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An article by by H.E. Ambassador Song Zhe, Head of the Mission of the People's Republic of China to the European Union, on Euractiv
EU Investment in China Benefits Both Sides

The EU has always been a major investor in China since the country adopted reform and opening-up policy, ranking only next to Hongkong and Japan. By October 2009, actual investment from the EU to China totaled USD 67 billion, and the European investors 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 drop 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 USD 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 modernization and globalization. The number of enterprises related to foreign investment accounts for only 3% of China’s total, but they generate 30% of China’s industrial output, 21% tax revenue, 55% of foreign trade and jobs for 45 million people.

The Chinese government recognizes the positive role of foreign investment in promoting the country’s development and has made great effort to create sound environment for foreign business in China. Particularly in the wake of the financial crisis, the Chinese Government held strong attention to foreign investment and enterprises and took strong measures to boost confidence, stabilize production and help the foreign business to sail through the difficult time.

To streamline the review and approval procedures, relevant authority was relegated from the ministry in the central government to the commerce department of each provincial administration, and on-line licensing service was launched to facilitate applications and improve efficiency.

To revitalize 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 to 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 open or open wider to foreign investment, such as telecommunication, finance, petrochemical industry, production services and social services including medical and health service.

Secondly, more investment will be directed to favored sectors. China welcomes more investment in high-tech industries, modern service industry such as international service outsourcing, clean energy, energy efficiency and environmental protection.

Thirdly, investment environment will be improved. In order to facilitate investment, review items will be reduced, and the approval procedure will be streamlined and standardized. In order to provide better service, government function 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 potentials, as the two economies are highly complementary to and interdependent on each other. The Chinese Government encourages the European investors to strengthen cooperation with Chinese enterprises by matching EU’s strength in capital and technology with China’s advantage in low cost (5-10% compared to developed countries on labor) 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, especially new energy, renewable energy, energy efficiency and environment protection, as the country will anchor its economy on sustainable development;

to service and high-tech industries, such as finance, medicine, logistics, pharmaceutical, information, ect., as China will restructure its economy towards more knowledge and innovation;

to more diversified models of cooperation, including setting up regional headquarters, R&D centers, logistics centers, procurement centers in China and joint ventures to explore Asian and other regional markets, as both sides need greater space for future development.

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