invest here, explains that the actions for the branding of Catalonia should be more practical than the ones applied until now. “Opening an office there and officially visiting the country once is not the way", says Ma, who thinks that Catalonia is not also well ranked by people highly skilled in Chinese. If we want to attract multinational companies, it will require that we become attractive for highly educated people that would know both languages and both cultures.

According to Pedro Nueno, if Catalonia overcomes these disadvantages, then it could become a land with great interest for Chinese investors. "I am convinced that things will happen this way, because our industrial base is highly diverse and this makes us unique in Europe". Prof. Nueno also has high hopes that some of these Chinese car makers that are evaluating where in Europe to establish might land in Catalonia. Local car industry has a good reputation thanks to two big brands, Seat and Nissan, and to all the other smaller satellite companies around them that provide service to the larger ones, which are playing now an essential role in attraction of new, foreign investments.

As Amadeu Jensana from Casa Asia says, "costs here are more competitive as compared with the rest of Europe. However, the logistics of the quick connection with Europe need to be solved if Catalonia wants to presented itself as a platform for the access to this European market. "It would be important to finish the railroad connection with Europe and improve the rest of the railroad lines". And not only a good land connection with Europe is important, a good connection with China by air is also essential. According to Carlos Hernández, that a direct link between Catalan airports and Asian ones does not exist yet is something that has to be improved as soon as possible.

Invest in Catalonia says that in the recent months a growing trend of Chinese investments in Catalonia has been observed. Claudia Danesi, responsible for foreign investments, says that since January they have received three missions of Chinese businessmen and that they are currently working on the development of different investment projects. "We are working to attract Chinese companies to profitable economic sectors".

However, some people are worried that if too many Chinese investors are attracted here, Catalonia is going to have less trade with Germany, France, and Italy, which have been the largest investors so far. Emilio Mulet, Spanish delegate at the China Council for the Promotion of the International Trade (CCPIT), considers that attracting Chinese investments is just a matter of time. "Now Chinese people are focusing their investments where prime matters abound, and Catalonia is a mature economy". That's the reason why the most important investments a abroad are happening in African or Southern American countries that are richer in natural resources and that have industrial sectors still to develop. "In many cases, they reach agreements with local governments to extract natural resources in exchange of the construction of infrastructures". Another different feature of Chinese investments is that nowadays 60% of their multinational companies are state-owned and they don't get into a country by buying local companies but by starting a new investment from scratch. Instead, investments in Europe are mostly happening through the acquisition of existing, leading technological companies.

The challenge for Catalonia is to increase visibility and increase positions in strategic sectors, if it does not want to be the last runner in this tough race.