How to get the eggs into the right basket

Updated: 2012-10-26 17:18

By Jiang Shixue (China Daily)

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Chinese investment in Europe feeds the worries of many Europeans. A poll by the BBC World Service in March found rising concern about the eastward shift in economic power: most Germans, Italians and French view China's rise negatively. Americans and Canadians feel similarly. These proportions have risen since a similar survey in 2005.

In fact, China's investment in Europe benefits both sides. First of all, it can partially meet Europe's capital needs. In particular when the debt crisis has dealt a heavy blow to the European economy, China's investment can contribute to its efforts to spur economic growth.

Second, Chinese investment has created employment for the host countries. A Rhodium Group report concluded that the 428 greenfield projects in its 2000-11 dataset created an estimated 15,000 new jobs, not counting employment from smaller firms with investment values of less than $1 million.

Chinese investment can preserve jobs in at-risk firms on the brink of shutdown. The Rhodium Group report also reckons Geely's acquisition of Volvo in 2010 not only saved 16,000 local jobs but also sparked an ambitious $11 billion job-creating investment program in Sweden and the rest of Europe.

Moreover, Chinese investment has saved jobs by turning around ailing smaller firms. Based on mergers and acquisitions transactions in its 2000-11 database, Rhodium estimated that majority-owned subsidiaries of Chinese firms support at least 30,000 additional jobs across Europe. This brought the total employment figure from majority-owned subsidiaries to more than 45,000. If Chinese investment through non-majority stakes is included, such as Gas de France or Songbird Estates, this figure would swell by several tens of thousands.

Third, Chinese investment can intensify competition in the European market and benefit consumers by lowering prices and creating product diversity. This is particularly true in telecommunications, in which Chinese companies such as Huawei and ZTE enjoy a technological advantage over others. According to The Economist, Huawei is involved in more than half of the superfast 4G telecoms networks in Europe, and it has become a strong competitor in mobile phones.

The British magazine agrees that "banning Huawei from bidding for commercial contracts is wrongheaded, for two reasons. One is that the economic benefit of competition from China in general and Huawei in particular is huge. It boosts growth and thus wellbeing".

In response to the question of whether China's rise threatens the EU, Olusegun Obasanjo, former president of Nigeria, said: "I think there's no cause for panic. I believe that Europe should do what Europe can do best, without unduly panicking about China. Let me put it this way: any Nigerian or any African who wants to buy a very precise industrial machine will not go to China. He will come to Europe. But, if he wants to buy equipment for poultry or pigs or something like that, he will probably go to China. So that should not worry you. And I don't believe that we should unduly worry about that."

Trade relations between China and the EU have grown rapidly. Last year two-way trade had reached $567 billion, or more than $1.5 billion a day. But trade has always been present. The EU always protects its market with anti-dumping tariffs against Chinese products.