Chinese Enterprises Achieve Win-Win with Europe
On June 12, 2008, the China Ocean Shipping (Group) Company (COSCO) won the privatization tender for a 35-year concession to run Piers 2 and 3 at Piraeus Port, Greece’s largest port, for a price of €498 million. After signing the relevant agreements with the Piraeus Port Authority on September 30, 2009, COSCO started managing the two container terminals. But the venture met with protest from some locals, who feared their jobs would be threatened by the introduction of the Chinese enterprises. As COSCO took over the management of the container terminals in October 2009, the company encountered a six-week-long strike. Yet COSCO was able to allay the workers’ fears: The newly built container terminals created 1,000 jobs at a higher salary than the local average level. The group also provided professional development opportunities for port workers to streamline their efficiency, enabling them to up their rate of loading and unloading from six to 22 standard containers per hour, so surpassing the European port average. In 2008, 434,000 containers were transported at Piraeus. In 2013, the number reached 3.16 million containers, a seven-fold increase. COSCO thus helped Piraeus Port get back into the black. The profits of the first half of 2014 hit €11.30 million, an increase of 22 percent compared to the same period in 2013, making COSCO’s Piraeus project one of the most successful cases of asset privatization in Greece, as well as one of the most demonstrative cases of Chinese investment in Europe.
A Scramble for Europe?
As the COSCO example illustrates, things do not always go smoothly for Chinese enterprises in Europe. Prejudice from governments and local people is one of the barriers hindering Chinese investors from increasing their investment in the region. China’s investment in Europe is equal to Venezuela’s; South Africa invests much more than China; and Brazil’s investment in Europe is 10 times China’s figure. No one believes these countries intend to “occupy” or “eat up” Europe, but the fear of China doing so is palpable.
As a matter of fact, it is unlikely that China will “occupy” or “eat up” the European countries receiving its investment. Rather, there are clear benefits of Chinese investment.
First, it eases a lack of liquidity. The European debt crisis resulted in inadequate economic growth. Public investment remains restricted while private investors’ confidence is shattered. Continued Chinese investment is expected to bring more capital to the EU, which is still tightening its belt.
Second, investment from Chinese enterprises provides plenty of job opportunities for local people. Data from China’s Ministry of Commerce reveal that by the end of 2012, the number of companies founded by Chinese investors through direct investment reached nearly 2,000, and that those companies employ 42,000 locals.
Third, Chinese investment stimulates companies that have been merged to improve their production efficiency, which enables European trade to increase its share in the global market.
Fourth, investment from China helps raise the asset value of European companies. According to market rules, an increase in demand brings about a rise in price. Although some European companies’ share prices fell because of the debt crisis, the arrival of Chinese enterprises in Europe expands the demands on assets and, accordingly, raises asset prices.
Eliminating prejudice against Chinese enterprises requires an objective attitude from European governments and people as well as reflection on the part of Chinese enterprises.
First of all, Chinese companies should learn more about European policies and laws. Some investors from China believe that their capital is the key to everything and know little about local policies and laws. Such an attitude is doomed to hinder their development in a market based on a sound legal system.
Next, cooperation between Chinese companies and local labor unions needs to be strengthened. Chinese investors did not bank on resistance from European labor unions when they made their first forays into the European market. In recent years, many Chinese firms have encountered considerable opposition to planned mergers due to their improper ways of dealing with local labor unions. Public relations (PR) strategies should be stressed, and communication between Chinese firms and local governments and people needs to be enhanced. Most Chinese enterprises lack sound PR strategies, which creates the mistaken impression that they intend to “plunder” their European counterparts’ core technologies. Locals often believe Chinese companies neglect their corporate social responsibilities and are suspicious of the true aims of Chinese investors. Communication is the key to erasing such doubts and prejudices.
EU countries have always been favored investment destinations for China owing to advanced technology, skilled labor, transparent laws and fewer market access barriers. Europe, at the same time, welcomes investment from China to revive the local economy and generate more job opportunities. Though China’s economic aggregate takes up 10 percent of the global figure, its stock of outward direct investment only accounts for 1.5 percent of the world’s total. Therefore, the country has enormous potential for outward investment. Meanwhile, both sides have the desire and conditions to increase mutual investment. With favorable factors including the rapid development of an all-round strategic partnership between China and EU, an advance in bilateral investment agreement negotiations, and progress in RMB internationalization, the China-EU investment relationship has a bright future.
LI GANG is an assistant research fellow at the Institute of European Studies of the Chinese Academy of Social Sciences (CASS).
