As Europe's ongoing debt crisis unfolds, Chinese investors have increasingly looked to Portugal, Spain, Greece and others for opportunities as debt-troubled governments sell off public assets. In 2011, China invested more than $9 billion in Europe, according to Rhodium.
But Ireland is doing more than banking on public assets. And this should probably come as little surprise, given that the country previously built up its economy on exports and foreign investments. Many U.S. multinationals, from Pfizer (PFE) to Facebook, have based their European headquarters in Ireland. And Ireland hopes Chinese companies might follow, with the allure of its low corporate tax rates and relatively well-educated workforce of English speakers.
Indeed, the competition for Chinese investments is ramping up. And it's hard not to wonder if the U.S. might be mistaken for not competing better with the Irish and others. Admittedly, Ireland is in a much tougher financial spot than the U.S. and eager to lure all the investment it can. Its unemployment rate is running at a high 14%, after having been battered by a property market crash and a banking crisis.
Ireland is turning it around. In recent months, investors have signaled renewed confidence that Ireland could overcome its financial problems better than the rest of Europe. Irish 10-year bond yields have slid to 8.2% since last July's peak of about 14% partly on better than expected growth for 2011 (driven largely by exports). What's more, in January, Ireland returned to the international bond market for the first time since it was forced to accept a mega European Union-International Monetary Fund bailout package in November 2010.
The Celtic Tiger isn't just narrowing its focus on China, however. Earlier this month, Ireland announced it would cut the amount of tax levied on some highly skilled foreign workers in an effort to attract new investments.
Indeed, Ireland realizes its economy at home is weak and has turned to investors abroad to help return it to its heydays. Instead of falling on protectionist rhetoric, might the U.S. follow?
