EU urged to drop plan
▶ Investment screening would hurt both sides: experts
Europe is backpedalling on its commitment to an open market and the potential restriction of Chinese investment could harm, instead of protecting, the strategic interests of the bloc, Chinese experts said on Thursday.
Europe is moving ahead with a foreign investment screening plan that would enable the European Commission to investigate foreign investments in strategic technologies and infrastructure such as ports or energy networks, according to a Reuters report on Thursday. The plan could potentially affect Chinese investment in the EU.
The plan is more ambitious than initially proposed, the report said, as the list of sectors to be scrutinized has been extended to include aerospace, health, nanotechnology, electric batteries, food and the media.
The rapid growth of China’s foreign direct investment into Europe has drawn attention in recent years. Chinese investors put nine times more money into Europe than North America in the first half of 2018, as Chinese merger and acquisition deals reached $22 billion in Europe, while deals by North American firms reached only $2.5 billion, a report released by global law firm Baker McKenzie and research provider Rhodium Group said in July.
Traditionally a flag bearer for free trade, the EU appears to be giving way to a rising global trend of protectionism and this may bode ill for the 28-member bloc, experts said.
Zhang Yansheng, chief research fellow with the China Center for International Economic Exchanges (CCIEE), said that the EU is showing double standards in its attitude toward foreign investment.
“Such motions are unfair as the EU simultaneously clamors for wider market access in China,” Zhang told the Global Times on Thursday, adding that there would be no winners from protectionism in trade, investment and technology.
Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, said that Chinese investment provides support, and holding it back would harm Europe’s strategic interests.
For instance, Chinese investment in Sweden’s failing Volvo car unit in 2010 opened up a vast market for the company and gradually put it back on a healthy footing.
Furthermore, the EU investment screening plan could potentially undermine unity in the bloc, according to Tian Guangqiang, assistant research fellow with the National Institute of International Strategy at the Chinese Academy of Social Sciences.
“The plan could intensify internal conflicts between EU members. It is possible that some member countries will not fully honor the EU’s decision and this would stall the bloc’s economic integration process and harm its cohesion,” Tian told the Global Times.
It is unclear whether the proposal will be passed by the European Parliament in 2019. Media reports have suggested there is opposition to it from Cyprus, Greece, Luxembourg, Malta, Portugal and Italy.
Some have pinned hopes on the Comprehensive EU-China Agreement on Investment, which is still being negotiated, to provide proper reciprocity in terms of market access. It is unclear whether the agreement would exempt China from the provisions of the EU investment screening plan.
“If the proposed plan is passed, we will need to see how it coexists with the China-EU bilateral investment treaty,” Zhang said.
“China should react by continuing to open up its market and demanding reciprocity. This would be a way to tackle the headwinds of global protectionism,” he said.
Given the rising scrutiny of Chinese investment, Tian said China should beef up its efforts in economic restructuring and industrial upgrading to move into the upper streams of the global industrial chain.
Diversifying trading partners, notably through the Belt and Road initiative, would add further immunity from protectionism, Tian noted.
“China should react by continuing to open up its market and demanding reciprocity. This would be a way to tackle the headwinds of global protectionism.” Zhang Yansheng
Chief research fellow with the China Center for International Economic Exchanges
A view of the Port of Rotterdam, where COSCO has acquired a minority stake in a container terminal