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Europe remains tough export market

Updated: 2012-08-16 03:32
By DING QINGFEN and LI JIABAO in Beijing, XU JINGXI in Guangdong, and FU JING in Brussels ( China Daily)

In March, the European Commission said it was considering imposing duties on made-in-China products to offset alleged subsidies, because it believed that European companies are hesitant about asking the EU to take protective measures for fear that China will retaliate against their business interests. But the move, if taken, would violate World Trade Organization rules, said trade experts.

And the investigations have spread from low-end manufacturing to high-end categories.

In May, reports said the European Commission was preparing an investigation into Chinese telecom equipment companies including Huawei Technologies Co Ltd and ZTE Corp.

After the US announced its preliminary anti-dumping and anti-subsidy duties on Chinese solar panels, European solar panel manufacturers were reportedly preparing to launch an anti-dumping complaint against their Chinese counterparts.

"Sales to Europe were bad during the first half, and orders decreased by big margins," said Zhao Chunyang, general manager of Miracle Dynasty Fine Bone China (Shanghai) Co Ltd.

But the situation will worsen in the second half, and many industrial players will "probably have no orders from the EU market", as the EU is likely to announce anti-dumping duties against Chinese ceramic products in October, he added.

For manufacturers like Miracle, whose major clients are in the EU, change is the only way ahead.

"We are turning toward promoting goods in emerging markets, and boosting spending on research and development," said Zhao.

As Europe faces tough economic conditions, Beijing has expressed concern that Brussels may take protectionist measures against Chinese companies to expand its exports.

"Within the European Union, it is not just up to one government to make this decision, it is a quite complicated process to approve such trade measures," said Jonathan Holslag, a researcher at Brussels Institute of Contemporary China Studies.

Holslag said eurozone countries need to reduce the trade imbalance by expanding exports and creating jobs. He warned that if the crisis lasts longer than expected, Brussels may resort to more protectionist trade policies.

"But at this stage, trade tensions between Beijing and Brussels remain at a manageable level," Holslag said.

Chinese investment

While European investment in China shrank in the past few months, Chinese investment in the EU is rising.

According to the Ministry of Commerce, in the first five months of the year, investment in China from the European Union dropped 5.1 percent year-on-year to $2.78 billion.

But China's investment in the EU increased 23.6 percent, after growing by 100 percent in 2010 and 94 percent in 2011.

One of the biggest deals so far this year was Chinese construction equipment maker Sany Heavy Industry Co Ltd's announcement that it will pay 324 million euros ($426 million) for a 90 percent stake in Putzmeister, Germany's largest concrete pump maker.

Asia, Europe and Africa are the top three destinations for China's outbound direct investment. But since the outbreak of the eurozone debt crisis, Europe has led the growth and will probably continue to do so, experts said.

Recent research by consultancy Rhodium Group and China International Capital Corporation showed that China is set to accelerate its overseas investment, and debt-stricken Europe will be the most attractive market for Chinese companies.

By the end of 2020, China's investment in the region will range between $250 billion and $500 billion, it predicted.

"The fast growth could be attributed to China's 'go overseas' strategy and the devaluation of assets in some European companies," said Yao from the Chinese Academy of International Trade and Economic Cooperation.

A survey conducted by Ernst & Young showed Europe remains the top destination for Chinese investors over the next three years.

But Zhang Jianping, an expert at the Institute for International Economic Research, a think tank of the National Development and Reform Commission, warned of the risks.

Growing Chinese investment in the eurozone is putting the bloc on alert, and uncertainties over the eurozone debt crisis are casting a shadow over investment deals, Zhang said.

Yu Ran in Shanghai and Shu Meng in Guangzhou contributed to this story.

Contact the writers at dingqingfen@chinadaily.com.cn, lijiabao@chinadaily.com.cn and fujing@chinadaily.com.cn

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