AT A CONVENTION Centre event a couple of years ago to mark 40 years of diplomatic ties between Ireland and China, then-Minister for Justice Charlie Flanagan noted that relations between Dublin and Beijing were “growing stronger with each passing year”.
Flanagan’s statement is backed up by the numbers, which reveal just how strong those ties have become.
In 2020, Ireland had a trade surplus with China of over €3.5 billion after exporting over €10.5 billion worth of goods to China— an 18% increase on the previous year — despite the challenges of the pandemic.
In 2019, foreign direct investment by Chinese companies in Ireland soared by 56% at a time when Chinese interest in the UK, the US and Europe seemed to be waning.
A bevvy of major Chinese companies like the Bank of China have set up shop here in recent years.
Newer Chinese success stories like TikTok are also in the process of ramping up their presence in the State and, since 2012, Ireland has become a top destination for high net-worth Chinese investors and their families to live, work and study in.
But as a small, open economy, Ireland’s trading relationships are heavily influenced by our position within the European Union.
As we’ve covered previously as part The Good Information Project, EU-China relations have deteriorated substantially in recent months, culminating with the shelving of a blockbuster trade deal between the two jurisdictions last week.
So from where we’re standing at the moment, guessing at the trajectory of Ireland-China relations is a difficult task.
But where does it stand right now? Let’s take a look.
Across the board, Ireland has been flooded with international capital in the decade since the crash.
No sector of the economy has been left untouched by the deluge but the property market, in particular, has been completely altered from its pre-crisis structure by this influx of foreign investors.
The downsides of this phenomenon have been made abundantly clear in recent weeks in the controversy over cuckoo funds and their power within the market.
But the flip side is that the market for investment in Irish property is “a lot deeper” than it was pre-crash, says Iain Sayer, director at commercial property consultancy HWBC.
“Before the crash, it was Irish fellas selling to Irish fellas with Irish bank debt. And we all know how that ended.
“So there’s a comfort in the depth of the market. Now, the market is reliant on large firms who tend not to borrow very large sums of money. They will use some leverage, but they’re not borrowing up to the hilt.”
Naturally, Chinese cash has been part of this but it’s difficult to get precise figures.
At the level of individual investors, Sayer says there’s not much evidence that Chinese capital is having any sort of an outsized influence on property markets here, either commercial or residential.
At the end of the day, Ireland is still a more popular destination for individual European and American investors, from his experience. “Now, that’s not to say that Chinese investors haven’t invested via other people’s funds.”
Sayer explains, “There are a lot of very large fund managers active in Ireland… So while we’re not seeing a huge number of inbound queries directly from China, I would expect that there would be Chinese capital invested here through other funds.”
There have, however, been some headline-grabbing forays into the Irish market by Chinese investors — like the purchase of the Fota Island Resort in 2012 by the Kangs, a hotelier family originally from the Heibei Province.
But Sayer says that when investors don’t know a market particularly well, they tend to dip their toes in gradually by investing in “core offices” in city centres — low-risk investments, in other words.
There’s certainly been some of that, he says, but Chinese interest in Irish property is still a new phenomenon.
“From Asia, most of the activity [in Ireland] would be from Korean investors and funds from Singapore. We would have seen some activity and interest from Hong Kong-based investors,” Sayer says.
“But from mainland China, less so.”
Where we have seen substantial interest from individual Chinese investors in Irish property is in the area of social housing.
That’s mainly because Ireland operates something called the Immigrant Investor Programme (IIP), an initiative that allows investors from non-European Economic Area to obtain visas to study, work and live in Ireland.
Aimed at high net worth individuals, prospective applicants have to agree to plough between €500,000 and €2 million into certain, specified areas.
Investments of at least €1 million in Irish enterprises are at the top of the list.
“Particular preference is given” at the moment to investments in social housing, primary healthcare centres and nursing homes, according to the Department of Justice.
Applicants can also choose to invest at least €1 million in Central Bank-regulated investment funds, at least €2 million in publicly listed Real Estate Investment Trusts (REITs) or make philanthropic endowments to charitable, cultural or sports organisations of no less than €500,000.
The latest figures from the department, released this week, show that just 3% of the €185.6 million raised through the IIP last year went into REITs, bonds and a mix of other investments.
The lion’s share, some 41%, went towards Irish enterprises.
The programme has been a big draw, mainly for Chinese investors, since its inception in 2012.
China had the highest number of approved applications last year at 254 with the US far behind in second place at just six.
In fact, this has been general trend observed across the lifetime of the scheme. According to an Irish Times analysis of the figures, some 1,088 applications from China had been approved since the IIP’s inception in 2012 to 2019.
Americans were second with just 21 approvals.
It’s worth noting that Ireland isn’t an outlier when it comes to attracting foreign investors in this manner. In fact, according to the BBC, more than half of the nations in the world — including the UK — operate similar systems.
So what’s the attraction of Ireland, exactly?
Ireland’s low-tax environment is certainly a factor. The threat of Brexit and Ireland’s status as a gateway to Europe may also have helped to turbocharge applications in recent years.
It’s difficult to put a precise figure on it at the moment.
According to IDA Ireland, Chinese-owned companies employed at least 900 people in Ireland by the end of 2019.
Since then there have been some high profile jobs announcements by companies like TikTok and Huawei. So it’s possible that the total number of Irish jobs directly supported by Chinese investment has grown to around 2,000 or above.
A plethora of Chinese-owned companies have set up in Ireland in recent years, the result of a concerted effort by the government and the IDA.
Once upon a time, “most of our big FDI projects came from either the United States or Europe,” says Eileen Sharpe, head of Global Business Development for Growth Markets at the IDA.
“Over recent years, we have pivoted to look at investment in what we call growth market areas. Of them, China would probably be the most important.”
Across areas like financial services, technology and pharmaceuticals, Sharpe says the IDA has secured a number of “really strategic investments”.
Wuxi Biologics is one of the most eye-catching.
The pharma company is building a major production facility in Dundalk, which represents “the largest greenfield life sciences investment by a Chinese company into Europe to date,” according to the IDA.
Huawei — which has been at the centre of European and American concerns over data protection at Chinese companies — is also “very well embedded here”, Sharpe says.
“It’s been here for a number of years, but it continues to expand its presence,” she says.
Huawei has three research and development centres in the Republic — in Cork, in Dublin and in Athlone — and recently announced the creation of 110 new R&D jobs.
TikTok is another big win for the IDA.
Amid increased focus on its own data processing policies last year, particularly from the Trump administration, the social media platform announced plans to create a ‘trust and safety’ centre in Dublin and 1,200 jobs along with it.
The company declined to provide a spokesperson to be interviewed for this article.
Asked about trust issues around Chinese companies, Sharpe says that “view is there” but she “hasn’t experienced” any evidence that it’s justified.
“I can only tell you this: the companies that we’re dealing with, they’re highly sophisticated; they’re very commercially driven; they’re good to deal with,” she says.
“They take account of all the protocols in Ireland, to be fair, and they’re very careful to be within regulations etc.”
China has become an increasingly lucrative market for Irish exporters in recent years.
It’s a case of a rising tide lifting all boats, says Mary Kinnane, Enterprise Ireland Regional Director for Greater China.
“The Chinese market has been growing exponentially for several years and this growth has led to increased opportunities in almost every sector,” she says.
Ireland’s export strategy was a key factor in the economic recovery after the Great Recession and in that time, China emerged as a major trading partner.
Last year, Ireland exported over €10.5 billion worth of goods to China, including Hong Kong and Macau, according to CSO figures.
That made China Ireland’s sixth-largest export market and the third-largest outside the European Union, behind only the US and the UK.
Machinery and transport equipment — including aircraft purchased by Irish-resident leasing companies — made up the lion’s share of exports (€6.8 billion).
But Ireland’s pharmaceutical sector, which boomed in 2020 during the pandemic, was another major contributor.
Chemical and related product exports — which includes medical and pharmaceutical goods — to China increased to €1.7 billion in 2020 from €1.4 billion.
Meanwhile, agricultural and live animal exports were worth €810 million, down slightly due to public health restrictions in China at the start of the pandemic in the early part of the year.
“Overall future projections are difficult to predict,” says Kinnane.
“However, the Enterprise Ireland clients who are active in the market are predicting post-pandemic growth.
“It must be acknowledged that given distance China is a challenging market and is not in the main a realistic destination for early-stage exporters.
“That said, for companies who have the experience, scale, management and balance sheet strength China offers very significant potential.
This work is co-funded by Journal Media and a grant programme from the European Parliament. Any opinions or conclusions expressed in this work is the author’s own. The European Parliament has no involvement in nor responsibility for the editorial content published by the project. For more information, see here.
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