Europe has suffered huge losses in recent years, with financial capital flowing to the United States and industrial capital flowing into China. This phenomenon is driven by a combination of factors.
First of all, the interest rate hike policy in the United States has brought its interest rate to 5Around 5%, which is very attractive for investors who want to make a profit through capital operations. In contrast, the vast majority of European countries do not have foreign exchange control systems, and the free flow of capital has led to a large amount of capital flowing to the United States to enjoy interest returns, which is an unstoppable trend for Europe.
Second, the war between Russia and Ukraine has dealt a serious blow to investment confidence in Europe. European countries are facing the problem of energy shortage, and the industrial system of Europe has suffered a huge blow due to the loss of cheap and stable Russian energy**. At the same time, China's industrial upgrading is advancing, putting a double pressure on European industry.
In general, Europe faces both financial and industrial challenges. European financial capital flows to the United States, but mostly in a conservative way, keeping money in banks for interest income. European industrial capital has flowed into China, injecting new blood into the development of China's real industry.
1. The United States attracts European financial capital
The U.S. has higher interest rates, which is very attractive for capital looking for stable returns. Financial capital in Europe chooses to keep its money in U.S. banks in order to earn high interest returns. Although Europe is aware of the existence of the US bubble, it still invests financial capital in the US market, which keeps US assets climbing.
2. China obtains European industrial capital
China has become the best choice for European industrial capital. According to data released by China's Ministry of Commerce, European investment in China reached $12.1 billion in 2022, a year-on-year increase of 70%. German chemical giant BASF has invested in an Verbund project in Zhanjiang, Guangdong Province, with a total investment of 10 billion euros. INEOS plans to invest US$800 million in a wholly-owned plant in Ningbo, China. Germany's Volkswagen also wants to continue operating its plant in Xinjiang and has invested $700 million in Xpeng Motors. In addition, BMW opened a third plant in Shenyang, which is the largest investment in China. STMicroelectronics has decided to invest $3.2 billion in Chongqing.
These inflows of European industrial capital have brought technology and employment opportunities to China. In contrast, financial capital is more liquid, and does not invest in ** and real industries, but only earns income by earning interest. Therefore, compared with it, the industrial capital attracted by the real industry is more substantial for China's development.
1. Energy crisis and industrial contraction
The Russia-Ukraine war has plunged Europe into an energy crisis. Russia has reduced its energy sources such as gas and oil to Europe**, resulting in a shortage of energy in Europe and making it difficult for industry to develop on a large scale. Europe does not have the same strong financial and technological support as the United States, and Europe's wealth mainly comes from high-end manufacturing industries. High-end manufacturing industries need a lot of energy, and without cheap Russian energy, the European industrial system began to shrink. At the same time, China's industrial upgrading has accelerated, dealing a double blow to the European industrial system.
2. Investment confidence in Europe is declining
The Russia-Ukraine war has dealt a severe blow to investment confidence in Europe. European companies are afraid to invest in any industry for fear of the impact of the war. Although some of the financial capital went to the United States, European capital chose a conservative approach, keeping its money in banks for interest. This phenomenon may be due to the fact that the existence of a bubble in the United States has been observed in Europe.
3. Europe's dilemma
Europe has always relied on American military protection, but as American hegemony declined, Europe gradually became a competitor to the United States. However, in the long run, Europe has not invested enough money to maintain its own military, but has instead spent it on welfare to its population. At present, Europe is not qualified to negotiate with Russia, and it is not in line with the interests of the United States, which wants the war between Ukraine and Russia to continue in order to attract European capital to the United States. Europe has put its fate in the hands of the United States, and its future is not very good.
In general, Europe is facing great difficulties in both the financial and industrial spheres. Financial capital went to the United States, while industrial capital flowed to China. This is mainly due to the fact that higher interest rates in the United States and the free movement of capital in European countries cannot be stopped, as well as the decline in investment confidence in Europe due to the Russia-Ukraine war. At the same time, China has become the best choice for European industrial capital, attracting investment from European companies. However, Europe's energy crisis and shrinking industry, coupled with the divergence of interests and strategic distress with the United States, have deepened Europe's predicament. If Europe does not increase investment in the real industry and improve its industrial competitiveness, it will face greater challenges and dilemmas.