China, Europe and the Netherlands: Opportunity Is Knocking at Our Doors

108 
  Apr. 2015
C
hinese Outbound Direct Investment (ODI) 
reached 120 billion US dollars in 2014 and is 
projected to reach a new record in 2015. This 
is a result of the new policy that features significant 
reductions of approval requirements and bureaucratic 
red tape for Chinese firms investing overseas. However, 
this data, as confirmed by the MOFCOM, largely ig-
nores reverse flows from overseas subsidiaries back to 
their Chinese parent firms, which have surged recently 
due to greater freedom to move money and a tighter 
credit environment in China.
This new trend should be fostered if recipient econ-
omies want to grasp opportunities offered by the new 
wave of Chinese investment. 
Paving the way for attracting more Chinese 
investments
Only by offering an attractive and predictable legal 
environment will recipients be able to prosper like their 
Chinese investors. 
Top EU decision bodies and their Chinese coun-
terparts are drafting a comprehensive framework to 
strengthen business relations. In the absence of other 
vehicles to improve policy and business ties, an invest-
ment agreement is the best strategy to improve access 
to China’s market and vice versa, but also an efficient 
China is expanding its investment presence around the world in a variety 
of sectors. In order to attract the most functional Chinese ODI, 
it is necessary to understand how to pave the way for these investments 
with specific strategies and policies that remove obstacles and try to 
understand the need of Chinese investors. 
Investment 
Strategies and 
Policies to Attract 
Chinese Investment
By Cristiano Rizzi and  Wei Lin
tool to ease and resolve other tensions. 
President Xi Jinping’s March 2014 visit to the EU’s 
headquarters aimed to explore ways to deepen and 
expand China-EU bilateral economic and trade cooper-
ation and to enrich China-EU strategic cooperation. 
It is noteworthy that China’s focus is to maintain the 
EU’s status as China’s largest trading partner and en-
sure smooth passage for its exports into the EU. 
It was stressed that China also wants to maintain 
technical cooperation with the EU countries. This is 
reflected not only in their expanding cooperation in 
traditional fields like nuclear energy, aeronautics and 
astronautics, and automobiles; but also in jointly re-
searching and developing new growth areas like intel-
ligent manufacturing, the digital economy, and new in-
formation technology. Indeed, mobile Internet (through 
smart-phones) has emerged as a new business frontier 
for investment, considering the astonishing number of 
users and applications it is possible to offer to netizens.
Industries and sectors targeted by Chinese 
investors
Chinese ODIs in economically developed countries 
generally indicates a motivation to acquire technolo-
gies and brands as well as a degree of capability and 
competitiveness. This allows Chinese firms to move up 
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Apr. 2015 
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WWW.BOAOREVIEW.COM
the value chain gaining core technology assets and the 
know-how for utilizing this technology and the exper-
tise internationally. In the US, the biggest deal in the 
third quarter of 2013 was Levovo’s purchase of IBM’s 
low-end server business ($2.1 billion).
According to the European Chamber of Commerce, 
the sectors most frequently targeted by Chinese inves-
tors are: 
(i) communications equipment and services, 
(ii) industrial machinery, and equipment and (iii) al-
ternative and renewable energy. It seems these are the 
most frequently invested sectors in terms of the num-
ber of deals. 
Chinese investors are also interested in human tal-
ent and research infrastructure. Many Chinese enter-
prises have ramped up R&D operations after acquiring 
European firms. Geely, for example, has significantly 
expanded its engineering staff in Sweden after the 
acquisition of Volvo. Telecommunications equipment 
supplier Huawei runs multiple R&D centers across Eu-
rope, and China's fourth-largest auto maker Chang’an 
has opened R&D offices in Italy, the U.K., Japan, and 
the U.S., will invest $820 million in 10 major global 
markets by 2020.
Chinese presence in the “service sector” in the E.U., 
U.S., and other markets deserves special attention. In-
vestments in small scales like representative offices and 
sales operations, are growing and assuming a greater 
importance. In fact, companies need to build up an 
extensive network of operations within Europe’s single 
market. Sometimes in expanding their business, oper-
ators face some barriers such as language and culture, 
which create opportunities for smaller investors and 
specialized agencies to offer personalized services.
Naturally, Chinese investors are variegated and the 
scale of the investment varies according to the capa-
bility of the category of the investor. The size of the 
investment reflects the different interests manifested 
by private individuals or enterprises (private and state 
owned). Although individuals generally do not dis-
pose of hundreds of millions of euro or dollars, some 
nouveaux Chinese entrepreneurs have the tendency to 
invest huge amounts of money, especially in the real 
estate sector to obtain citizenship for example.
Individuals were until recently banned from taking 
direct investment stakes overseas, but a pilot program 
to allow entrepreneurs and individuals from the city of 
Wenzhou to engage in OFDI was launched in 2012. 
Finally, private equity funds are becoming more 
prominent in outbound direct investment, which 
will open another channel for private flows. What is 
necessary to stress here is that the number of wealthy 
Chinese investors is growing fast and they are willing 
to invest heavily both in Europe and in the US, China’s 
two major outbound investment recipients, but in 
order to attract them it is of paramount importance to 
understand their needs and concerns. 
Another important factor to be understood is that 
Chinese investors are not driven by the same entre-
preneurial culture existing in the EU or US. China’s 
version of this new entrepreneurial movement involves 
an exciting blend of modern and traditional cultural 
values. The term “Confucian dynamism” is not new, 
and it is rooted in the DNA of the Chinese people. Chi-
nese culture is impregnated with traditional Confucian 
values (and the vast majority of business people are fa-
miliar with the classics, such as The Art of War, which 
Chinese tend to apply in today’s business environment) 
such as respect for seniority, close-knit family rela-
tionships and a hardworking spirit as fundamental 
elements despite an increase in more modern values 
such as innovation, independence and entrepreneur-
ialism. 
Therefore, if European or US counterparts wish to 
attract Chinese investors, they have to become more 
familiar with these values and with Chinese culture. As 
a result, Europe and the US have nothing to fear and 
everything to gain from a growing number of Chinese 
entrepreneurs investing in these two markets.
Cristiano Rizzi
Counsel, Zhonglun W&D Law Firm 
(Beijing Office) 
Wei Lin
Senior Partner in Charge of Shanghai 
Office, Zhonglun W&D Law Firm
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