December 14, 2009
The EU has always been a major investor in China since the country adopted its reform and opening-up policy, ranking behind only Hong Kong and Japan. By October 2009, actual investment from the EU in China totalled US$67 billion, and European investors have set up 31,573 ventures in China.
EU investment in China is a win-win undertaking. China wins in terms of overseas funding, technology transfer and managerial expertise, and the EU wins in terms of cost reduction, market expansion and big-margin profits.
Even under the impact of the financial crisis, when China’s total FDI dropped by 12.6% in the first 10 months of 2009, EU investment still registered a 1% year-on-year growth within the same period of time, amounting to US$4.29 billion, which is widely regarded as an exceptional achievement.
China always welcomes foreign investment, which has exerted a strong impact on China’s economy and society, giving China a helping hand in its pursuit of modernisation and globalisation. The number of enterprises related to foreign investment accounts for only 3% of China’s total, but they generate 30% of its industrial output, 21% of its tax revenue, 55% of its foreign trade and jobs for 45 million people.
The Chinese government recognises the positive role of foreign investment in promoting the country’s development and has made great efforts to create a sound environment for foreign business in China. Particularly in the wake of the financial crisis, the Chinese government maintained strong attention to foreign investment and enterprises and took strong measures to boost confidence, stabilise production and help foreign business to sail through the difficult times.
To streamline the review and approval procedures, relevant authority was delegated from the ministry in the central government to the commerce department of each provincial administration, and an online licensing service was launched to facilitate applications and improve efficiency.
To revitalise the industries, the central government set out a national action plan which includes measures to expand opening-up, promote international cooperation, speed up technological innovation and build up market capacity. It provides equal opportunities in both domestic and foreign enterprises.
To attract more foreign investment, China will adhere to the open policy and integrate the FDI strategy with its overall development plan.
First, more sectors will be opened or opened wider to foreign investment, such as telecommunications, finance, the petrochemical industry, production services and social services including the medical and health service.
Secondly, more investment will be directed to favoured sectors. China welcomes more investment in high-tech industries and the modern service industry such as international service outsourcing, clean energy, energy efficiency and environmental protection.
Thirdly, the investment environment will be improved. In order to facilitate investment, review items will be reduced, and the approval procedure will be streamlined and standardised. In order to provide better service, government operations will improve, and national treatment will be granted to foreign-invested enterprises step-by-step.
Fourthly, there will be new means to attract foreign capital. Foreign-invested enterprises will be permitted for domestic listing. Venture capital and private equity funds are welcome, and mergers and acquisitions by foreign capital will also be promoted.
EU investment in China enjoys vast potential, as the two economies are highly complementary to, and interdependent on, each other. The Chinese government encourages European investors to strengthen cooperation with Chinese enterprises by matching the EU’s strength in capital and technology with China’s advantages of low cost (5-10% compared to developed countries for labour) and manufacturing capacity, so that both sides will harvest more profit from bilateral cooperation.
For European business, it is strongly recommended that, in the post-crisis era, more investment should go to the middle and western regions in China, as the country is redirecting its development focus westward; to the field of energy and environment, and especially new energy, renewable energy, energy efficiency and environment protection.
The country will anchor its economy on sustainable development; to service and high-tech industries, such as finance, medicine, logistics, pharmaceutical, information, etc., as China will restructure its economy towards more knowledge and innovation; to more diversified models of cooperation, including setting up regional headquarters, R&D centres, logistics centres, procurement centres in China and joint ventures to explore Asian and other regional markets, as both sides need greater space for future development.
Head of the Chinese Mission to the EUAuthor : Letters to the EurActiv editor