China's investment in the European Union doubled that of the United States in 2012, due primarily to political implications, according a Rhodium Group report.
Experts note that when compared to the EU, the U.S. is prone to paranoia in regards to Chinese investment, a mainstay of Cold War thinking. The U.S. frequently restricts Chinese companies from investing into the U.S. through traditional trade protections such as anti-dumping and countervailing, but also including technological barriers and excuses like national security.
More investment in the EU
The Rhodium report shows that Chinese direct investment to the EU started to surge in 2009 and 2010, tripling the 2008 figure of US$1 billion to reach an average of US$3 billion, and then further rose to top US$10 billion in 2011 and 2012.
Meanwhile, Chinese investment into the U.S. increased from less than US$1 billion in 2008 to US$5 billion in 2010, before waning to US$4.7 billion in 2011 and later reaching a record high of US$6.5 billion in 2012. But that remained far below the level seen in the EU over the same period.
The report deems the surge of China's foreign direct investment (FDI) in Europe was mostly driven by the fiscal and economic crisis in the Eurozone, when Chinese investors seized upon the opportunity and invested in "cash-strapped companies with promising stable long-term growth, such as utilities and infrastructure," said Thilo Hanemann, who led the Rhodium research report.
Europe welcomed Chinese FDI in airports, power grids, and ports. In 2012 alone, China's EU-investment in this field exceeded US$5 billion. But the U.S. failed to attract any substantial form of foreign investment in transportation infrastructure.
China's expansion in overseas investment follows the country's "going global" strategy, which, compared to international trade, could effectually circumvent barriers while boosting exports. Chinese investment also increased employment in the recipient countries, achieving a win-win result, said Bai Ming, a senior fellow with a Ministry of Commerce research institute.
Most European entrepreneurs have sensed a chill since the sovereign-debt crisis encompassed the EU in 2009, opening a prime window for Chinese companies' overseas acquisition.
The EU at the same time keeps improving its intrinsic inter-dependence among its member states in trade, especially after the formation of the Eurozone in 1998.
However, China's investment growth in the U.S. has been less than satisfactory. The U.S. deals with China through an antiquated Cold War mindset, creating a major political barrier for Chinese investment.
The Rhodium report claims that U.S. security concerns have been a major obstacle for Chinese companies looking to do more business in the U.S.
"The U.S. attitude toward China is a combination of Cold War mindset and trade protectionism," said Bai Ming. He explained how the U.S. blocked Chinese telecom giants Huawei and ZTE from entering the U.S. market, and recently blocked Sany, a heavy machinery manufacturing company, from investing a 3-billion-yuan (US$48 million) scale wind power project.
The U.S. plans to rebuild its economic engine in the post-economic crisis years, and has been actively developing wind power and photovoltaic power industries. The U.S. then tried to protect its post-crisis economic momentum by fending off Chinese competitors.
China and U.S. interdependence on trade has inevitably resulted in more trade spats. Chinese companies have become more competitive in the international market, and no longer fall prey to U.S. protectionist traps. Hence, political measures are the last barricade to keep incoming Chinese investors at bay.
"It's an excuse that abuses state security," said Bai Ming, referring to how the U.S. blocked Chinese investors from entering some fields. He said such a Cold War mindset will result in a lose-lose situation.
According to Bai, Sino-U.S. trade should be cooperative and complementary. The U.S. ought to make the most of its hi-tech advantages and lever up its deficit in trading with China.
But the U.S. neither exports any technology to China nor allows China to make hi-tech investment in the U.S., intending to slow down China's development.
This is how the United States lost Chinese overseas investment. If the U.S. insists on its paranoid Cold War mindset, even more losses are likely.
This article was first published in Chinese and translated by Chen Boyuan.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.