Asia Briefing:How do Chinese companies feel about doing business in the European Union?
A new survey by the European Union Chamber of Commerce shows that 97 per cent of firms would make future investments in the region.
Overall, the business environment in Europe is less accommodating than in Africa, the Middle East or Latin America.But for all that, Europe is a safe, stable destination for investment for Chinese investors, the survey of 74 Chinese enterprises that have already invested in the EU, showed.
With a consumer market of 500 million, it’s a great place to sell goods and services. Europe also has advanced technologies, an educated workforce and desirable brands that can help Chinese firms to boost both their domestic and international competitiveness.
“Operating in the EU, however, is not considered easy and there are numerous obstacles often relating to bureaucratic procedures and high costs,” the report says.
Some 78 per cent of those surveyed said they faced operational difficulties, including high personnel costs, difficulties obtaining visas and work permits for Chinese employees, opaque European labour and tax laws, plus cultural differences in management style.
Despite the debt crisis and the difficulties listed above, 33 per cent of Chinese firms considered the EU more favourable for investment than North America, with 45 per cent saying it was the same and 21 per cent believed it was less favourable.
“Evidence indicates there will be increased future investments from China into the EU and if the policymakers of both regions can positively address key issues, this investment relationship can develop further,” the report said.
Chinese foreign direct investment has been increasing since the mid-2000s to reach nearly €48 billion in investment flow in 2011, and the trend of Chinese companies investing in Europe has become more prominent in the public sphere.
Increasing overseas investment is a key goal of the Chinese government and is seen as crucial in advancing its economic development, with Europe becoming a more frequent destination as China moves beyond making investments focused on securing resources and on to acquiring advanced technologies, expertise and brands. In a report issued by the Economic and Social Research Institute last week entitled The Impact of Foreign Direct Investment to China on Foreign Direct Investment to Other Countries, Laura Resmini and Iulia Siedschlag examined the surge of foreign direct investment (FDI) to China to see if it has happened at the expense of such investment in other countries and regions, including the EU.
“On average, over the analysed period, other things equal, FDI inflows to China have been complementary to FDI flows to other countries,” the authors wrote.
“However, this FDI creation effect has varied across country groups, being less strong in European countries than in the other host countries.”
In the case of Ireland, over the analysed period, the FDI to China has fostered foreign direct investment to Ireland. It appears that the FDI to China has led to less foreign direct investment to Ireland from Belgium and France.
“However, this substitution effect has been weak,” they said.
This research suggests that future effects of FDI to China on FDI to other countries are likely to foster as well as substitute FDI to other countries.
“To the extent that China’s high growth rates will persist, China is likely to attract more market-seeking FDI and less efficiency-seeking FDI.
“While the effects of FDI to China on FDI to other countries are likely to persist over time, country specific effects will change depending on the evolution of international production networks,” the report says.
