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19th Aug 2022

China 'unreasonable' to attack EU on investment checks

Chinese criticism of EU plans to screen foreign investments was "unreasonable" due to "lack of reciprocity", Europe's envoy to China has said.

It "seems somewhat unreasonable that the EU is accused of protectionist tendencies when, for example, president Juncker announced recently a new EU-wide investment screening system," Hans Dietmar Schweisgut said in a statement published on the website of the EU embassy in Beijing on Thursday (28 September).

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"Chinese investors have been able to buy 100 percent stakes in EU car companies, banks or other key industries, while this would be impossible for European companies to do in China due to market access restrictions and forced joint-venture requirements," Schweisgut said.

"There is clearly a lack of reciprocity here, which cannot go on indefinitely," he added.

His comments came after Chinese foreign ministry spokesman Lu Kang said on 18 September that the EU screening proposal was a "protectionist trade policy for short-term interests".

He warned the EU that it would face "losses" if it went ahead and accused European Commission president Jean-Claude Juncker of "putting out wrong, confusing and negative information to the outside world".

Lu was referring to Juncker's speech in the European Parliament on 13 September in which he called for non-binding EU assessments of whether foreign takeovers of "strategic" firms, such as energy companies or defence firms, harmed EU security.

The Commission followed up with a proposal the next day, in an initiative that had been pushed for by France, Germany, and Italy.

Promise fatigue

Schweisgut, the EU ambassador, who comes from Austria, noted in his statement that 12 EU states already had screening policies of their own.

He also warned that "EU investment into China is decreasing".

"EU businesses feel less and less welcome in China and continually indicate that the business environment is worsening", he said.

He said that Chinese leaders had promised time and again for the past four years that they would grant "wider market access", but that this never came to be.

"Progress has been so slow that EU companies are now suffering from what they call 'promise fatigue'," he said.

He said EU investors in China could bring in more "employment, tax-revenue, innovation and high-tech" if the EU and China were able to agree a Comprehensive Agreement on Investment - an accord that has remained locked in negotiations since 2013.

He also called on China to address EU concern at its upcoming, five-yearly, ruling party congress which starts on 18 October.

Untapped potential

A recent study, published by EU think tanks Chatham House and Bruegel as well as the Chinese state-linked China Centre for International Economic Exchanges in Beijing, bore out Schweisgut's concerns.

It noted that there was just €203 billion of cumulative foreign direct investments between the EU and China compared to the EU-US figure of €5 trillion.

The authors said that once the investment treaty was signed the EU and China should also agree a free trade treaty.

Alicia Garcia-Herrero, Bruegel's Hong Kong-based expert, who co-wrote the paper, told EUobserver that closer bilateral ties would serve China's strategic as well as economic interests.

"It would tilt the balance toward a more China-centred world," she said.

Tim Summers, who works for Chatham House also out of Hong Kong, said the EU was better placed than the US to bring in Chinese investment for political reasons.

"Some people in the US see China as a potential competitor for the US status as global number one - I don't think Europe has that concern because it's not a global superpower," he told this website.

He said the fact that Chinese firms were de facto arms of the Chinese state should not spark too much concern.

"Would China switch off the lights [in Europe]? No. I don't think it would," he said, referring, for instance, to Chinese ownership of EU energy companies.

EU preparing to screen Chinese investments

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

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