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Concerns over Rising Chinese Investments in Europe

Europe is now the top destination for Chinese investors. Foreign direct investment in Europe now accounts for 10% of total Chinese foreign investment, compared to just 2% three years ago. That’s according to a recent report by Radio France Internationale.Not all these investments are paying off though, reports RFI. While Chinese companies have ridden on the Euro debt crisis to snap up bargains, few have been successful. But that’s nothing new. According to economics Professor Xia Yeliang from Peking University, Chinese companies have made minimal return from its overseas investments over the past decades. Professor Xia says that’s because economic benefits are not the motivating factor.[Professor Xia Yeliang, School of Economics at Peking University]:“Loss and bankruptcy cases are seen everywhere. So it is hard to say that these kind of Chinese investments are entirely for economic purposes. In many cases, they have strong political purposes. The Chinese regime wants not only to increase China's influence in Europe, it also hopes to have a psychological impact on certain local governments or on the local population by investing in specific areas.”Chinese companies have acquired assets in European technology, well-recognized brands and high-end manufacturing. This has helped to boost local economies and employment, but is also concerning to some.[Professor Frank Tian Xie, University of South Carolina Aiken Business School]:“China's capital always has this problem. In other words, there are many Westerners who, in the end, cannot tell the difference between private sector capital and state capital, or whether the Chinese Communist regime is behind it. If the Chinese Communist regime was behind it, they are worried that it has political motivations. So they would have concerns.”While promising more investments in Europe last year, Chinese Premier Wen Jiabao asked European leaders to recognize China's full market economy status. Professor Xia refutes this.[Professor Xia Yeliang, School of Economics, Peking University]:“The Chinese state, instead of private businesses or individuals, is always the main investment body. In reality, it is state monopoly at the discretion of the Chinese regime. It is hardly the practice of a full market economy.”In 2001, Chinese firms invested 10.4 billion US dollars in Chinese firms. That’s up from $4.1 billion the year before, according to private-equity firm A Capital.

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