Chinese companies have a big role to play in creating jobs

The tangible benefit of China's sizable investments in Europe has been the wealth of direct and indirect jobs created by Chinese companies.

Though the actual number of jobs created in Europe is yet to be quantified, like the proverbial "small drop in a big ocean", the Chinese companies have helped provide sustenance and nourishment to many struggling local economies.

According to a report published by the New York-based research firm Rhodium Group, between 2000 and 2011, China made 428 greenfield investments in Europe (not including projects whose investment is less than $1 million, or 766,000 euros) and created more than 15,000 jobs.

The M&A deals made by Chinese companies during this period played a significant role in reducing the overall unemployment rate through their job retention policies, but had only limited impact in overall job additions.

According to the Rhodium report, the Zhejiang Geely Holding Group's acquisition of the Swedish brand Volvo in 2010 protected the jobs of more than 16,000 employees, and paved the way for foreign direct investment of more than $11 billion to flow to Sweden.

In 2005, China's direct investment in the EU was only $190 million, but by 2007, it had risen to $1 billion, and expanded to $7.56 billion in 2011. The $3 billion of accumulated Chinese investment in Europe in 2008 zoomed to $20 billion in 2011, a $17 billion increase in just three years.

The openness of the European economy and the repeated statements of European leaders that they want more Chinese investment have also helped create a positive atmosphere. German Chancellor Angela Merkel during her visit to China earlier this year had reiterated that Chinese investment was more than welcome in Europe, and there would be no steps from Germany to politicize the economic exchanges. Europe will not set up a wall of protectionism and both Germany and China will take further steps to promote bilateral trade and investment cooperation, Merkel said.

China's investment in Europe has also been the sustenance for several European companies to put on hold their job reduction plans. When Chinese PC maker Lenovo Group acquired the German company Medion earlier this year, there were no job reductions, but rather job additions as the merged entity now had to cater to the whole European market.

Dora Bakoyannis, the former foreign minister of Greece, had mentioned in an interview with Xinhua News Agency that Chinese transport operator COSCO's deal with the Greek government to manage the facilities at the port of Piraeus will bring Greece 4.3 billion euros of investment over a 35-year period and create more than 1,000 jobs.

The overseas moves of the Chinese companies also play a key role in reducing the overall funding gap in Europe. Though Europe is a developed continent, it also needs to expand investment and use external funding to make up shortfalls in capital accumulation.

Due to the prolonged debt crisis, many European nations such as Greece, Portugal, Ireland, Spain and Italy have implemented large-scale privatization programs as part of their efforts to cut government spending and maintain fiscal stability.

Greece is planning to privatize 15 billion euros' worth of state-owned enterprises in areas such as infrastructure and manufacturing from 2012 to 2013, and the total revenue from the privatization is expected to reach 50 billion euros by 2015. Ireland plans to privatize 2 billion euros' worth of state-owned enterprises, but the International Monetary Fund wants to increase it to 5 billion euros. Portugal will privatize 6 billion euros' worth of airlines, railways, postal services, energy and paper manufacturing enterprises before 2013.

Italian Economic Minister Giulio Tremonti had earlier said the Italian government would privatize most of its state-owned enterprises except for the water supply companies, so as to achieve fiscal balance in 2014. Spain has also unveiled a privatization plan for the two largest domestic airports and lottery companies.

There is no doubt that all these measures would lead to more foreign investment, a rise in asset prices and create several new job opportunities.

The Chinese companies have also played a key role in expanding the market share of several European companies through their various investment measures. The Chinese heavy machinery maker Sany's acquisition of the German concrete machinery maker Putzmeister had surprised many, considering that concrete was not Sany's strength. But what Sany brought to the deal was its swift turnaround capability in mixer and concrete mixing station equipment, and thereby helping the company move up the value chain. Sany Chairman Liang Wengen had indicated during the deal process that the speedy market moves would help companies to scale up operations and thereby create more jobs.

The author is deputy director of the Institute of European Studies, Chinese Academy of Social Sciences. The views do not necessarily reflect those of China Daily.

(China Daily 12/07/2012 page7)