EU Investment in China -Challenges and Possibilities

Dirk MoensSecretary General

The European Union Chamber of Commerce in China

Strategic importance

Declining� in importance

Same level� of importance

Increasingly� important

IMPORTANCE OF CHINA IN COMPANIES' OVERALL GLOBAL STRATEGY

74%

23%

3%

Increasing investment

CONTEMPLATING NEW INVESTMENTS

39%

41%

59%

52%

48%

61%

63%

37%63% plan to make new investments in China in

the next two years

71% set China as a top 3 destination for future

investments

Regulatory barriers

GOVERNMENT POLICY TRENDS AFFECTING FIEs OVER LAST 2 YEARS

No Opinion27%

Fairer13%

Same18%

Less Fair42%

MISSED OPPORTUNITIES BECAUSE OF REGULATORY BARRIERS

No52%

Yes48%

Shifting investment

COMPANIES CONSIDERING MOVING INVESTMENTS OUTSIDE PRC

No78%

Yes 22%

Unequal by design

STATE-LED PROMOTION OF DOMESTIC INDUSTRY

Unequal access

UNEQUAL MARKET ACCESS IS COMPOUNDED BY UNEQUAL ACCESS IN OTHER AREAS

Real Equal Real Equal TreatmentTreatment

MarketMarketAccessAccess

Restricted market access

SIGNIFICANT BARRIERS TO MARKET ACCESS FOR FOREIGN-INVESTED ENTERPRISES

Bilateral investment

Source: Rhodium Group: China Invests in Europe

FDI FLOWS ALLOW FOR LARGE SCALE IMPROVEMENTS

From EU = 2%

From China= 3.5%

EU FDI INFLOWS CHINA FDI INFLOWS

Chinese investment

Source: Rhodium Group: China Invests in Europe

ABSOLUTE VALUES REMAIN SMALL COMPARED TO TOTAL FDI STOCK, BUT THERE IS A REAL CHANGE IN THE TREND LINE

SOEs account

for 2/3 of investmen

t value

"Treaty"/ "Agreement"

MUST BE A STAND-ALONE AGREEMENT THAT GOES SUBSTANTIALLY BEYOND THE EXISTING BITs

Consolidation of the 26 existing BITs is of

more interest to China

Consider Investment Realities

Require a commitment from

China to discuss adding pre-

establishment national treatment within negotiations prior to granting a

formal mandate for negotiations

Post-establishment national treatment

&Pre-establishment national treatment

Potential areas for opening

PRE-ESTABLISHMENT NATIONAL TREATMENT MUST SERVE TO SUBSTANTIALLY OPEN ACCESS, BUT MUST BE REALISTIC

Protection provisions

REMAINING IMPORTANCE OF THE VARIOUS CONVENTIONAL INVESTMENT PROTECTION PROVISIONS

Grandfathering clause

Thank you

http://www.europeanchamber.com.cn/en/chamber-publications

Dirk MoensSecretary General

dmoens@europeanchamber.com.cn