Africa most welcoming, favorable destination for investors, says survey

Despite operational issues such as cultural differences and high cost of personnel, Chinese investors generally see the European Union as being open to foreign investment, and are willing to increase investment there, a survey has found.

Released by the EU Chamber of Commerce in China on Thursday, it found that Chinese investors consider Europe's business environment to be less welcoming compared with Africa, the Middle East and Latin America, but more welcoming than North America and Southeast Asia.

Africa is viewed as the most welcoming destination for Chinese investment, with 85 percent of respondents saying it is more favorable than the EU. North America received the lowest mark, with 22 percent of respondents saying it has a more favorable environment than the EU.

"We have not encountered opposition on the grounds of national security in the EU, which we have in the United States and other regions," a respondent was quoted by the EU chamber as saying.

The report found only 7 percent of respondents encountered national security concerns, with a majority coming from the IT and telecommunications sector. It also found that 97 percent of Chinese enterprises plan to make additional investment in the EU, with 82 percent set to invest more than their current amounts.

China's outbound investment has risen steadily in the past decade, reaching $345.1 billion by the end of 2011, according to the Ministry of Commerce. In 2011, its outbound investment was $60 billion, of which only $4.28 billion, or 7.1 percent went to the EU. However, the scale of investment may be underestimated as a significant amount of Chinese ODI is routed via Hong Kong and British territories.

The survey found the overwhelming reason for Chinese companies' presence in the EU is access to European markets.

David Cucino, president of the EU chamber, said: "Many respondents said increased domestic competition forces them to seek new markets for sales, and become more competitive by acquiring new technologies, brands or expertise."

Deng Dong, president of a Sichuan silk manufacturer, told China Daily he plans to establish a branch in Europe to learn about customers' needs more directly and design tailor-made products. The company used to sell silk to Europe through European distributors.

"They (distributors) are profit-oriented, which means they are not willing to use the best and most appropriate materials to optimize the effect of silk's unique advantage, its elegance and luxury," Deng said.

But the situation varies from sector to sector.

Cucino said Chinese enterprises in industries such as the automotive sector or fashion do not necessarily feel the pressure to invest overseas as they are selling to a large and growing market at home.

The survey found Chinese enterprises tend to invest in countries with strong domestic industries in specific sectors, such as Sweden for telecommunications, the United Kingdom for financial services, Germany for manufacturing, electronics and automotive, and the Netherlands for logistics.

Though 48 percent of Chinese enterprises which have invested in the EU report regulatory approval obstacles in Europe, mostly arising at local, rather than EU or national level, 78 percent report operating difficulties.

The difficulties include obtaining visas and work permits for Chinese employees, dealing with European labor laws, cultural differences in management style, and understanding tax laws across member states, the survey found.

The manager of a Chinese machinery company with branches in Europe told China Daily: "At present, transferring workers from our parent company in China is difficult because it usually takes a long time to obtain a temporary visa."

A survey respondent was quoted by the EU chamber as saying: "Labor laws are the key issue. Lack of labor market flexibility, and working hours are hard to cope with, especially in France. Taxes on labor are very high, too."

The culture is so different that a senior Chinese company representative was shocked when required to deal with employee representatives in a discussion about where to place a coffee machine in an office.

Chen Fei, general manager of Industrial and Commercial Bank of China's Brussels branch, who has dealt with many Chinese entrepreneurs in Europe, said: "The way people do business here is different. Here, business is business. No personal emotion is involved."

Chen said European companies prefer their Chinese partners to hire professionals in legal, accounting and taxation affairs. Chinese companies are reluctant to do this because of the high cost, but not hiring them could be potentially disastrous, he said.

Pan Jianping, who has been with an overseas business department at a Chinese-Japanese joint venture in telecommunications equipment for many years, said: "Going abroad is not simply selling products overseas. If you want to move up the value chain and build your own brand there, a comprehensive strategy needs to be adopted."

zhengyangpeng@chinadaily.com.cn

(China Daily 02/01/2013 page13)