Chinese companies seeking to invest in Europe find its business environment less welcoming than in Africa, the Middle East and Latin America and face obstacles relating to bureaucracy and high costs, a survey showed.
At the same time, the 27-nation bloc is seen as relatively open with few market-access barriers and little history of opposition to Chinese investment on national-security grounds, according to a survey on the country’s overseas direct investment, or ODI, in the European Union released in Beijing today by the EU Chamber of Commerce in China, KPMG and Roland Berger Strategy Consultants.
China’s outbound investment surged 29 percent to a record $77.2 billion last year, Ministry of Commerce data show, underscoring government efforts to encourage overseas expansion to gain access to technology and resources. Chinese companies will invest as much as $2 trillion overseas in the decade through 2020, a report by New York-based Rhodium Group estimated last year.
“Increasing ODI is a key goal of the Chinese government and is seen as a key tool in advancing its economic development,” according to today’s EU Chamber report. Europe is becoming “a more frequent destination as China moves beyond making investments focused on securing resources and on to acquiring advanced technologies, expertise and brands,” it said.
Enterprises invest overseas mainly to gain market share because of increased competition at home and to differentiate themselves from competitors to help avoid forced industry consolidations by the government, the survey found.
From 2004 to 2010, 72 percent of Chinese outbound investment went to Asia and 5 percent to Europe, the report found, citing Chinese government data.
“The EU is not regarded as a particularly easy market to operate in and is reported to suffer from bureaucratic barriers and high costs,” according to the report. Among key obstacles to investing in the EU are difficulties obtaining visas and work permits for Chinese employees, dealing with European labor laws, human resources costs, cultural differences in management style, and understanding complex tax laws across member states, the survey found.
Eighty-five percent of 74 respondents to the survey said the EU’s business environment is less favorable than in Africa, 69 percent found it worse than the Middle East and 56 percent thought Latin America more favorable.
Even so, 97 percent said they will increase investment in the EU, the survey found.
“Europe is viewed by Chinese investors as a safe, stable destination” with a “large consumer market for sales of goods and services, as well as advanced technologies, an educated workforce and desirable brands that could be acquired to help their competitiveness both domestically and internationally,” according to the report. “Indicators are that Chinese enterprises will be looking to expand existing investments and invest more and at larger amounts in the future.”
The survey was conducted between August and November last year with questionnaires completed by Chinese enterprises that had made at least one investment in an EU country.