Chinese Enterprises Achieve Win-Win with Europe

By LI GANG

Since the outbreak of the European debt crisis, Chinese enterprises have accelerated the pace of investment in Europe, becoming a highlight of Europe-China economic and trade relations. The increase in China’s investment in Europe not only expands China’s global influence, but also promotes the recovery of Europe’s economy, thus achieving a win-win result. Some European countries welcome China’s investment; however, there are other, less affirmative voices and even suspicion among European media and citizens. To avoid misunderstandings and prejudices, Chinese enterprises have confronted the need to enhance their knowledge and understanding of local laws and cultures, and strengthen their communication with Europe’s governments and people. From a long-term perspective, bilateral investment between China and Europe has a bright future.

A China Entrepreneur Club delegation visited France and Belgium in June 2013.

Soaring Investment, Potential for Growth

According to Eurostat, the European Commission’s statistics database, from 2008 to 2012, the EU’s outward foreign direct investment (OFDI) stock in China was on a path of steady growth. In 2011, the OFDI stock of the EU’s 27 countries in China exceeded €100 billion and the figure rose to €118.1 billion in 2012, a 1.2-fold increase compared to that of 2008 (see Table I).

In recent years, a new trend in EU-China relations has been the strong growth momentum of Chinese enterprises’ investment in the EU. According to the Statistical Communiqué of 2012 on China Direct Investment Overseas jointly released by the Ministry of Commerce and the National Bureau of Statistics, in 2005 China’s OFDI stock in the EU totaled US $768 million, accounting for just 1.3 percent of its OFDI as a whole. In 2006, China’s OFDI stock in the EU broke the billion-dollar mark to reach US $1.275 billion, a year-on-year increase of 66 percent. After the outbreak of the European debt crisis, China’s investment in the EU bucked the trend by maintaining its growth and achieving leapfrog development. In 2009, China’s OFDI stock in the EU hit US $6.278 billion, almost double the 2008 amount. By the end of 2012, China’s OFDI stock in the EU stood at US $31.538 billion, a 40-fold increase over the 2005 level.

Statistics on China’s global investment collected by the U.S.-based Heritage Foundation show that in 2005 there was only one transaction where the amount of investment from China to Europe was above US $100 million. The number of transactions on such an investment scale increased gradually in the following years and by 2013, the figure was 18 (see Table II).

Although bilateral investment between China and Europe has mushroomed, it nonetheless remains in the initial stages, both sides scoring equally low on the bilateral investment scale. There is consequently huge potential for further growth.

According to statistics from the Ministry of Commerce, in 2012, China’s OFDI stock in the EU totaled US $31.538 billion, representing 5.9 percent of its global sum. In terms of the EU’s direct investment in China, by the end of 2012, the EU’s OFDI stock in China reached €118.1 billion, only 2.3 percent of the region’s total OFDI. During the same period, the EU’s OFDI stock in the U.S. was valued at about €1.7 trillion, representing over 30 percent of the EU’s total OFDI stock (see Table I). It’s clear that the bilateral OFDI is not commensurate with their economic aggregates. Both sides hence have ample space to increase their mutual direct investment.