Chinese investment holds promise for all Europe

Recent success in Greece shows the benefits of good relationship

The pace of China's investment activities in Europe seems to be quickening, even as European investment remains stuck at historically below-average rates.

Today, this mutually-advantageous fit is largely praised in the two regions. In future, however, certain points of contention may emerge, driven mainly by the concerns of European and other host countries. These issues will need to be addressed early on in order for the relationship to continue to thrive.

Nowhere is the positive effect of Chinese investment felt more clearly than in Greece. As Greece goes through its ninth year of recession, having seen its capital stock steadily shrink throughout this period and incoming foreign investment sharply decline, one of the few bright spots on the business horizon has been the expanding presence of Cosco at the port of Piraeus.

One of the first major Chinese direct investments in the EU, Cosco's management of the two terminals at Greece's largest port since 2008 has seen commercial traffic going through the port increase eightfold. In January, the company was awarded a majority stake in the remaining State-run facilities at the port.

By going against the current, this move solidified the perception, in Greece, of China as a steadfast partner that not only talks the talk, but walks the walk.

In some ways, Greece may be a special case. It is not threatened by adverse technology flows. In the case of Greece, Cosco's initiatives are aimed at turning the country into a transshipment point and distribution center for Europe.

To this end, it has negotiated agreements with major multinationals, such as Hewlett-Packard and the Chinese telecom giant ZTE－not the most strategically-sensitive kind of deal.

Declarations about the benefits to the economies of Europe and other regions from Chinese direct investment are numerous, if not always free of caveats and warnings: This is a unique opportunity to attract capital to Europe and help restart investment and economic growth; innovation spillovers may occur; complements may be available and links strengthened between the host countries and one of the most important, expanding regions of the world.

However, new types of challenges may soon surface: China is clearly different from other investor countries. Specific concerns relate to the nature of China's economic system, for example subsidies and the lack of openness to FDI in China. Foreign ownership of assets can create problems if it provides a foreign power with the means to control, monitor and appropriate critical strategic goods, including certain sensitive technologies and infrastructure. Because of China's uniqueness, policymakers will need to be equipped with real and effective policy tools to defend the principle of investment openness against potential populist and local revolts.

Recent initiatives by Washington, Brussels and Beijing, such as the agreement last January on the scope of an ambitious EU-China investment agreement covering such important issues as market access, nondiscrimination, key regulatory matters, protection for investors, and environmental and labor issues, are, however, indicative of a deeper understanding on the part of all partners of the importance of the issues at stake.

These three poles－the US, the EU and China－together account for more than 67 percent of the world's outbound FDI. Building trust via such improvements in global governance structures can go a long way toward making the smooth insertion of China into the global economy a reality to be feted by all.

The author is a former Greek minister for international economic relations.