Friday, January 11, 2013

Rising Chinese influence in Portugal


This year marks the 500th anniversary of the first direct contact between Portugal and China. With Chinese New Year 2013, the year of the snake, just a month away, relations between the two countries have probably never been closer.
In 1513, the Portuguese explorer Jorge Álvares sailed into the southern Chinese port of Guangzhou on the Pearl River about 120 km north of Hong Kong and Macau. He was the first European to reach China. Trading activities were established a few years later, but things soon soured because of outrageous Portuguese behaviour. This included the building of a fort on Chinese soil without permission and the kidnapping of Chinese children for enslavement.
Since then there have been serious ups and downs, but the two nations put differences behind them with the agreement to return the Portuguese colony of Macau to Chinese control in 1999. 
The fact that there are now Chinese shops and restaurants in almost every town throughout Portugal is the most obvious sign of cordiality. Less apparent is that China is now the main foreign investor in Portuguese companies.
China owns a significant stake in the production and distribution of Portugal’s energy. The Bank of China is due to start operating soon in Lisbon. China is also reportedly seeking business interests in a major port.
Last year, China’s State Grid International Development company bought a 25% stake in Portugal’s national electricity grid operator REN for more than €387 million. The year before, China Three Gorges (CTG) bid nearly €2.7 billion to acquire the Portuguese government's 21.35% stake in Energias de Portugal (EDP). The state-owned China Petroleum and Chemical Corp paid €3.6 billion for a 30% stake in a subsidiary of Portugal’s biggest oil company, Lisbon-based Galp Energia, which prospects for oil in Brazil.
Trade between the two countries in the first half of last year totalled €1.8 billion, with Portugal’s exports up almost 60% on the same period in 2011 at €737 million. Container loads of inexpensive Chinese products continue to flood in.
Portuguese decolonisation brought about a certain amount of Chinese immigration in the 70s and 80s, but a far greater number of immigrants have arrived from mainland China, particularly the Shanghai area, in the last few years. Of course, the recent exodus is infinitesimal compared to the number who stay at home. The population of Shanghai alone is well over twice that of the whole of Portugal.
The native tongue of most Chinese in Portugal is not the Cantonese dialect spoken in Macau, Hong Kong and elsewhere in southern China, but the country’s predominent language, Mandarin.  Immigrants undertake intensive courses to become fluent in Portuguese.
Up from official figures of about 4,000 in 2001, the big majority of the 20,000 or so Chinese people presently living in Portugal are younger than 40. These young entrepreneurs and employees are attracted by tax exemptions, job opportunities and the ability to make more money than they could back home. Making money by efficiently providing goods and services is the overwhelming motivation for Chinese expats. Even back in their communist homeland, it is officially no longer bad to be rich.
Perhaps inevitably, the expansion of Chinese businesses in Portugal and elsewhere in southern Europe, at a time when many indigenous businesses are closing down, has caused a certain amount of resentment amid accusations that the Chinese are exploiting not only cheap materials but also cheap labour. 
Most Chinese-owned firms here are family enterprises. Their suppliers are mostly Chinese and Chinese products are readily available to them. Their traditional foodstuffs, for example, can be obtained from a big central outlet in Lisbon, or a subsidiary in Albufeira.
Although they like to live in family units, when looking to expand business interests the Chinese tend to avoid competition by moving in on untapped markets elsewhere in the country. Despite being clannish, the Chinese send their children to Portuguese schools. Chinese community leaders have been reported as saying they would like to see greater integration and more marriages between Chinese and Portuguese.
Meanwhile, it is said that the strategy of the Bank of China in Portugal will initially focus on the Chinese expatriate market and on small and medium-sized companies exporting to China. This will give extra support to the culture of dedicated hard work that is so characteristic of the Chinese here.
We may well see a greater demand for the expensive cars so beloved by the Chinese. If Portugal continues on its economic downward spiral while China closes in on overtaking the US as the richest country in the world, the Chinese may soon be very much in the driving seat in this country in more ways than one.

8 comments:

  1. I am a enterpeneur In Portugal for the last ten years, and always hear about the Chinese shopkeepers not having to pay tax as we do, but never found out what this is all about? Can anybody tell me what actually is this tax agreement that makes that the Chinese don't have to pay? They don't pay IVA (VAT)? Incomtaxes?

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  2. I cannot quote the specific regulation, nor can I confirm whether it is still in effect, but I understood that several years ago (possibly 10?) new business opened by Chinese nationals received tax incentives for the first couple of years in operation. I believe the equivalent would be what was once called a "special initial allowance" (S.I.A) in the UK. The intention of such incentives is normally to boost economic activity in certain areas (not unlike "export processing zones" established in some countries to stimulate industry). The net effect of the incentives given to the Chinese in Portugal, however, was that locally-owned shops selling comparable goods could not compete on price, and therefore were pretty much forced closed up shop.
    As to VAT: There is no escape! Everyone pays it, unless you are an "independent worker" who earns less than ten thousand euros per annum, in which case, you are exempt from charging VAT, and therefore no portion of your income is paid to the tax department as VAT.

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  3. Latest co-operation....
    The Lusa news agency reported from Beijing today that the Lisbon-based landscape architectural firm Proap established a partnership agreement at the weekend with a large Chinese building group specialising in garden, nursery and associated workshop projects. The president of Proap, João Nunes, told Lusa: “ Our country underestimates the potential of this cultural area: Portuguese architecture has a huge reputation.”

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  4. Update....

    The Bank of China plans to open its first delegation in Portugal next March, said the chairwoman of the Portuguese Socialist Party after a meeting in Beijing with the head of the Chinese state bank.

    This will be the first delegation of a Chinese bank in Portugal, but “a number of contacts,” had been made between banks of both countries, Maria de Belém Roseira told the Portuguese news agency Lusa.

    Maria de Belém Roseira ended a six-day visit to China on Saturday, at the invitation of the Chinese Communist Party, accompanied by leaders of the Portuguese Socialist Party (PS) and ten business people. This was the first mission of its kind since the two parties established political relations around 30 years ago.

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  5. Update....

    The Bank of China plans to open its first delegation in Portugal next March, said the chairwoman of the Portuguese Socialist Party after a meeting in Beijing with the head of the Chinese state bank.

    This will be the first delegation of a Chinese bank in Portugal, but “a number of contacts,” had been made between banks of both countries, Maria de Belém Roseira told the Portuguese news agency Lusa.

    Maria de Belém Roseira ended a six-day visit to China on Saturday, at the invitation of the Chinese Communist Party, accompanied by leaders of the Portuguese Socialist Party (PS) and ten business people. This was the first mission of its kind since the two parties established political relations around 30 years ago.

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  6. Comment from fellow blogger. Great column. Chinese being my first language, I can’t help but mention the fact that occidental understanding of oriental thinking is severely lacking. Let’s just say, fair play is not in the cards. Venice, a city I once loved, had been literally overtaken. So, while you may like the ABC stores, caveat emptor.

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  7. It's not just Portugal - the Chinese are slowly taking over the world!

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  8. WWW.macauhub.com:

    Permits to reside in Portugal granted as part of the programme for Residence Permits for Investment Activities (ARI) require that the investment remain in the country for a minimum of five years, the new delegate in Macau for Portugal’s investment promotion agency, AICEP, said Thursday.

    ARI, which is also know as the Golden Residence Permit is a measure implemented by the Portuguese government to attract foreign investment, which is valid for operations carried out from 8 October 2012, and residence permits are focused on non-Europeans that transfer amounts of over 1 million euros and that launch businesses that create more than 30 jobs or acquire properties worth at least 500,000 euros.

    The residence permit is granted for one year and is renewable for a further two periods of two years, based on proof of the financial transaction and suitability of the investor.

    At a seminar in Macau about the ARI programme, the AICEP delegate, Maria João Bonifácio, said that the tourism, automotive, aeronautical and health technology sectors were “very attractive” to Chinese businesspeople.

    “The automotive sector is very important in Portugal, as is the aeronautical sector, in which Brazilian aeronautical company Empresa Brasileira de Aeronáutica (Embraer) is already present, and there are also other sectors for which we intend to attract investments, such as moulding, machinery, medicine and health,” she said.

    At the session the Portuguese consul in Macau, Manuel Carvalho, said that the aRI programme was an “invitation for people to invest in Portugal” and added that he was convinced that it was a “highly competitive offer compared to others of its kinds across the world”.

    As well as promoting the ARI programme, Bonifácio also noted Portugal’s interest in “attracting other types of investment and to boost Portuguese exports and trade with China, Macau and Hong Kong”. (macauhub)

    ReplyDelete