The European Parliament warned of the risks for an excessive presence in the single market
by Emanuele Bonini
Rather than a strategic partner China is a dangerous economic player because of the risks that the country poses for Europe. This the European Parliament opinion, as underlined in the report "Chinese investment in the EU" issued by the Research service of the institution. The document showed both positive and negative effects of Chinese investors' activities in Europe. On one hand these activities stimulate employment (it has been calculated that Chinese are source of job for 45.000 Europeans) and «help to expand European access to China», but on the other hand a greater Chinese investment «could expose Europe to macro-economic volatility» as the volume of Chinese foreign direct investment would depend on economic conditions in China. The European Parliament expressed concern for the possibility that Chinese investors could transfer the economic activity from the EU to China: foreign firms could eventually move high-value activities acquired in the EU to China, which would entail a loss of jobs and tax revenue in the European Union.
Volvo is a clear example of what Chinese presence in the European market can mean. In 2010 the Swedish luxury car brand, was acquired by Geely, the tenth largest car maker in China from the Ford Motor Company for US$ 1,8 billion, saving about 16.000 jobs in the EU. But «since the acquisition by Geely the Volvo brand has seen its market share and profits diminish», the report denounced. Why it happened? Because Chinese investors moved to China. New factories were built in China and a dealership network was created. The reason is purely economic: production in China is cheaper and thus more competitive. Outside the EU it's possible to follow social and working conditions very much below the European standards. For the same reason a greater presence of Chinese investors «could have a negative impact on European welfare», according to the study. Furthermore, in the industrial perspective the EU has a lot to loose. When investing in China, European businesses «have experienced problems in protecting their key technologies due to copying». Similarly «this could also be the case» where a European business is acquired by a Chinese investor.
All these issues «would be resolved by an EU-China bilateral investment agreement», the EP document stated sending a clear message to the upcoming European Commission. Negotiations on an EU-China bilateral investment treaty were launched in 2013 and are still ongoing. The European Parliament called the Commission to avoid «a race to the bottom», inviting the member states to do the same. In fact the report said especially in time of crisis «there is the possibility of a race to the bottom between EU Member States to attract Chinese investments». Such a scenario produced «strategic concerns»: China, warned the European Parliament, could threaten to withhold foreign direct investment in order to influence European policies, if EU countries were to become dependent on Chinese investment.
Rather than a strategic partner China is a dangerous economic player because of the risks that the country poses for Europe. This the European Parliament opinion, as underlined in the report "Chinese investment in the EU" issued by the Research service of the institution. The document showed both positive and negative effects of Chinese investors' activities in Europe. On one hand these activities stimulate employment (it has been calculated that Chinese are source of job for 45.000 Europeans) and «help to expand European access to China», but on the other hand a greater Chinese investment «could expose Europe to macro-economic volatility» as the volume of Chinese foreign direct investment would depend on economic conditions in China. The European Parliament expressed concern for the possibility that Chinese investors could transfer the economic activity from the EU to China: foreign firms could eventually move high-value activities acquired in the EU to China, which would entail a loss of jobs and tax revenue in the European Union.
Volvo is a clear example of what Chinese presence in the European market can mean. In 2010 the Swedish luxury car brand, was acquired by Geely, the tenth largest car maker in China from the Ford Motor Company for US$ 1,8 billion, saving about 16.000 jobs in the EU. But «since the acquisition by Geely the Volvo brand has seen its market share and profits diminish», the report denounced. Why it happened? Because Chinese investors moved to China. New factories were built in China and a dealership network was created. The reason is purely economic: production in China is cheaper and thus more competitive. Outside the EU it's possible to follow social and working conditions very much below the European standards. For the same reason a greater presence of Chinese investors «could have a negative impact on European welfare», according to the study. Furthermore, in the industrial perspective the EU has a lot to loose. When investing in China, European businesses «have experienced problems in protecting their key technologies due to copying». Similarly «this could also be the case» where a European business is acquired by a Chinese investor.
All these issues «would be resolved by an EU-China bilateral investment agreement», the EP document stated sending a clear message to the upcoming European Commission. Negotiations on an EU-China bilateral investment treaty were launched in 2013 and are still ongoing. The European Parliament called the Commission to avoid «a race to the bottom», inviting the member states to do the same. In fact the report said especially in time of crisis «there is the possibility of a race to the bottom between EU Member States to attract Chinese investments». Such a scenario produced «strategic concerns»: China, warned the European Parliament, could threaten to withhold foreign direct investment in order to influence European policies, if EU countries were to become dependent on Chinese investment.
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