Wednesday

23rd May 2018

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".

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"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.

Analysis

EU has no 'magic bullet' against US Iran sanctions

EU leaders in Sofia will discuss how they can protect the bloc's economic interests against US threats to sanction companies doing business in Iran. But their options are limited.

Opinion

EU budget must not fortify Europe at expense of peace

Given the European Commission new budget's heavy focus on migration, border management and security, many are asking whether the proposal will fortify Europe at the expense of its peace commitments.

Stakeholders' Highlights

  1. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  2. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  3. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  4. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  5. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  6. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  7. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  8. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  9. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  10. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  11. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  12. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May

Latest News

  1. 'Killer robot' projects eligible for EU defence fund
  2. Funding for European values needs radical changes
  3. Feeble EU format deflates Zuckerberg 'hearing'
  4. Are EU data watchdogs staffed for GDPR?
  5. EU pessimistic on permanent US trade exemption
  6. US asks EU to go after Russian and African villains
  7. Facebook threatened with removal from EU-US data pact
  8. Defence firms 'reap benefits' of advice to EU

Stakeholders' Highlights

  1. EU Green Week 2018Green Cities for a Greener Future. Join the Debate in Brussels from 22 to 24 May
  2. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  3. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  4. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  5. Mission of China to the EUProgress on China-EU Cooperation
  6. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  7. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  8. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  9. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  10. UNICEFCalls for the Protection of Children in the Gaza Strip
  11. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  12. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight