Unlocking the potential of the next decade

EU should review regulations on FDI so as not to hinder investment from Chinese firms

Since Brexit was first touted, Chinese investment in Europe has had to live with rising market uncertainties brought by this setback to European integration.

All in all, the changes provoked by Brexit will be unsettling for Chinese companies in the European Union.

They will probably face increased red tape and higher administrative expenses, more logistics costs, burdensome customs procedures, higher import duties and reduced freedom of movement for their employees between branches in the United Kingdom and the EU. Companies will need time to adjust to changes in the market structure and business processes.

Therefore, it is urgent for EU and UK authorities to mitigate the impact of the UK leaving the EU by reducing the uncertainties. For enterprises, certainty and predictability are vital for a smooth continuation of their internal and external processes, from production and trade, to investment and innovation.

On behalf of its members, the China Chamber of Commerce to the EU urges agreement be reached as soon as possible on the legal principles and norms regulating trade and investment between the UK and the EU. Chinese businesses will benefit from legal certainty and predictable market conditions which will also benefit the EU and the UK.

The EU, which still consists of almost 500 million citizens, ranks among biggest economies in the world and it will continue to be a magnet for investment.

Neighbors can easily move away but neighboring countries cannot. Brexit is a reality now, and the EU and the UK have to face the consequences and try to make the best of their new relationship. The approach suggested by the China Chamber of Commerce to the EU is to follow the sage Chinese saying “turn bad things into good ones”. It is pressing to work on a smooth transition, which will limit the negative impacts of Brexit and make it possible to move toward a new decade of prosperity.

While dealing with short-term disorder, EU politicians must realize that the year 2020 represents the beginning of a new decade, a new political cycle for EU institutions, and a historic year to renew the agenda of China-EU Strategic Partnership and Cooperation.

The EU leadership has already formulated its key priorities to realize a green and digital transition, which also tops China’s economic agenda. Chinese enterprises in the EU are also committed to these priorities.

Chinese companies in the digital sector are investing in the EU, especially in research and innovation, and aim to jointly develop technologies for the future. In their involvement in EU countries, they also support local development and job creation.

But the EU badly needs a bolder vision for the new decade, which considers the long-term effects and results of political choices on businesses and the private sector. It is also the ambition of the China Chamber of Commerce to the EU and its members to support European growth and raise the average annual growth — 1.6 percent in the past decade and 1.9 percent in the past 25 years — to between 2 percent and 3 percent.

However, we insist that this growth is high quality, green and inclusive, as it is in this way that EU-China cooperation will deliver significant results.

Needless to say, the common goal for China and the EU is a decade of growth and prosperity. Together, they constitute a market of 1.9 billion consumers and, through economic interaction and the global supply chain, they contribute to the well-being of these people and the world.

Learning from the past gives us the key to unlock the potential of the future. It is worthwhile to consider how ChinaEU economic interaction fared in the past decade.

The contribution of Chinese enterprises to the EU economy is undeniable. After the 2008 economic crisis, Chinese foreign direct investments have been growing exponentially. In 2018, Chinese FDI in the EU reached $7.82 billion, according to Chinese Ministry of Commerce, and this investment has contributed to boosting the EU’s economic growth.

The opening of numerous research centers in Europe, where highly educated European researchers and innovative Chinese companies work side by side, has also paved the way for further industrial upgrading by means of new discoveries. Also, the engagement of Chinese enterprises in the EU has further stimulated job creation: By 2018, Chinese enterprises had created up to 330,000 direct jobs and millions of indirect jobs, which is a key finding in the first flagship report of the China Chamber of Commerce to the EU released in October 2019.

These positive trends should be encouraged and sustained. The cooperative approach between the EU and China has made it possible to pave the way for stable and long-term economic interaction, which ultimately benefits companies and citizens.

It is now vital to take a reassessment of existing regulations on FDI to understand to what extent that they hinder economic interaction between Chinese companies and their European counterparts.

The aim of these regulations should not be to prevent FDI, and they should not endanger either the EU’s commitment to an open economy or the mutual trust between European and Chinese companies. Indeed, the EU and China should remain committed to safeguarding multilateralism and pushing for further cooperation with openness to trade and mutual trust.

Only in this way will Chinese companies in Europe be able to sustain their contribution, and help the bloc realize the goal of 2 to 3 percent inclusive growth annually.

LUO JIE / CHINA DAILY