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Print Edition> World
UPDATED: January 5, 2013 NO. 2 JANUARY 10, 2013
An EU Opening
China stands ready to increase investment in Central and Eastern European countries
By Liu Zuokui

TOP ENDORSEMENT: Chinese Premier Wen Jiabao addresses the China-Central and Eastern Europe Business Forum in Warsaw, Poland, on April 26, 2012 (WANG YE)

Strengthened ties between China and Central and Eastern Europe (CEE) were a highlight of Sino-EU relations in 2012. During his trip to the region in April, Chinese Premier Wen Jiabao put forward 12 proposals to promote Sino-CEE friendship and cooperation. On September 6, Beijing hosted the Inaugural Conference of the China-CEE Cooperation Secretariat. With the fast growth of economic and trade cooperation between China and CEE, flourishing Chinese investment in the area has helped stimulate the further development of bilateral relations.

At a meeting of the China-CEE Cooperation Secretariat in Beijing on December 19, China's Vice Foreign Minister and Secretary General of the secretariat Song Tao said that with their cooperation still in its infancy, China and CEE should continue to expand collaboration in 2013 by maintaining high-level exchanges and launching new initiatives to accommodate future developments.

In the coming year, Chinese investors are expected to seize opportunities to establish a greater business presence in CEE.

Window of opportunity

The Greek sovereign debt crisis has triggered continuous turmoil in the euro zone and exerted significant influence on the economic development of CEE. In the midst of this challenging situation, the area offers China a "window of opportunity."

The debt crisis has altered the investment climate in CEE. The World Investment Report 2012, released by the UN Conference on Trade and Development (UNCTAD), noted that against the backdrop of sustained economic uncertainties in Europe, continued instability in global financial markets and the slowdown in most emerging economies, many countries have adopted foreign direct investment as a way to promote growth and made their investment environment more conducive to foreign investors.

Countries in CEE, in particular, are using investment promotion as a means to spur economic growth. A 2012 survey of multinational corporations conducted by UNCTAD showed that the new EU-12 countries (10 countries in CEE plus Cyprus and Malta) have become some of the world's top investment destinations.

Moreover, following the impact of the debt crisis, euro-zone countries such as Greece and Italy struggled to maintain their presence in CEE, resulting in a large number of poorly managed assets, which provided opportunities for foreign investors to step in. Meanwhile, the spillover of the euro-zone crisis has seriously affected the economic growth and social stability of CEE, which used to turn primarily to Western countries for investment, but are now "looking both eastward and westward," seeking closer cooperation with Russia and China to promote economic growth. In light of its good investment foundation in these industries and abundant foreign exchange reserves, countries in CEE are vying to attract investment from China.

It should be emphasized that the major factor affecting changes in the investment environment of CEE is the European debt crisis. As such, the future of the crisis will directly affect Chinese investment in the region. The grimness of the situation is likely to ease in the near future due to internal structural adjustments however. As a result, the interaction with and even control over CEE by euro-zone countries will be restored and investment opportunities for external countries will gradually diminish.

China should make the most of these opportunities before it's too late. Investing in CEE helps China upgrade export products and extend its investment value chain. The European debt crisis has shrunk the real economies of EU countries and caused a decline in import demand. These trends have taken a toll on the EU's imports from China. Since mid-2010, the growth rate of exports to the region has continued to decline. Worse yet, such exports registered negative growth in 2012—down 1.8 percent, 0.8 percent and 5.6 percent in the first three quarters respectively year on year, according to China's Ministry of Commerce.

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