Sunday

21st Apr 2019

EU preparing to screen Chinese investments

  • The Belt and Road initiative is a massive Chinese plan to invest in transport infrastructure (Photo: Thomas Hawk)

The EU is to screen foreign investments to avoid takeovers in some sensitive sectors. But the plan, mainly aimed at China, will raise political and technical difficulties.

In his state of the union speech on Wednesday (13 September), European Commission president Jean-Claude Juncker announced the creation of a "new EU framework for investment screening".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

"If a foreign, state-owned, company wants to purchase a European harbour, part of our energy infrastructure or a defence technology firm, this should only happen with transparency, with scrutiny, and debate," he said.

He added that it was a "political responsibility to know what is going on in our own backyard so that we can protect our collective security if needed."

"Europe must always defend its strategic interests," he said.

The EU executive has not presented the details of its proposal yet, but the plan is to involve better coordination between national authorities, with the commission and member states being able to oppose takeover plans by foreign powers in the EU.

The assessment would be non-binding.

So far, some 15 EU countries have agencies that screen foreign investments on their territory.

The idea to defend the EU against potentially hostile investments was pushed by France and supported by Germany and Italy.

'Important step forward'

In a common statement on Wednesday, the three countries' economy ministers welcomed Juncker's announcement as "an important step towards a level playing field in Europe."

"We need to prevent other states from taking advantage of our openness in order to push through their industrial policy interests," Germany's Brigitte Zypries said.

France's Bruno Le Maire noted that the proposal needed to be "complemented by further work to ensure reciprocity in public procurement and more widely in all our trade relationships."

As the commission's proposal will have to be adopted by the Council of the EU - where member states meet - and by the European Parliament, Italy's Carlo Calenda said the three countries "count on the EU to swiftly agree on the proposed system".

When French president Emmanuel Macron raised the issues at the EU summit in June, he got a lukewarm reaction from his colleagues.

Countries like Sweden, Netherlands, and Denmark were wary of a measure that went against their free-trade traditions.

Others like Greece, Portugal, and Hungary are dependent on foreign investment to develop their economies.

At the June summit, EU leaders agreed to call on the commission to "analyse" foreign investments, but said member states would still take the decisions.

Although the screening will apply to all foreign, state-owned investments, the main target of the measure is China.

"China is becoming a prominent actor in foreign direct investments in Europe," Mikko Huotari, from the Berlin-based Mercator Institute for China Studies (Merics), told EUobserver.

'Less splashy'

Last year, Chinese investments in the EU reached €35 billion, a 77-percent jump from 2015, according to a Merics study led by Huotari.

"Chinese investors are eyeing a broad range of industries, but showed particularly strong interest in technology and advanced manufacturing assets in 2016," Merics' report noted.

The EU's core economies were the main destinations of Chinese funds, with the UK and Germany getting more than half of the money.

The report added that "southern Europe experienced continuing interest", especially in Greece, and that " Chinese investment in eastern Europe remains limited".

In 2017, Huotari said the growth in Chinese investments in Europe will be slower, but the trend will remain.

Projects will be "less splashy", with fewer real estate or hotel purchases, but they will be "more directed on what the Chinese leadership prefers", Huotari said.

Priority is going to high-tech manufacturing, automation, and projects related to the Belt and Road initiative - a massive Chinese plan to invest in transport infrastructure from China to the Middle East, Africa, and Europe.

The implementation of the screening plans could be difficult, Huotari said.

Bone of contention

"The first limitation is the current EU policy framework, which is based on the free flow of capitals," he said. "This is a principle that speaks against member states and Brussels blocking investment."

Another problem, he said, would be how to define to what extent an investment was considered a national security issue.

"For some industries or technologies, like semiconductors or to some extent automation or robotics, encryption, there is a legitimate case to be made," he said.

But in other cases, "there is a long stretch from national security to strategic industries."

For Huotari, the screening's efficiency will depend on how far member states can go with the interpretation of the future mechanism's assessments.

"We have to wait until the first case, and it is not for now," he said.

In the shorter term, the plan, combined with an ongoing discussion over anti-dumping measures, could be "a major bone of contention in relations with China," Huotari added.

But in a global context where the EU and China are trying to maintain common interests, "China will be able to handle it," he said.

Analysis

Trump is 'gift' for China's EU agenda

The more harm Trump does to trans-Atlantic ties, the better for China's global interests, the author of a new study on Sino-European relations has said.

Focus

China's 16+1 foray into Central and Eastern Europe

Half a decade after it was launched, the network of cooperation between China and 16 Central and Eastern European countries has brought uneven economical and political fruits so far.

Focus

EU-China united on climate, divided on trade

Within 24 hours of Trump announcing that the US will pull out of the Paris climate accord, EU and Chinese leaders presented a united front on fighting climate change. But divergence on trade plagues the new alliance.

EU commission changes gear on trade

The EU executive seeks new deals with Australia and New Zealand, while aiming to overhaul the global investment protection system. It also wants to screen foreign investments.

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Romania drafts EU code on NGO migrant rescues
  2. Bulgaria, Hungary, and Malta shamed on press unfreedom
  3. EU drafts $20bn US sanctions list in aviation dispute
  4. Brunei defends stoning to death of gay men in EU letter
  5. US Democrats side with Ireland on Brexit
  6. Wifi or 5G to connect EU cars? MEPs weigh in
  7. How Brexit may harm the new EU parliament
  8. EU parliament backs whistleblower law

Stakeholders' Highlights

  1. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  2. Nordic Council of MinistersNordic talks on parental leave at the UN
  3. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  4. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  5. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  6. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  7. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  8. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  9. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  10. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  11. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  12. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov

Join EUobserver

Support quality EU news

Join us