How Regulations Deter Investments: The China-Europe Story

Many Chinese firms including State Owned Enterprises (SoE) have been considering to invest in Europe as the latter eyes $560 billion of Chinese FDIs in 5 years.

Unfortunately regulatory barriers have been a huge turn off

From Reuters:

But getting your head around European laws and visa restrictions, as well as the fear that tough economic times could spark more political instability, make Europe hard to navigate for Chinese firms.

In fact the surveyed firms perceive Africa and the Middle East as having a more favourable business environment than the EU.

Chinese firms find EU law particularly troublesome because there is no unified inbound investment approval process and some member states have their own security reviews…

Six in 10 of the firms surveyed were SOEs and the most popular EU country for Chinese investment was Germany, with France a distant second.

Chinese firms asked for more support with the operational issues they face from policymakers in Europe and back home.

Regulatory obstacles can also signify as forms of disguised protectionism via technical barriers to trade as product or safety standards as well as people protectionism which limits flow of people.

The European crisis will hardly be resolved until real reforms to promote a business friendly environment or by the liberalization of the economy.

Also the above also reflects on the Africa’s ‘globalization’ boom story which has been attracting lots of Chinese investments. Chinese FDI reportedly zoomed to $14.7 billion in 2012 up by 60% from 2009 (ChinaUSfocus.com)