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SPEECH/ 09/366

Catherine Ashton

EU Commissioner for Trade

Boosting EU-China investment

Figures and graphics available in PDF and WORD PROCESSED

China International Fair for Investment and Trade

Xiamen, 8 September 2009

I am delighted to be here today at the China International Fair for Investment and Trade.

The success story of Xiamen, and indeed China's phenomenal rise as an economic powerhouse, is grounded in an ever-increasing openness to foreign investment. At the same time, China itself is increasingly "going global" by becoming an active investor abroad. New figures indicate that China could soon become a net investor, with FDI outflows exceeding FDI inflows. China is already set to become the biggest exporter in the global economy.

For this positive development to continue, the next steps will be very important. We are seeing some warning signs in our bilateral investment relationship: EU investment in China fell from 7.1 billion euros in 2007 to 4.5 billion euros in 2008. Chinese investment in Europe also decreased, falling by half a billion euros in 2008 compared to 2007.

The downward trend for our bilateral investment is in contrast to our strong trade relationship. We need to ask ourselves why our full investment potential is not being realised, which is certainly the case for European businesses investing in China. China is still attracting much less FDI from Europe than other emerging economies such as India, Brazil and Russia.

One likely explanation is that capital markets have dried up in the financial crisis. However, this is not the whole story. Although European business clearly sees China as an attractive destination, there is also some disappointment amongst those that have invested in China, and some wariness amongst those who are considering it.

With global competition for the best investment rising, governments should be seeking to attract not restrict investment. Barriers in China not only cost European business, but also deprive the Chinese economy of investment inflows and significant tax revenues.

Foreign direct investment should not be curtailed by equity caps, unnecessary joint venture obligations or restrictions in sectors considered strategic. On the contrary - the more important and economically strategic a sector, the more indispensable it is to attract investment which brings technology transfer and research and development.

Protection of intellectual property, especially patents, is also crucial if more companies are to bring their ideas and their technology to China. Without the promise of protection for their innovations, European companies are sometimes hesitant to invest here. It is therefore very encouraging that the Chinese leadership sees the necessity of a well-enforced IPR system as a stepping-stone to future economic development.

Investment is the fuel that drives the engine of long-term sustained economic development. With the free flow of investment inside the European Union, we have created not only the biggest economy in the world, but also a strong motor for economic development.

The EU welcomes foreign investment, as it drives innovation and growth. All we ask in return is that European investors enjoy the same openness and equal treatment in other markets, including China. Our companies want to be here, in order to create even more jobs and economic development.

China and the EU have a role to play in ensuring our G20 pledge to refrain from raising new barriers to trade and investment. We should also try and remove existing barriers progressively in order to boost our investment to a level that does our trade relationship justice.

The EU and China have already committed to a dialogue to improve our trade and investment relationship. This is at the very centre of my discussions with Vice Premier Wang Qishan at the EU-China High Level Economic and Trade Dialogue. Our businesses have suffered in this economic downturn, and we need to give them the confidence to get moving again.

In addition, in the coming weeks, the EU and China will be continuing our negotiations for a more ambitious Partnership and Cooperation Agreement which we would like to see, amongst other things, create a more advantageous climate for investment on both sides. This should unleash the potential for even more Chinese businesses to invest in Europe, and more European companies to come to China.

Thank you.

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