EU urged to drop plan

▶ In­vest­ment screen­ing would hurt both sides: ex­perts

Global Times - - FRONT PAGE - By Chu Daye Page Edi­tor: lix­u­an­[email protected]­al­times.com.cn

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.

Dou­ble stan­dards

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.

Re­sponse needed

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

Photo:Li Xuan­min/ GT

A view of the Port of Rot­ter­dam, where COSCO has ac­quired a mi­nor­ity stake in a con­tainer ter­mi­nal

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