Investment needs a level playing field

Investment | Davide Cucino

At a time when foreign direct investment in China continues to decline, the need for it and its importance are being called into question. However, as the global economic crisis is far from over, this is a time when, if anything, FDI should continue and increase, not the other way around.

We have seen the benefits that foreign investment has brought and still continues to bring to China. Investment brings great benefits to the host country, in terms of jobs, capital, taxation, technology and management know-how transfer, and the expansion of supply chains.

A woman works on the China stand at fairgrounds in Hanover, central Germany, for the Hannover Messe technology fair on April 20. China was the fair's partner country in 2012. [Photo/Agency]

Chinese investment in Europe tripled in 2011. This not only demonstrates the European market's increasing importance to Chinese companies, but also shows the potentially massive benefits that the increasing ability of Chinese companies "going global" could bring for Europe.

The European Chamber, as a proponent of freer trade and investment, welcomes and encourages China's increased investment in Europe - so long as similar access is granted in China.

There are lots of perceptions right now that Europe is weak and China is strong. In some ways, this is the case.

But, Europe remains fundamentally strong and European business is still the global leader in many high-tech industries and advanced services. And Europe's future growth potential remains very strong.

As Europe needs China, we must also realize that China also needs Europe.

The eurozone debt crisis makes the relationship more important. China, as a creditor nation, has lots of opportunities in the European Union. And at a time when the European economy is not growing, leading growth markets like China become even more important for EU companies.

Europe provides China with opportunities to deploy its foreign reserves, diversify its currency portfolio and spread risks. Importantly, it also offers many merger and acquisition opportunities.

While there are frequent temptations to protect markets during economic downturns, Europe remains resiliently open.

Alongside the increasing ability of Chinese companies to go global, this openness has been a major factor in contributing to China's massive investment expansion into Europe.

But, this also reveals the major sticking point for EU-China relations - a lack of alignment.

While the European Chamber welcomes Chinese investment in Europe, it is important to point out that Chinese companies are increasingly entering markets in Europe that European businesses are in many evident cases not allowed similar access into in China.

And Chinese companies are showing their capabilities to bid for major participation in infrastructure projects in Europe, while such procurement markets in China remain out of bounds for the European industry.

This is evidenced by deals such as Geely buying Volvo. Such an acquisition would not be possible were it the other way around because China requires foreign automobile manufacturers to form joint ventures, limited to a maximum 50 percent share, to operate in China.