Of course, many Chinese investments are aimed at helping Chinese companies enter and expand in the huge European market. Investments in securing strategic partners, research and development capacity, patents and technology know-how and distribution channels all seem worthy investments to Chinese companies for their long-term growth in Europe.

China, EU talking investment

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Many Chinese companies in Europe are well placed to grab opportunities because the economies of many European countries continue to recover from the sovereign debt crisis. They need capital and investment from outside the region. With improved fiscal situations and a determination to jump-start their economies, many European countries are looking for help not only in the private sector, but also in rebuilding or upgrading their existing infrastructure, much of it completed around the end of World War II. There, Chinese companies' experience in infrastructure investment and construction over the past 30 years may well come in handy. Many of the investment projects are not only funded by Chinese companies, but managed and implemented by them too. There are areas in which Chinese companies can turn their domestic expertise into global competitiveness.

Because China's economy continues to grow, it inevitably becomes more international, and Chinese companies inevitably engage in more international investment. Local businesses worldwide are monitoring Chinese companies' international expansion and investment, some with enthusiasm and others with concern.

Regardless of the vested interests different parties have, it is important to note that Chinese economic growth brings opportunities not only to Chinese people but those of many other countries and other continents. After all, Chinese overseas investment is a necessary and healthy rebalancing of the persistent imbalances in trade and capital flow that has dogged the global economic and monetary system over the past decade.

Recent tapering off of quantitative easing in the US may break the balance that has been fueling the growth of emerging markets and China in the past few years. There have already been signs of capital flight out of emerging economies. If this trend were to continue, the ODI of many emerging economies could exceed their FDI simply as a result of the slowing in FDI growth, rather than increasing ODI.

The author is a faculty fellow at the International Center for Finance, Yale University, and deputy dean of the Shanghai Advanced Institute of Finance, Shanghai Jiaotong University. The views do not necessarily reflect those of China Daily.

 

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