European enterprises are accelerating their investment in China amid dim economic prospects at home, and analysts said that the Chinese market provides irreplaceable opportunities and growth prospects, and only by strengthening cooperation with China can Europe get out of its economic quagmire.
Bertelsmann Investments, one of Germany’s largest venture capital funds, is planning a $700 million investment in Chinese start-ups over the next three to five years, Chief Executive Carsten Coesfeld told the Financial Times on Saturday.
Germany’s Volkswagen Group invested approximately $700 million in China’s electric carmaker XPENG and holds about 4.99 percent of its shares, the two companies announced on July 26.
With the cooperation, Volkswagen is strengthening its position in the Chinese automotive market, read a statement by the company.
Germany’s BASF and Mingyang Smart Energy, a Chinese wind turbine manufacturer, formed a joint venture on July 21 for an offshore wind farm in South China’s Guangdong Province, according to a note sent from BASF to the Global Times.
This is the first Chinese-German offshore wind farm project involving development, construction and operation. The wind farm is expected to be fully operational in 2025, and the majority of the power generated will be used to supply renewable electricity to the BASF Zhanjiang Verbund site in Guangdong.
European companies’ decisions to invest and set up factories in China are based on rational analyses and positive business expectations. China can provide opportunities and growth prospects that cannot be found elsewhere, Li Yong, a senior research fellow at the China Association of International Trade, told the Global Times on Thursday.
“After all, China is one of the most important markets in the world, and it is impossible for any multinational company to bypass this market if it wants to have a global presence,” an employee at a European enterprise in China told the Global Times on Thursday on condition of anonymity.
China is an important part of the global supply chain, and the layout of production bases or research and development bases in China is conducive to companies’ operations, the employee said.
Increasing investment in the Chinese market by European companies is probably a safer choice, as Europe’s economy is suffering setbacks and geopolitical risks persist. Europe’s manufacturing downturn has been worsening and its services sector came close to stalling in July, as shown in the latest economic data.
The HCOB Eurozone Composite Purchasing Managers’ Index (PMI) Output Index, compiled by S&P Global, dropped from 49.9 in June to 48.6 in July, its lowest since November 2022 and below the 50.0 mark that separates growth from contraction.
Meanwhile, the HCOB Eurozone Services PMI Business Activity Index declined for the third consecutive month in July, signaling “a sustained growth slowdown in the euro area’s dominant services sector,” said S&P Global in a recent analysis.
“Business confidence retreated further at the start of the third quarter, falling to its weakest level seen this year and marking a fifth successive month in which growth expectations have eased. Both manufacturers and services providers were less optimistic toward the 12-month outlook,” said S&P Global.
“Given the complexities facing Europe, cooperation with China will create positive possibilities for its economy,” said Li.
Based on mutual benefit, China-Europe cooperation is one of the main driving forces supporting the economic development of both sides, analysts pointed out.
But they also warned that if Europe continues to follow increasing US trade and investment restrictions against China, the China-Europe trade deficit will worsen and Chinese enterprises’ investment in Europe will continue to drop, which will harm the European economy.
“Restrictive measures will undermine the welfare brought by trade to consumers, disrupt business order and fair competition, produce disutility, and finally worsen free trade expectations,” Li noted.
Chen Jia, an independent analyst on international strategy, said that given the EU’s comprehensive trade restrictions on the technologies needed by the Chinese market, how could EU companies be expected to increase their exports to China?
Chen also noted that many European manufacturers migrated their industrial chains to China even during the epidemic. This shows to a large extent the real reason for the China-EU trade deficit, said Chen.
This was a rebuttal to the remarks of European Commission Executive Vice-President and Trade Commissioner Valdis Dombrovskis, who said that “the China-EU trading relationship is very unbalanced. China is running a huge trade surplus.”
“The EU’s widening trade deficit with China is itself a perfect satire on the EU’s contradictory policies on economic and trade relations with China.
“Meanwhile, Chinese enterprises’ investments in Europe have also encountered significant obstacles, which is the root cause of the decline in Chinese investment in Europe,” said Chen.
Source : GlobalTimes
