Chinese confidence in Europe holds up

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China remains interested in stepping up investment in Europe, but caution is required, said members of the Chinese People's Political Consultative Conference this week at their annual meeting in Beijing.

The members suggested that Chinese companies that wish to go to Europe should conduct more in-depth risk analysis and control to avoid losses.

"There are some barriers to investing in the European Union, because it is not like the United States, which is a large integrated market. Every single country in the EU has its own laws," said Wan Jifei, president of the China Council for the Promotion of International Trade.

"I think it's better (for Chinese companies) to establish research and development centers in Europe, but not production lines," said Wan.

He added that increased risk analysis and control should be "compulsory" for Chinese outfits going abroad.

In 2011, Europe became the biggest destination for Chinese overseas investment, replacing the US for the first time.

Last year, China's total overseas investment reached $68 billion, $10.4 billion of which was spent on mergers in Europe.

Meanwhile, the country's European deals this year have included Shandong Heavy Industry Group Co Ltd buying a 75 percent stake in the Italian yacht maker Ferretti Group, and the State Grid Corporation of China buying 25 percent of Redes Energeticas Nacionais SA, Portugal's electric utility.

At a news briefing on Tuesday last week, China's Foreign Minister Yang Jiechi said that the country retains confidence in Europe and will continue to invest there.

The Irish Times said Yang's "upbeat comments" reflected "the positive view of ties with Europe" since Vice-President Xi Jinping's visit to Ireland last month. In Dublin, Xi said that China's total overseas investment is likely to reach $500 billion in 2015.

The EU is China's largest trading partner, with the total bilateral trading volume surpassing $500 billion in 2011.

With $3.2 trillion in foreign-exchange reserves, China is "the only country left with the necessary economic muscle to rescue some European governments", according to The Irish Times.

China Investment Corp, the nation's sovereign wealth fund, founded in 2007, recently received a cash injection of $30 billion that will help it buy assets in debt-stricken Europe, said Wang Jianxi, CIC's deputy general manager and chief risk officer, on Monday last week.

China should "try its best" to use this "rare chance" to invest in Europe, said the country's former ambassador to the EU, Guan Chengyuan, who stressed that "avoiding risks" must be a precondition.

"With Europe's hopes for more external cooperation, as it needs money, this is a good opportunity. We could buy companies, industrial enterprises, brands, high-end products and technology," Guan said.

Sectors such as high-technology and high-end manufacturing are indeed attractive to China, said Lu Fengding, China's former ambassador to Sweden.

"But we should be cautious (when investing in Europe)," the CPPCC member noted.

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