EU Toughens Foreign Investment Rules in Face of Beijing’s Attempts to Buy Sensitive Companies

By Nick Gutteridge, Special to The Epoch Times
February 14, 2019 Updated: February 14, 2019

BRUSSELS—The European Parliament has given the green light to tough new rules to block malicious foreign investments in an effort to prevent the Chinese government from buying strategically sensitive companies.

Representatives voted 500–49 on Feb. 14 to approve the package of legislation, which for the first time will set EU-wide standards that overseas investors will have to meet.

The law was first proposed by the European Commission in 2017 amid growing concerns about Chinese investments in a number of strategically sensitive companies in areas including technology and the energy sector.

Under the plan, national governments still retain the ultimate power over whether to review or block investments, but the commission will be able to request information about cases of concern and issue advisory opinions.

Cecilia Malmstrom, the EU Commissioner for trade, said while Brussels maintains that the EU remains open to investment, “a condition to remain open is to be able to trust that foreign investors cannot threaten strategic interests or security.”

“This has become even more important at the internal market where foreign investments in one member state can have an impact in another member state,” Malmstrom said.

The Swedish official insisted the law doesn’t specifically target China, but admitted that Beijing’s open attempts to invest in sensitive European companies was a major concern for most member states.

“This legislation is totally neutral and non-discriminatory and it has to be, but it is no secret that if you follow the debate in certain countries right now that of course there is a question on China,” she said.

“China has also very clearly in their official documents and their long-term strategy said that investments in strategic infrastructure in foreign countries is a priority, so we’re aware of that.”

She added that most of EU’s allies around the world have taken similar measures, and it was a “tool that has been lacking” in the EU.

Franck Proust, a French member of the European Parliament who was the rapporteur for the legislation, said it was designed to stop EU countries getting into a “relationship of dependency” with China.

“Canada gave its rare earth expectations over to China and when they wanted to work with Japan to export these rare earths, the Chinese prevented them doing so because of the ones that already exist in China. That’s the kind of situation we want to try and avoid,” Proust said.

Spanish Prime Minister Pedro Sanchez (R) and Chinese President Xi Jinping.
Spanish Prime Minister Pedro Sanchez (R) and Chinese President Xi Jinping attend a ceremony to sign agreements between both countries at Moncloa Palace on Nove. 28, 2018 in Madrid, Spain. (Pablo Blazquez Dominguez/Getty Images)

German representative Bernd Lange, who is chairman of the Parliament’s International Trade Committee, added: “We really have to be more proactive for our industry in the European Union and to defend their possibilities to be competitive compared to other regions of the world.”

The new law will be enacted after member states sign off on it. EU capitals will then have 18 months to put screening systems in place, although officials expect many to act quickly once it is ratified.

According to a study by Bloomberg published last year, Chinese investment in Europe between 2008 and 2017 amounted to $318 billion, which is 45 percent more than it injected into the United States over the same period.

Giving evidence to the U.S. House of Representatives Foreign Affairs Committee in May last year, Philippe Le Corre from Carnegie Endowment for International Peace said Washington and Europe should work together to address the issue.

“Although the U.S. and the EU do not always speak with one voice, they should coordinate and present a united front as Chinese capital continues to flow towards the European continent,” Le Corre said.

The state-owned energy company China Three Gorges is currently trying to wrap up a $10 billion take-over of Portugal’s EDP-Energias de Portugal, in a case that has sparked concern about Beijing’s investments in key infrastructure.

Beijing is also funding a third of the costs of building a new nuclear power plant at Hinkley Point in southern England, with some British politicians voicing fears over the possible security implications.

According to Le Corre, the Chinese have targeted Europe’s biggest economies, investing $70 billion in the UK to date, $31 billion in Italy, $20 billion in Germany, and $13 billion in France.

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