Europe is riding a gathering wave of Chinese direct investment that could bring in US$250 billion (S$319 billion) to US$500 billion in fresh capital this decade, generating jobs but giving policymakers headaches in return, a report released yesterday said.

Annual outbound direct investments (ODI) into Europe tripled from 2006 to 2009 before tripling again last year to US$10 billion, according to research firm Rhodium Group.

The firm expects the trend to continue: It projects US$1 trillion to US$2 trillion in global Chinese ODI between 2010 and 2020. This is equivalent to US$250 billion to US$500 billion cumulatively in new Chinese investment - either mergers and acquisitions or green field projects.

The study estimated that China's current investment supports 45,000 jobs in the 27-member European Union. But it also acknowledged the potential for negative economic consequences from rising investment.

For instance, Europe could be exposed to greater volatility in the event of severe economic disruption in China and Chinese firms could repatriate high-value activities after making acquisitions. Beijing could also try to mix money with politics, as it has done with Japan over rare earths.

As a one-party authoritarian state with values at variance with those of the West, burgeoning investment was likely to stoke national security fears, the report said.

TODAY