China European Investments
A man takes a call next to a poster stating China meets Europe in Florence at China International Fair for Trade in Services in Beijing (Photo: Reuters / Jason Lee)

China's investments in Europe have dramatically decreased for the first half of the year as investors become more wary of the nation's economic uncertainty.

According to a report from consultancy group EY, the total investments that were made by Chinese firms in Europe for the first half only amounted to around $2.4 billion, an 84 percent drop when compared to the same period last year.

The data further revealed that the total number of investments, either through the buying of partial stakes or outright acquisitions, dropped by 28 percent.

There was reportedly only 81 transactions that were recorded throughout the first six months of this year, with a drop in investment values of around $15.3 billion.

The report further revealed that the first half of the year did not show any significant merger and acquisition activity in Europe's biggest economy, Germany. The country is typically the go-to destination for Chinese investors as it does house some of the biggest European firms in the region.

According to the report, Chinese companies only invested around $500 million into Germany in the first half of the year. That was a significant drop from the $10 billion that was invested in the country in 2018. This year, the UK managed to overtake Germany as the top mergers and acquisitions destination for Chinese businesses.

It has to be noted that Beijing Automotive Group did make a substantial investment in July when it acquired a 5 percent stake in German carmaker Daimler AG.

Unfortunately, that deal was not included in the six-month report. The move was preceded by a similar investment made by Geely Holdings last year when it bought a 9.69 percent stake in Daimler.

Analysts have explained that the overall mood to invest in Europe has declined due to several factors. These factors include the ongoing trade conflict between China and the United States as well as the looming fears of a no-deal Brexit. Due to these factors, Chinese firms have now become more reluctant in making deals internationally.

In its survey of business investors conducted in June, EY was able to rank the top factors that have besmirched Europe as an investment destination.

The survey found that Chinese business ranked a possible no-deal Brexit as the number one risk to investing in Europe. In second was the European Union's political instability and the third reason was the rise of popular and protectionist sentiments.

The EY report concluded that if the ongoing trade conflict were to be resolved, it would be very likely that Chinese investments in Europe would bounce back. During that time, transaction activities are expected to return, and even perhaps grow.