A woman works on the China stand at fairgrounds in Hanover, central Germany, for the Hannover Messe technology fair on April 20. China was the fair's partner country in 2012. Jochen Luebke / AFP

Investment | Davide Cucino

At a time when foreign direct investment in China continues to decline, the need for it and its importance are being called into question. However, as the global economic crisis is far from over, this is a time when, if anything, FDI should continue and increase, not the other way around.

We have seen the benefits that foreign investment has brought and still continues to bring to China. Investment brings great benefits to the host country, in terms of jobs, capital, taxation, technology and management know-how transfer, and the expansion of supply chains.

Chinese investment in Europe tripled in 2011. This not only demonstrates the European market's increasing importance to Chinese companies, but also shows the potentially massive benefits that the increasing ability of Chinese companies "going global" could bring for Europe.

The European Chamber, as a proponent of freer trade and investment, welcomes and encourages China's increased investment in Europe - so long as similar access is granted in China.

There are lots of perceptions right now that Europe is weak and China is strong. In some ways, this is the case.

But, Europe remains fundamentally strong and European business is still the global leader in many high-tech industries and advanced services. And Europe's future growth potential remains very strong.

As Europe needs China, we must also realize that China also needs Europe.

The eurozone debt crisis makes the relationship more important. China, as a creditor nation, has lots of opportunities in the European Union. And at a time when the European economy is not growing, leading growth markets like China become even more important for EU companies.

Europe provides China with opportunities to deploy its foreign reserves, diversify its currency portfolio and spread risks. Importantly, it also offers many merger and acquisition opportunities.

While there are frequent temptations to protect markets during economic downturns, Europe remains resiliently open.

Alongside the increasing ability of Chinese companies to go global, this openness has been a major factor in contributing to China's massive investment expansion into Europe.

But, this also reveals the major sticking point for EU-China relations - a lack of alignment.

While the European Chamber welcomes Chinese investment in Europe, it is important to point out that Chinese companies are increasingly entering markets in Europe that European businesses are in many evident cases not allowed similar access into in China.

And Chinese companies are showing their capabilities to bid for major participation in infrastructure projects in Europe, while such procurement markets in China remain out of bounds for the European industry.

This is evidenced by deals such as Geely buying Volvo. Such an acquisition would not be possible were it the other way around because China requires foreign automobile manufacturers to form joint ventures, limited to a maximum 50 percent share, to operate in China.

Likewise, Chinese State-owned enterprises are increasingly entering markets in Europe that foreign enterprises are unable to access in China. Two deals in Portugal's energy sector demonstrate this lack of alignment. China's State Grid Corporation acquired a 25 percent stake in Redes Energeticas Nacionais, the Portuguese national energy network, in February. And in December, China Three Gorges bought a 21 percent stake in Energias de Portugal, Portugual's state power company.

The eurozone debt crisis is the result of a misallocation of resources. It is a crisis of sovereign debt, not of private debt. By and large, European companies remain strong and still hold large amounts of capital. This means that European companies are still in a strong position to invest.

China has been by far the biggest driver of global growth since the global financial crisis started in 2007. This growth and the sheer size of the Chinese market continue to offer major investment opportunities for European companies.

And we have the products, services, technology and know-how to serve the Chinese market.

But, while Chinese overseas direct investment in Europe tripled in 2011, in contrast, EU companies' investment in China over the same period actually declined - despite our members telling us that the Chinese market is increasingly important to their global success.

Without the open global trading system, China's remarkable economic development would not have been possible. So, we hope that as Chinese companies are increasingly going global, the importance of open markets will be increasingly recognized.

But, more important is the role that further opening-up can play to help rebalance China's own economic model.

The European Chamber has listed the acceleration of the discussion on a China-EU Bilateral Investment Treaty as a top priority recommendation to the policymakers of both sides.

This remains a precondition for a better sharing of interests between European and Chinese companies, enabling Europe to attract more capital and investment, and giving China more access to the technologies it needs to further climb the value chain and gain positions in new markets.

This process will bring the EU and Chinese economies closer.

At the core of both the EU's 2020 Strategy and China's 12th Five-Year Plan (2011-15) is the drive for green and sustainable growth based on an innovative economy.

This will bring synergies, but will also put China and the EU into greater competition in some areas.

Both parties need to keep an eye on the long term. If both sides can solve and make progress on issues that affect EU-China relations in the short term and foster the conditions for a comprehensive Bilateral Investment Treaty, this will bring huge long-term benefits.

Mutual open access to markets in the EU and China would promote competition and would lead to increased efficiency, effective innovation and greater economic development, ultimately benefiting both EU and Chinese consumers.

(China Daily 07/27/2012 page17)