EU plan won't stop Chinese investment
China Daily


(Photo: Xinhua)

Europe faces industrial development challenges

Di Dongsheng, associate dean of the School of International Studies and International Monetary Institute, Renmin University of China

The industrial competitiveness of European countries as a whole has been declining this century, creating concerns over their overall economic development and doubts about foreign investments and M&As. But there is no reason to worry about China's large investment in Europe or doubt its intentions.

Thanks to a series of industrial upgrading over the years, China has developed an industrial network with a structure similar to the EU's, which enables Chinese companies to merge with or acquire EU companies that used to be global leaders in their fields. But instead of welcoming such a move, the EU seems intent on blocking it.

The US, too, has tightened its vigilance against Chinese enterprises' cooperation with and acquisitions of high-tech companies in the EU. It has also exerted pressure on its EU allies to be wary of Chinese companies' investment moves.

Although mergers have their pros and cons, they are an important part of globalization. In 2005-06, many US and EU companies engaged in M&As worldwide, raising China's concern over its national security and national brands. But China didn't react like the EU and the United States-and eventually mergers turned out to be helpful for industrial integration during China's further opening-up.

The major problem with EU industries is they lag behind in the digital economy because of their preference for traditional industries, and difficulty in adapting to emerging industries and expanding their limited market. Besides, US investors have acquired most of the EU's promising internet companies and moved them overseas, for instance, to the US west coast.

The EU's traditional leading companies face great pressure from rapidly developing Asian economies, especially China, which have squeezed EU companies' profits because of their cheaper labor and manufacturing costs. Some family-run businesses in the EU wanted to sell their companies for handsome amounts. But instead of allowing them to do so, the EU officials sought refuge in protectionism to arrest Europe's industrial decline.

The US has considerable influence in Europe, but now that it is leading the wave of anti-globalization, the EU has to safeguard its interests and rights from the US' unilateral and protectionist policies. And this is one area where China is very important to the EU-for instance, the EU depends a lot on its auto industry and spends huge amounts on research and development, and China plays an important role in the related chemical and the manufacturing industries.

Not much impact on foreign investment

Feng Zhongping, vice-president of the China Institutes of Contemporary International Relations

The EU suspects foreign investments, particularly those from emerging countries, will compromise Europe's infrastructure network and threaten its security.

Many believe the EU's investment screening framework is targeted at Chinese investments in Europe, which have grown rapidly since 2016. But the EU claims the framework is aimed at protecting and promoting the bloc's industrial development instead of restricting the EU's cooperation with foreign companies.

The agreement within the bloc on screening is to promote information sharing among EU member states and allow different EU bodies to better play their roles in enacting foreign investment rules, although EU member states will have the final say when deciding about foreign investments.

As such, investment screening may limit, but not totally ban, foreign investment, particularly those in high-tech and infrastructure such as water and electricity that the EU considers strategic security sectors, particularly because many EU companies welcome foreign investments and M&As for their further development.

Besides, once the final mechanism comes into force, the EU will issue a list with details of investment regulations so that foreign companies will know how to invest and cooperate in Europe. There is therefore no need to worry too much about the screening framework or the EU's intentions.