China, EU embrace open economies to fight against impact of protectionism
Why do Chinese investors prefer Europe to North America? In 2017, Chinese investment in North America fell 35 percent to $30 billion, while investment in Europe rose 76 percent to $81 billion, said a report released by international law firm Baker McKenzie earlier this year.
With a boom in outward investment, China is expected to retain its position as the world’s second-largest source of outbound direct investment (ODI). Chinese people’s choices of investment destinations are having a big impact on global investment flows.
Chinese investors’ enthusiasm for Europe reflects China’s confidence in the European economy. As US President Donald Trump has begun the pursuit of protectionist trade policies, Europe’s pro-free trade attitude has become noticeable. In most people’s eyes, China and European countries will promote bilateral and multilateral trade through mutual opening-up.
A pro-free trade attitude is a crucial prerequisite for economic integration. It seems that the European market is becoming more unified, and China has great confidence that this process can continue. Although Chinese enterprises invest in specific European countries, most of them keep an eye on the entire continent. Economic integration can help Chinese companies in one European country reach other markets through Europe’s intra-regional trade.
Some Chinese enterprises, such as heavy truck builder Sinotruk, are seeking a fulcrum in Central and Eastern European countries (CEEC) as a strategy to enter the EU market. Some people have concerns that China’s cooperation with CEEC may cause divisions in the European economy, but Chinese enterprises are the most active supporters of Europe’s economic integration.
Most of them are willing to do their bit to help European countries make progress to form a single economic market, which will allow them to use CEEC as a springboard to enter the EU market. In contrast, North America is going backward on forming a single market. With Trump’s protectionist impulses, the North American Free Trade Agreement faces an uncertain fate. Some Chinese enterprises are taking a waitand-see attitude when it comes to investing in the US.
Chinese companies’ appetite for outward investment will gradually reshape global supply chains. But anti-globalization in the US will undermine its place in these supply chains.
Earlier this week, the EU indicated it would join in the consultations requested by China at the WTO over US import tariffs on steel and aluminum. The EU moves reflects concerns in European countries over Trump’s “America First” policies.