European investment climate warms, China seen cooling

Europe has improved its standing with global investors in the past year as big corporations grow cooler on China, according to a study published Wednesday.

But European states are struggling to turn investment cash into new jobs, the report by Ernst & Young also showed, and their future attractiveness depends heavily on economic reform.

The findings, presented to business leaders and politicians attending the World Investment Conference in La Baule, western France, draw upon the global accounting firm's own databases and a survey of more than 1,000 decision-making executives conducted by pollster CSA.

Some 68 percent cited Western Europe among their top three investment areas in 2006, up 5 points from last year. Central and Eastern Europe won 52 percent backing.

China and the United States scored the highest ratings for individual countries, both were placed in the top three by 41 percent of those polled, but lagged Europe as a region. China's 2006 score was 11 points lower than last year's.

Investors see in Europe "a balance of developed and developing economies that they are attracted to," Ernst & Young Chairman and CEO James Turley said in an interview.

Concerns about high labor and social costs in some richer countries are countered by factors such as Europe's highly skilled work forces and strong entrepreneurial culture, Turley said.

But the director of France's leading international economics think-tank, CEPII, said the figures suggested a short-lived retreat to the certainties of European rule of law, rather than a triumph over the forces of globalization.

"Europe offers a magnificent island of stability in a world that's threatening to become very unsettled," Lionel Fontange said, citing concerns about dollar, high oil prices and "endemic political instability" in many parts of the world.

China's investment appeal waned markedly among large companies in 2006. Its rating from multinationals dropped from 58 percent to 38 percent, below its 46 percent backing from small and medium-sized firms.

"In 2005, the larger the company, the more they were attracted by investment in China," the report said. "In 2006 the reverse is true," reports AP.


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