Germans View Share of Chinese Direct Investment Critically and Overestimate It by a Factor of 30
ResearchZEW Study on the Perception of Chinese Investment in Germany
People in Germany significantly overestimate the proportion of Chinese direct investment in the Federal Republic and view these economic activities with scepticism. The general preference for European or US investors remains unchanged even when factual information about the true scale of Chinese investment is provided. This is shown by a joint study by the ZEW Mannheim, the Paris School of Economics, the Stone Centre on Socio-Economic Inequality and the German Institute for Economic Research.
Respondents estimate the Chinese share of all foreign direct investment in Germany at 33%. In reality, it has amounted to just one per cent in recent years. This means that investment from China is overestimated by more than a factor of 30. “Although facts can help to correct misperceptions and alter people’s view of specific economic benefits, such information does little to change general preferences regarding investors from different countries,” explains co-author Li Yang, PhD, a researcher in ZEW’s “Inequality and Public Policy” Research Group.
“Our findings suggest that scepticism towards Chinese investment is not based solely on a misconception about its economic significance. Concerns about political dependence and government influence may also play a role in how it is assessed.”
Higher expectations placed on Chinese investors
For a direct investment from China to be perceived as attractive, it has to offer significantly greater advantages than investments from other European countries or the US. In an experiment conducted as part of a survey, bids from Chinese companies were chosen around 40 percentage points less frequently than bids from other EU countries, with all other characteristics being identical. Compared with US investors, the gap was around 20 percentage points.
This preference becomes particularly evident when considering the case of the takeover of an insolvent German company: While a European or US buyer would need to retain 250 out of 500 jobs, respondents estimated that a Chinese buyer would have to save an average of around 350 jobs for both offers to be considered equally attractive. This corresponds to a premium of around 40%.
Furthermore, the experiment varied not only the country of origin but also whether investors were state-owned or private, and whether they were seeking a majority or minority stake. In the case of Chinese investors, there was additional scepticism across all categories towards state-owned enterprises compared with private Chinese companies. Overall, the corresponding effects did not differ significantly between the experimental groups.
Political concerns carry greater weight
The negative attitude is directed in particular at possible political consequences. Of the respondents, 64.2% regard Chinese direct investment as detrimental to Germany’s political independence. Where general economic benefits are concerned, scepticism is lower, at 44.2%.
Once respondents are informed about the actual scale of foreign investment, they assess the impact of Chinese investment on employment and innovation with less scepticism. Descriptions of potential benefits also lead to a more positive perception, albeit to a lesser extent. However, none of this information increases the willingness to favour Chinese investors over Western alternatives.
More than 2,300 Germans surveyed
The study is based on a pre-registered survey experiment conducted using the innovation sample from the German Socio-Economic Panel (SOEP) in 2023. A total of 2,365 adults from 1,738 German households were surveyed. Participants were randomly assigned to a control group or one of three information groups. They were provided either with data on actual investment shares, a presentation of arguments regarding the potential benefits of Chinese investment, or a presentation of arguments regarding potential risks.
They then assessed the impact of foreign direct investment on employment and innovation, chose between hypothetical investment offers and worked through a takeover scenario. The offers differed, amongst other things, in terms of the investor’s origin, whether the investor was state-owned or privately owned, and the size of the stake.
