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EU Expands Foreign Investment Guidelines as Chinese Influence Grows

The European Union will tighten rules surrounding foreign investment into Europe, as Chinese investment and influence grows in the region. The European Parliament and negotiators from the 28 EU Member Nations agreed on draft legislation aimed at protecting European strategic interests while promoting investment. Although not mentioned by name, China’s increasing investment in strategic European sectors appears to be the focus of the proposed new law. Currently 14 EU Member States have some form of foreign investment review mechanism. The new legislation, originally proposed in September 2017, will create a pan-EU framework for screening foreign investment and protecting the bloc’s collective security. Foreign companies seeking to acquire European assets “related to the operation or provision of critical technologies, infrastructure, inputs or sensitive information” will be subject to these measures.

China’s economic and political presence in the European Union, as is the case throughout the world, is expanding greatly. Data compiled in a joint Mercator Institute for China Studies/Rhodium Group report indicates that yearly Chinese foreign direct investment (FDI) in the EU has grown exponentially in recent years, rising from EUR 700 million in 2008 to EUR 35 billion in 2016 (before dropping to EUR 30 billion in 2017, largely a result of Beijing’s effort to curb capital outflows). In the first half of 2018, announced Chinese FDI in Europe was nine times greater than North America – with Sweden, the UK, Germany and France ranked as the top destinations.


EU Member Nations are, however, increasingly moving to introduce foreign investment restrictions. Germany, France, and the UK have taken significant steps to enact investment screening measures amid a flurry of proposed Chinese investments, and were initial backers of the proposed EU framework. The proposed framework still needs the support of the 28 EU states when they convene on December 5, and this is far from assured “given opposition from a number a countries, including Cyprus, Greece, Luxembourg, Malta and Portugal.” Should the law receive sufficient backing, European Parliament will vote on the issue in early 2019.

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