Deepening Bilateral Investment between China and Europe Requires Mutual Action

Spanish Prime Minister Sanchez, French President Malcolm and European Commission President von der Leyen have visited China recently, highlighting the frequent high-level interactions and warm exchanges between China and the EU, and providing guidance for bilateral exchanges and cooperation in various fields. Economic and trade cooperation has always been a focus of attention for both sides, and how to strengthen bilateral investment cooperation between China and Europe is a key topic of concern for both sides.
Yang Chengyu, associate researcher of the European Economic Research Office of the Institute of European Studies of the Chinese Academy of Social Sciences, said recently in an interview with the China Trade Daily that whether German Prime Minister Schultz came to China last November as the first European leader to visit China after the convening of the 20th National Congress of the Communist Party of China, or the recent intensive visit of European leaders to China, all sent positive signals to the investment field of China and the EU. On the one hand, it indicates that Europe continues to value the Chinese market and recognizes the sustainability of Chinese market demand; On the other hand, Europe is seeking to resolve bilateral economic and trade differences through dialogue in response to the widespread "decoupling" voices.
A good business environment for both sides is the foundation for promoting two-way investment between China and Europe, "Yang Chengyu said. The use of economic and trade policy tools such as EU foreign investment review, foreign subsidy review, public procurement review, and the implementation of multiple protectionist policies have posed challenges to Chinese enterprises' investment in Europe. Only by continuously creating a better business environment and reducing the investment risks of foreign enterprises in Europe can we attract more Chinese enterprises to enter the European market.
It is understood that in 2022, the EU's investment in China reached $10 billion, a year-on-year increase of 96.6%. China's investment in Europe was $6.9 billion, an increase of 23.7% year-on-year. Chinese Ambassador to France, Lu Shaye, previously emphasized the importance of a business environment in an interview with the media. He stated that expanding two-way investment is an important direction. China's investment stock in France is much smaller than that of France's investment stock in China, which highlights the imbalance. Chinese enterprises hope to expand their investment in France, contribute to its economic recovery and job creation. They also hope that the French side can overcome third-party interference factors and actively provide an open, fair, transparent, and non discriminatory business environment for Chinese enterprises, especially in the fields of telecommunications and high-tech.
In this regard, French President Macron's visit to China has produced substantial positive results. On April 7th, China and France issued the latest joint statement, promising to provide fair and non discriminatory competition conditions for enterprises in investment and other fields. It is particularly mentioned that in the field of the digital economy, including 5G, the French side promises to continue to handle authorization license applications from Chinese enterprises in a fair and non discriminatory manner based on the laws and regulations of both countries, including national security.
In addition to optimizing the business environment, continuously expanding the investment fields of both sides is also an effective path to help China Europe two-way investment achieve stability and prosperity. Yang Chengyu stated that in 2022, two-way investment between China and Europe has grown against the trend, mainly showing two characteristics. Firstly, European investment in China is mainly concentrated in the manufacturing sector, especially in the high-end manufacturing sector. Taking Germany's investment in China as an example, according to the website of the Ministry of Commerce, Germany's investment in China in 2022 reached a historic high of 11.5 billion euros. The companies with the largest investment scale in China are Volkswagen, Mercedes Benz, and BMW Group. In recent years, the German automotive industry has accounted for an average of over 70% of domestic investment in China and over one-third of European investment. Chemical giant BASF is also releasing a pro China signal, still considering China as the most important development market and vigorously expanding its business in China. In the next few years, it will invest 10 billion euros to build an integrated base in Zhanjiang, which is one of the largest single investments in the group's history.
In contrast, European investment in China's service industry is relatively weak. A report released by overseas consulting firm Rhodium Group last year showed that between 2018 and 2021, commercial services accounted for less than 2% of the total investment in European direct investment in China, while software and IT services accounted for less than 0.5%.
Secondly, in recent years, the proportion of green space investment in China's investment in Europe has been increasing, "Yang Chengyu said. With the intensive implementation of various protectionist policies in Europe, green space investment can help bypass the protective barriers of the investment country and better enter the local market. Among them, investment in the green sector is relatively large due to its compliance with the European dual carbon goals and the renewable energy transformation plan, such as the participation of Ningde Times and Yuanyuan Power in the development of the European power battery industry.
In Yang Chengyu's view, strengthening European investment in the service industry in China and promoting China's investment in multiple fields in Europe are the future directions of efforts. In addition, from the perspective of investment source countries, Germany, the United Kingdom, France, and the Netherlands account for a relatively large proportion of Europe's total investment in China; From the perspective of investment enterprises, the overall investment is concentrated in existing European enterprises in China, with relatively few new enterprises added. Therefore, attracting more new enterprises from European countries to enter the Chinese market is also particularly important.
It is worth noting that the "EU Business Environment Report 2022/2023" previously released by the Research Institute of the China Council for the Promotion of International Trade shows that if the China Europe Comprehensive Investment Agreement is signed and implemented, 40.87% of surveyed Chinese enterprises will increase their investment in Europe. The negotiation of the China Europe Comprehensive Investment Agreement (CAI) was completed at the end of 2020 and has since entered the text review stage. However, the review process was temporarily suspended within the EU.
The resumption of the China Europe Comprehensive Investment Agreement still needs to return to the crux of how to lift bilateral sanctions, "Yang Chengyu said. China should continue to actively promote communication and coordination with the European Parliament, accelerate the removal of political obstacles to the approval of the agreement, help the agreement to be unfrozen as soon as possible, and provide greater market access opportunities for enterprises on both sides.