Global Investing

Chinese firms like Europe but could do without red tape

By Reuters Staff
January 31, 2013

By Dasha Afanasieva

Europe is a likely suitor for much of the $560 billion in outbound foreign direct investment China plans to make in the five years leading to 2015, according to a survey out today.

Ninety-seven percent of the 74 firms surveyed said that they will make future additional investments in the EU, with  most planning to invest higher amounts than currently, with more investment and acquisitions of technology brands and expertise, according to a study by European Union Chamber of Commerce in China, a lobby group for Chinese firms in the EU, with consultants Roland Berger and professional services firm KPMG.

In return for access to European markets and consumers, EU countries will get a boost in investment that they can ill afford themselves with such feeble growth prospects: in November the European Commission slashed its 2013 economic growth forecast for the EU’s euro zone bloc to just 0.1 percent, having predicted a much stronger recovery of 1 percent just six months before.

Chinese firms see the EU as a:

safe and stable place to invest, with a transparent and predictable legal environment, social stability, trusted brands, advanced technologies and an educated workforce

But getting your head around European laws and visa restrictions, as well as the fear that tough economic times could spark more political instability, make Europe hard to navigate for Chinese firms.

In fact the surveyed firms perceive Africa and the Middle East as having a more favourable business environment than the EU.

Chinese firms find EU law particularly troublesome because there is no unified inbound investment approval process and some member states have their own security reviews.

Perhaps unsurprisingly, one Chinese state-owned enterprise (SOE) said anti-trust investigations put them off

The in-depth investigations conducted by the European Antitrust Commission on Chinese SOEs will inevitably bring huge challenges to the antitrust declaration work of Chinese companies, and severely influence the investments from Chinese companies to Europe. We suggest that the barriers of the antitrust investigations should be lowered.

Six in 10 of the firms surveyed were SOEs and the most popular EU country for Chinese investment was Germany, with France a distant second.

Chinese firms asked for more support with the operational issues they face from policymakers in Europe and back home.

They also want Europe to simplify tax structures, perhaps with a few tax breaks thrown in!

Few respondents made recommendations relating to the lifting of market access barriers in the EU market – a contrast to the priorities of European businesses in China.

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