European investors cool toward China

Despite the rapid rise, the value of bilateral investment remains small considering the size of the two economies and the scale of bilateral trade. China represents only 3.5 percent of total foreign direct investment in Europe and Europe spends only 2 percent of its outward investment in China.

Practicalities, including market access, policy transparency and the protection of intellectual property, have stemmed investment flows. Feng Zhongping, an expert on European studies with the China Institute of Contemporary International Relations, says the EU expects more investment from China to help it combat its debt crisis, but there is not yet a good mechanism to regulate that investment.

Policymakers from both sides are working on a better system to facilitate bilateral trade and investment. In February, the two sides agreed to start negotiations this year on a China-EU bilateral investment treaty. State leaders reinforced the importance of a good investment mechanism at the China EU summit in Brussels in September.

During his visit to Europe in September, China's Premier Wen Jiabao said that China and Europe should begin negotiations on the proposed investment treaty as soon as possible. He said the two sides should aim to achieve a trade balance, sustainable development and fully explore market potential. He added that China and the EU can cooperate in areas such as energy, environmental protection and urbanization. In his speech in Brussels, Wen said the two sides should aim to provide legal safeguards that will enhance investor confidence.

Karel de Gucht, Europe's trade commissioner, also called for a more open-minded attitude toward bilateral investment. "There is too much emphasis on fear of China. This is simply misguidance," he said, adding that international trade and investment are the best ways to deliver growth, especially as 90 percent of global economic growth will happen outside of Europe's borders in the future.

Wen's suggestion to conduct investment treaty negotiations is timely as the old mechanism for Sino-EU economic cooperation is outdated, says Zhao Junjie, an expert on European studies at the Chinese Academy of Social Sciences. Many guidelines for economic cooperation between China and the EU date back to the 1980s, Zhao says.

"A new investment agreement to guide future economic cooperation should be reached as soon as possible," he says.

Cooperation between China and Europe has been growing fast in certain areas, including infrastructure development. An increasing number of Chinese companies have become involved in building infrastructure across Europe.

In his address to European policymakers in Brussels, Wen said Chinese construction companies are relatively cheap but reliable and offer quality work. They can play a part in the development of European infrastructure through funds, project bonds and holding shares, he said.

"As the eurozone debt crisis continues to fester and the US economy is slow to recover, Chinese investors are becoming more prudent. But outbound direct investment will grow faster as the current total volume is relatively small," Xiang says.

China's third quarter economic growth eased to 7.4 percent from a year earlier, the seventh straight deceleration. The country's non-financial outbound investment in the first nine months rose 28.9 percent to $52.52 billion, down from 39 percent growth in the first eight months, according to the commerce ministry.

Some experts say that China's overseas investments are not treated fairly compared with China's welcoming approach toward foreign investment.

The US House of Representatives Intelligence Committee issued a report earlier this month alleging that Chinese companies Huawei and ZTE posed a possible threat to US national security.

Meanwhile, Chinese heavy industry giant Sany Group has filed a lawsuit against US President Barack Obama, who issued a presidential order to prevent Ralls Corp, owned by two Sany Group executives, from owning four wind farms in Oregon, citing national security risks.

 

Contact the writers at diaoying@chinadaily.com.cn and lijiabao@chinadaily.com.cn