Less than two years after France, Germany and Italy wrote to the European Commission advocating a new screening mechanism on foreign direct investment, the EU has finalized a scheme that aims to protect European interests. Unlike America’s Committee on Foreign Investment of the United States (Cfius), an inter-agency committee tasked with reviewing inbound investments for national security concerns, the EU has produced a non-binding screening scheme that will allow a necessary debate in many European countries that, until now, lacked such a process.
It will be a useful tool. The law just approved by the European Parliament will create an alert mechanism for future foreign investments in Europe and a centralised database of current investments while leaving the final decision of approving deals to individual member states. The idea behind the 2017 letter to the Commission was to start addressing the issue of predatory Chinese investments in European infrastructures and technology.
For example, China Ocean Shipping Company (Cosco) has taken over the Piraeus harbour of Athens, where it is building a Mediterranean hub for its companies, both state-owned and private, as part of its “maritime silk road”. More deals were announced during Chinese President Xi Jinping’s state visit to Lisbon in early December, including the construction of microsatellites to help observe the ocean around the Azores, in the middle of the Atlantic.
In European decision-making circles, the ground started to shift after Midea, a Chinese appliance manufacturer, acquired Germany’s most famous robotics company, Kuka, in 2016 for $5.3bn. Next to the EU discussion, a huge debate is taking place in Germany, which – unlike many other European countries – has developed over the years a strong industrial presence in China and ran a trade surplus for many years. At the same time, German industries have been worrying about multiple Chinese takeovers of Mittelstand, or middle-size companies, that could become direct competitors under their new Chinese management.
Although facing different circumstances, French government and business circles are also concerned about China’s European shopping spree. Ironically, Italy has been one of the most targeted countries in Europe. Since 2014, Chinese investors have acquired tyre manufacturer Pirelli, football team AC Milan, stakes in energy companies Eni, Enel and CDP Reti. The Chinese are also investing heavily in Italian ports.
Most other European countries do not have discussions about Chinese investments. In fact, only 12 EU countries out of 28 currently have review mechanisms for foreign investment, though they differ significantly. The US, Japan and China all have schemes. US President Donald Trump’s radical policies towards China on trade and investment have helped nudge the Europeans, who feel freer than before to voice what many were thinking.
It is obvious that Europe will still need outside investors in the years to come, and that China will remain an appealing source of funds for many EU members, including the soon departing-UK. But unless Beijing offers full reciprocity and access to its own markets, the EU is right to start being selective.
‚EU Moves to Protect Interests Against Predatory China‘ – Opinion by Philippe Le Corre – Carnegie Endowment for International Peace.