SWEET AND SOUR INVESTMENT: A Sentiment Analysis of Chinese Investment in Europe

Abstract

Media reports and political rhetoric widely claim that Chinese Foreign Direct Investment (FDI) has politically impacted Europe, causing various countries to disagree over the consequences of Chinese investments for national security and the desirability of screening mechanisms to vet incoming investments. Given this phenomenon at the international level, Chinese investments may be dividing the European public at the sub-national level as well. This thesis investigates how Chinese foreign investments have impacted national politics since their first substantial presence in Europe after the 2008 Financial Crisis. The work employs large-scale computer-automated sentiment analysis of newspaper articles to discover the relationship between public opinion toward Chinese investments and the levels of Chinese investment in European countries over the last decade – a relationship yet to be explored.

After presenting some background on the evolution of Chinese direct investment both worldwide and specifically in Europe, I propose three hypotheses representing the current scholarly research on the political tensions induced by foreign investment: 1) The Traditional Political hypothesis places the debate between free markets and labor rights at the center of Chinese investment’s political divisiveness 2) The Globalism hypothesis focuses on issues of international growth, in competition with nationalism, as the main political wedge regarding Chinese investments 3) The Null Constant hypothesis posits that no relationship exists between public sentiment toward Chinese investments and the volume of investment.

In order to test these hypotheses, I first developed a computer program to web-scrape national European newspapers and created an original dataset, which could potentially be used by other scholars. I then conducted sentiment analysis on every article within this dataset, in the original language of the text, to quantitatively track public opinion towards Chinese investment from 2008 to 2019 for various permutations of nationality and political leaning. Through a correlation analysis of Chinese investment levels and sentiment toward Chinese investments as found in national newspapers, this thesis finds unique political circumstances in each nation. A further factor analysis identified the principal components of each newspaper allowing me to identify the central discussion surrounding Chinese investments in each country.

In France, the conservatives favored Chinese investments, focusing the discussion on the benefits of a free market, while liberals proved less inclined toward Chinese investments, directing their complaints toward abuses of labor rights. In Germany, the liberals favored Chinese investments more, centering their reporting around the benefits of international growth and cooperation, while German conservatives favored Chinese investments less, arguing for increased national protection from foreigners. Dutch political attitudes towards Chinese investment failed to exhibit any change over the last ten years on either side of the political spectrum, due to a long history of the Netherlands welcoming foreign investment.

These results show the nuanced conditions under which national divisions toward Chinese investment occur and highlight how the unique historical traditions and domestic politics of each case-study country influenced these political divisions. Understanding national tensions surrounding the topic of Chinese investments is critical not only for Chinese investors but also for national policymakers and other foreign investors. The EU can only unify its collective policies once each country comprehends its own internal struggles and member states understand the root of their division.