A wave of Chinese direct investment could bring $250 billion to $500 billion in fresh capital to Europe this decade, according to a new report, and European companies are eager to expand in fast-growing Asia.
But EU Trade Commissioner Karel De Gucht, speaking as the report was presented, said burdens on European investors – including rules requiring companies to share their know-how with Chinese firms – made deepening investment links problematic.
De Gucht told a seminar of EU officials and business groups that China is listed by the Paris-based Organisation for Economic Co-operation and Development as “having the most restrictive regime for foreign investment in all of the G20”.
“Obstacles range from mandatory joint ventures that apply to cars to the outright ban on foreign ownership in large parts of the postal services market,” De Gucht said. “In some cases the right to invest is conditional on forced technology transfer.”
With EU trade with China likely to reach a record of 500 billion euros ($625 billion) this year, De Gucht wants to deepen the relationship between two of the world’s biggest trading partners. China’s Commerce Minister Chen Deming, in a visit to Brussels last week, signalled his desire to do the same.
Exports are helping keep the stagnant European economy out of recession amid the euro zone debt crisis, and the European Commission, which negotiates trade and investment pacts for the EU’s 27 countries, wants to tie up deals in Asia.
De Gucht said a free-trade deal with China was not likely in his time as commissioner, which is scheduled to end in 2014. But he said an investment pact could happen faster, laying down rules for companies expanding in both regions.
However, the commissioner cautioned that he had no sense of when negotiations on an investment pact between China and the EU might begin.
“The real question is: when will they be really ready to move and start to make trade-offs?” De Gucht said. “And what will be the thorny issues? All of them, I think.”
Daniel Rosen, one of the authors of New York-based Rhodium Group’s report on China’s foreign investment trends that was released in Brussels and London, said Beijing was embarking on “globalisation 2.0”, and looking to go beyond its base as a low-cost exporter of factory goods.
“This will be like the coming of Japanese investment in Europe or U.S. investment in the 1950s,” he said.
Resource deals dominated China’s outbound investment of $21.4 billion in the first three months of 2012, with assets in South America the most sought after by mainly state-backed buyers, a study showed on Thursday.
But Chinese companies are now seeking to acquire brands and technology to stay ahead of low-cost competitors at home. Annual outbound direct investment (ODI) to Europe tripled from 2006 to 2009 before tripling again last year to $10 billion, the report said.
Rhodium projects $1 trillion to $2 trillion in global Chinese ODI between 2010 and 2020.
For Europe, that would equate to $250 billion to $500 billion cumulatively in new Chinese investment if Europe can avoid the collapse of the euro and sustain the 25 percent share of ODI it captured in the 2000s.
Europe too wants to invest in China and sent 7.1 billion euros in direct investment there in 2010, the Commission said. DM
Photo: Employees use machinery hands to install components onto car bodies at an assembly line of a Ford manufacturing plant in Chongqing municipality, April 20, 2012. REUTERS/Stringer
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