Europe larger Bay Area trading partner than China, study says

China, only surpassed by the United States in economic output, is one of the largest trading partners for America, and by extension, the Bay Area. Products by tech giants, including Apple’s iPhone, are assembled in the Asian nation, and container ships full of items made in China pass beneath the Golden Gate Bridge daily.

But a new study finds that another distant region tops the list when it comes to investing in the Bay Area and San Francisco — Europe.

“Europe is by far the largest overseas investor in the Bay Area, and is the primary destination for Bay Area companies investing abroad,” said Bay Area Council Economic Institute President Sean Randolph, who led the study. “The scale of this cross-investment overshadows the scale of cross-investment with China, and reflects a high-level integration of advanced economies.”

The study, called Europe and the Bay Area: Investing in Each Other, was funded by the business-friendly Bay Area council, among others, and found that European firms make up a third of all foreign companies operating in the Bay Area. Additionally, it noted that European private equity in the region, as well as some venture capital, was nearly as much as the rest of the world combined at $4.05 billion. What’s more, 56 percent of foreign investment by Bay Area businesses goes to Europe.

In contrast, according to the study, “China’s investment accounted for three percent of total global investment in the Bay Area in 2012.”

There are more than 1,000 European firms with affiliates in the Bay Area and more than 3,000 Bay Area companies with European affiliates. By comparison, Japan had just over 500 affiliates in the Bay Area and regional companies had just under 500 affiliates in Japan.

The largest single investor in this two-way economic relationship is by far the United Kingdom, followed by Germany and France, according to the study.

“The United Kingdom has the largest business presence in the Bay Area among European countries, and Bay Area companies have more affiliates in the U.K. than elsewhere in Europe,” said Priya Guha, the U.K.’s consul general to San Francisco.

Stephen Levy, director of the Center for Continuing Study of the California Economy, said the Bay Area is a prime recipient of all kinds of investment, both foreign and domestic, mostly because of the tech industry.

“Right now, and for the foreseeable future, the Bay Area is the strongest regional economy” in the state, he said.

The study, which didn’t focus on San Francisco specifically, noted, for instance, that while Europe is currently a larger trade partner than China, Asia accounted for $21 billion in exports in 2012, which exceeded Europe’s $9.2 billion and North America’s $12.1 billion.

In 2013, China had the second-largest economy of any country in the world after the U.S., with a gross domestic product of $9.2 trillion. Combined, four of the European Union’s largest economies — Germany, France, U.K. and Italy — had a GDP of $10.9 trillion.

California’s economy — $2 trillion GDP in 2012 — was set to surpass that of Russia and Italy in 2013 for a place as the world’s eighth-largest economy, according to the center studying the California economy.Bay Area NewsChinaEuropeInvestment

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