Money

Firms cautious on Europe

By Yang Ning and Ding Qingfen (China Daily)
Updated: 2010-05-06 09:42

People pass through the Brandenburg Gate in Berlin. When they do invest in Europe, Chinese companies mainly limit themselves to Germany, France, Italy, the United Kingdom and Spain. [Jose Giribas / Bloomberg]

BEIJING - Despite their great interest in investing in Europe, Chinese companies remain cautious on entering the continent due to a combination of intense competition and a lack of experience.

A recent report released by the China Council for the Promotion of International Trade (CCPIT) showed that only 10 percent of Chinese enterprises surveyed said they have operations in Europe, compared to 42 percent who have already invested in the United States.

And when they do invest in Europe, Chinese companies mainly limit themselves to Germany, France, Italy, the United Kingdom and Spain, according to the report.

Although most Chinese companies are cautious and have yet to invest in the continent, they realize that, in the long term, this will be imperative.

The CCPIT survey said 20 percent of the corporate interviewees said they had considered investing in Europe, but they gave up for various reasons.

The report said that the majority of Europe Union member states sharing the same currency is an attractive factor for Chinese companies.

In addition, "Chinese companies are attracted by the good infrastructure and research and development environment," said the report.

When it comes to the most promising sectors for investment, Chinese companies give "manufacturing, retailing and wholesale" the highest rank.

But many usually draw back when it comes to real investment, due to the high operating costs, language difficulties, and cultural misunderstandings.

"The current situation is that Chinese companies invest less in Europe than the US, Australia or Japan, and the main reason is they don't know enough about Europe," said Herman Reynders, governor of Limburg province in Belgium.

Wang Yaoqiang, strategy supervisor of Haier Electrical Appliances, China's largest household appliance manufacturer, told China Daily that the "European market is very important for Haier, but we are now facing severe challenges".

Competition is already "very fierce" in Europe, and "China's domestic brands entered European markets very late and we still need quite a long time to build up brand recognition there," Wang explained.

The Chinese government and its European partners are making efforts to help Chinese companies increase their investment in the continent.

"China and the UK are now taking action to help more Chinese companies, especially small- and medium-sized enterprises, to enter the British market," said Wu Kegang, chief adviser of the British Chambers of Commerce.

"We believe SMEs from China and the UK are highly complementary. Chinese companies are good at manufacturing, while their British counterparts are good at marketing and branding," he added.