Red tape choking China investment

The UK needs to get rid of red tape on travel visas and work permits and improve transport links if it is to attract major Chinese investment, according to new research by Leeds University.

Academics Professor Jeremy Clegg and Dr Hinrich Voss launched a paper at Chatham House yesterday setting out what EU countries can do to attract greater volumes of Chinese investment.

Investment has increased markedly over the last decade and in 2011 Chinese firms invested £46bn overseas.

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But while Chinese investment to the EU has doubled over the last few years, it still represents a tiny fraction of the country’s overseas expenditure.

Dr Voss said that the UK is one of the most successful recipients of Chinese investment in Europe, but it is still a very small player, attracting just 0.42 per cent of the cash coming out of China.

Prof Clegg said: “China focuses the minds of all the countries of the world, particularly the UK which is particularly cash-strapped.

“After the treaty of Lisbon the UK has to deal with China as if the EU were one country. It’s not the UK dealing with China, or Germany dealing with China. After the Treaty of Lisbon we have one voice.” This means that the EU needs to come together collectively to win Chinese investment.

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“If we can collectively raise our game, every EU country will gain. We need to improve labour mobility as the Chinese are likely to want to operate on a pan-European basis. We need trouble-free visas and work permits,” said Prof Clegg.

Papers leaked last month suggested Home Secretary Theresa May is blocking moves to make it easier for Chinese visitors to get visas on security grounds.

Dr Voss singled out Bradford-based retailer Greenwoods Menswear as being a good example of a company that has successfully attracted Chinese investment.

Greenwoods was rescued from administration in 2009 when a private Hong Kong company bought 87 of the 92 stores from the administrators.

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According to the research by Leeds University Business School, the Chinese will be very cautious both in how they invest and where. Kerry Brown, team leader for the Europe China Research and Advice Network, said: “For many of these investors, the EU is a formidably complex challenge that presents a great deal of fragmentation.

“While they see strong incentives to go to Europe seeking market access and benefits from its excellent technology and skilled labour, they also come across problems of how to navigate the different tax, union and insurance regulations across the member states.

“The underlying message of this paper is that while Chinese investment is set to grow in the years ahead, if it is to come in any great volume, Chinese investors will need assistance and guidance.”

Chinese firms have complained about the barriers of doing investment in the EU as there are different regulations in different countries. “Chinese firms will bring entrepreneurial business models. They will shake things up,” said Prof Clegg. “Maybe we can look to the Chinese to shake up European industry.”

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Dr Voss said that Chinese firms are more inclined to invest in countries where they have a good established relationship.

“They are more familiar with the business environment in the UK and Germany as British and German firms have invested in China,” he said.

The Chinese government has identified a number of UK sectors that it is interested in. These include finance, insurance, legal, distribution, logistics and transportation.

Passport To China – Page 5

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