China was the fifth largest investor in Portugal in 2021, and the largest non-european one, using various investment platforms, such as Luxembourg and Hong Kong, according to official data.
Bank of Portugal (BdP), using new statistics, shows in its most recent data that China uses Luxembourg, and other countries, to make most of its investments in the Portuguese economy. Only 28% of what it invests comes directly, 41% comes through Luxembourg.
Considering only the immediate destination of the funds, China is the ninth direct investor in Portugal, with a very short share of foreign direct investment in the country, of 2% of the total stock in 2021, according to Jornal de Negocios newspaper.
Portugal-China Trade and Investment to Hit New Records Post-Pandemic
Complex corporate structures, and the formation of multinationals and large groups, mean that in some countries investment is made only in passing, not has final destination. This is the case for much of the investment that passes through Luxembourg.
The new BdP statistics reveal that 41% of what China invested in the Portuguese economy went through Luxembourg and 22% via Hong Kong – in terms stocks, not flows. Considering this perspective of analysis, China becomes the fifth largest investor in Portugal, with 6.8% of the total stock invested in 2021 in the country.
Looking at specific sectors, 38% of direct investment made in the electricity, gas and water sector in 2021 is Chinese. France accounts for 17% and Spain for 7%.
Spain remains the largest investor in the country, although with a less dominant position in the total stock, the data show.
The second largest investor, in fact, is the Portuguese economy itself, which also resorts to third countries to then channel investment back to Portugal. Among other reasons, this strategy serves to diversify risks, obtain tax gains and access other markets. Portugal mainly uses the Netherlands and Luxembourg to carry out these operations.
The third largest final investor in Portugal is France, which also uses Luxembourg to channel 28% of its investment into Portugal, followed by the UK in fourth place. Data show that the UK has a leading position in the manufacturing sector, accounting for 31% of investment.
