China's investment in Europe hit a 10-year low in 2020 due to the EU's tighter scrutiny and the Covid-19 pandemic and it is predicted that the trend may continue this year, the Global Times wrote in an opinion piece based on an interview with Li Gang, Associate Professor at the Institute of European Studies under the Chinese Academy of Social Sciences (CASS). The 27 EU members together with the UK saw a decline of 45% in Chinese investment in 2020, down to €6.5 billion from €11.7 billion in 2019, according to a report by the U.S.-based Rhodium Group and the Germany-based Mercator Institute for China Studies (MERICS).
Comparing the EU's scrutiny – which has existed for years – to the pandemic, the latter might be a major and more direct reason for the drastic investment decline. Aside from cross-border personnel exchanges encountering serious obstacles, firms also tended to adopt a more prudent investment strategy amid the global health crisis, and Europe's sluggish economic situation amid the crisis also suppressed the appetite of investors. The euro area in the first quarter entered a second technical recession since the pandemic outbreak with GDP declining in nearly all major economies including Germany, Italy and Spain.
The investment policy in Europe has been tightened and Chinese investors are one of the groups being mainly affected. The essential reason is that China's rapid growth and technology development has triggered intensifying anxiety among European countries. Some European politicians try not only to increase investment scrutiny, but also to obstruct the ratification of the EU-China Comprehensive Agreement on Investment (CAI). Based purely on raw political calculations, the European Parliament earlier in May chose to freeze the ratification of the deal, the Global Times notes. However, China's tech development won't stop, and Chinese economic momentum, as a global recovery driver, won't be dampened by external obstructions; but it does not mean that, between China's growth and EU's anxiety, the two have no way to join hands. Expanding collaboration is still the main trend. There are plenty of areas for the two to seek cooperation, even in advanced technology fields, such as environment protection, health services and others.
Irrespective of whether it is the European countries or the U.S., building a “wall” due to paranoid anxiety will harm either side. European businesses need the potential Chinese market to grow, and Chinese firms are boosting the momentum in overseas markets. The era of the cold war has passed, and the EU should take practical measures to repair the mutual beneficial economic cooperation with China; and maybe start with promoting the implementation of the CAI so as to reverse the trend towards declining FDI, the Global Times concludes.
