China and the European Union have maintained diplomatic ties for more than 40 years, a period that has seen enhanced investment and the development of Chinese enterprises in the EU.

On the surface, China's investment in the EU has shown a slightly downturn trend with the compound average growth rate - 2 percent in the past five years. But scratch the surface and one sees high efficiency and quality in the Chinese investment. In recent years, Chinese enterprises' investment in software and IT services and the entertainment industry has been growing rapidly, with a CAGR of over 120 percent, in line with EU's policies to promote IT and the entertainment industry.

Besides, Chinese companies' business development in the EU is accelerating at an increasing output value, a CAGR of 29 percent in Germany, 46 percent in Italy.

This is because Chinese companies regard the EU as an important strategic base for global development. They invest in many R&D centers and manufacturing plants to lay a long-term foundation.

The breadth and depth of ties between China and the EU are continuously improving. And Chinese enterprises have brought economic benefits as well as innovation to the EU. They have driven the upgrading of the European value chain, achieving breakthroughs in product quality via technical cooperation, improving operational efficiency and filling the gap in the European local industry value chain.

For example, in 2018, Contemporary Amperex Technology Co Ltd (CATL), China's leading lithium battery producer, announced the establishment of Germany's first power battery plant in Erfurt, making up for the gap of cell manufacturing with Germany's new energy vehicle (NEV) industrial chain. Moreover, CATL helped enhance the core benefits of the upstream component suppliers and downstream vehicle manufacturers.

Chinese companies are also contributing to the development of the community by creating more jobs at a CAGR of nearly 40 percent. At the same time, Chinese companies have taken vast pragmatic measures in the fields of infrastructure construction and environmental protection, bringing actual improvement to people's livelihoods. Huawei has signed 5G cooperation agreements with a dozen countries in Europe, including Spain, Germany and France, providing Europeans better network and internet of things (IoT) experiences.

In terms of technology development, Chinese companies aim to promote the development of cutting-edge scientific and technological research by establishing research institutions, university-enterprise cooperation and personnel training.

However, Chinese enterprises are facing numerous challenges too. Overall, the EU's business environment for Chinese companies is pretty good, but there is room for improvement, with a score of 73 points, according to the European Business Environment Index launched by Roland Berger.

Chinese companies in Europe have limited access in certain key areas because of the tightening of the norms when it comes to foreign investment in the EU and restrictions on development of some Chinese business because of misunderstandings that make the Chinese enterprises conform less to EU standards.

Although these challenges have not shaken the confidence and determination of the Chinese companies, they have inevitably slowed down the pace of enterprise development.

Here are a few suggestions for Chinese enterprises and the EU governments to promote development of both parties.

First, Chinese enterprises should act according to circumstances when conducting business and fit in and promote the development of local industries and communities. They need to integrate with the local industries and upgrade the industrial level. They should conduct deeper industrial cooperation to enable industries to move to the next level through the establishment of strategic product development partnerships and joint construction of R&D centers.

Besides, for Chinese enterprises entering the EU market, the degree of emphasis on industry standards needs to be raised. They should actively engage in the setting of local standards by participating in standard seminars organized by industry associations.

Also, Chinese enterprises need to enhance their localization level and build "European enterprise" with Chinese genes - to enhance corporate transparency, raise the proportion of local employees, optimize internal communications and comply with local laws and regulations.

At the same time, further support from the EU government is required. In the interests of both parties, the EU should adhere to globalization and free trade goals and refuse to politicize business issues. Second, it is unwise to consider the China-EU economic relationship as a zero-sum game. Instead, the EU should take all industries into consideration to enable further cooperation.

In addition, if the EU could give Chinese enterprises some pragmatic assistance, such as information sharing and process optimization, it would be extremely helpful.

Looking to the future, both sides should strengthen mutual trust by actively seeking cooperation and expanding consensus, so as to release each other's potential and seek a long-term common leap.

The author is global partner of Roland Berger Management Consulting.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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