As the good times roll from East to West
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As Chinese investment in Europe rises in the future, it will play an important role in driving European economic recovery and generating employment.
Hungary's National Development Minister Tamas Fellegi said in an interview that China's investment has helped Europe to emerge from the economic turmoil.
In early February, China's Wanhua Industrial Group acquired full control of Hungary's isocyanate maker BorsodChem for 1.2 billion euros ($1.66 billion).
It's the largest investment a Chinese company has made so far in Hungary. "We are very happy. I hope that it is just the first step," Fellegi said.
Large Chinese companies are expanding to Europe, in increasing numbers, among them China Telecom Corp Ltd and Huawei Technologies Co, and many European countries are eager to attract Chinese investment.
Business leaders and experts said growth in areas such as infrastructure is likely to become an important source of employment in the coming years.
"There are already 420 Chinese companies in the United Kingdom and in the next few years the number will grow rapidly," said Stephen Phillips, CEO of the China-Britain Business Council.
Last summer, the leading Chinese automaker Changan Automobile Group established a research & development center in Nottingham, England, that focuses on the development of power-train and transmission technologies as well as alternative-energy vehicle technology.
"This is great news for job creation in the UK, as recruitment is expected to increase to approximately 200 employees by the end of 2013," said Guy Drury, chief representative of the Confederation of British Industry in China.
"The UK is considering adopting Chinese high-speed railway technology as it plans to dramatically expand its network over the next 15 years," Drury added.
Focusing on the issue of job creation can help to reduce some of the frictions which may arise from Chinese investments and from pre-existing concerns that Chinese exports undermine manufacturing jobs, said Rodger Baker, vice-president of Strategic Intelligence, a global intelligence company.
"However, there remains an underlying concern in Europe not only that the job creation from new investments doesn't match the job losses due to competition with Chinese goods, but also that the Chinese are taking advantage of Europe's hard luck," Baker said.
When it comes to the key barriers for Chinese companies setting up in the European Union (EU), analysts said that while regulations in the EU are fairly open to Chinese investment, the biggest hindrances are nationalism, intellectual property rights, and national security concerns.
"There are times when deals may make perfect sense from an economic perspective, but become political hot potatoes in the sector, locality or country," Baker said. It remains fairly easy for local nationalistic sentiments to rally opposition to foreign investment, particularly when it is seen as threatening a particular industry or presents potential risks to national security in industries such as telecom and aerospace, he said.
Analysts agree that China's biggest advantages in attracting EU investment are the lure of its potentially massive domestic market, the highly diligent work force, rapid infrastructural development, and the nation's role as the primary engine of growth for the world economy in the wake of the financial crisis.
However, companies and experts believe there are still barriers to European companies entering the Chinese market. Guy Drur identified the key barriers as weak protection of intellectual property rights and rising labor costs.
A White Paper published by the British government's Department for Business, Innovation & Skills in February also acknowledged intellectual property rights in China as an issue of particular importance for UK businesses.
The paper states that China's commitment to bringing its intellectual property system up to global standards is likely to grow as it becomes an independent innovator.
Jack Yu, International Policy Advisor for North Asia & the Pacific at the Law Society of England and Wales, said intellectual property rights are a major concern to many high-tech British companies operating in China.
"Evidently, progress in China has been made. The Chinese government realizes that only robust legislation and the enforcement of laws in this regard can help greater technology transfers."
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