EU must wake up to the Chinese investment factor

The EU is lagging behind all other major industrialised nations in its response to China’s investment explosion in Europe’s sensitive sectors. Political consultancy Rasmussen Global has published new research today as EU countries and the European Parliament begin considering their response, with a clear policy divide emerging across the bloc. The policy memo highlights how Chinese […]

The EU is lagging behind all other major industrialised nations in its response to China’s investment explosion in Europe’s sensitive sectors.

Political consultancy Rasmussen Global has published new research today as EU countries and the European Parliament begin considering their response, with a clear policy divide emerging across the bloc.

The policy memo highlights how Chinese investments dramatically expanded into southern Europe following the 2008 financial crisis. More recently, the investment focus has expanded to assets in northern Europe, including cutting edge technological know-how that can often be converted to military use.

The memo shows:

  • From the 2008 financial crisis to 2015, Chinese investments in the EU jumped tenfold. They have jumped a further 77% in 2016.
  • European investments in China decreased by 25%, with the trend set to continue due to regulatory barriers and a lack of reciprocity.
  • All G7 countries have foreign investment screening in place to detect strategically harmful investments. Several, including the UK and US, are considering strengthening these mechanisms.
  • Only 12 EU countries out of 28 have investment screening systems.

In recent months, some EU countries have had an ‘11th hour awakening’ over whether Europe’s free-trading agenda has left it vulnerable to Chinese influence, especially after several cases of countries with Chinese investment exposure altering EU foreign policy. The concern of losing some of Europe’s key technologies under targeted Chinese investments is another important factor.

A proposal made this Autumn by the European Commission seeks to strengthen information sharing between states. However, even this modest proposal has come under fire from a coalition of southern states reliant on Chinese investment, and traditional free-trading northern states.

The policy memo argues that all EU member states should be obliged to develop national investment screening mechanisms, alongside a stronger EU framework that includes a clear definition of a European strategic sector based on national security.

Rasmussen Global Senior Advisor, Jonas Parello-Plesner, has long-standing advisory expertise from government and think tanks on EU-China relations and investments flows. Speaking at the publication of the memo, he said:

“Europe should welcome inward investment including from China; it needs it. However, member states should not let their thirst for investment blind them. Europe should introduce a system of scrutinizing foreign investment based on national security in a clear, limited and rule-bound manner. Afterwards, it gets harder—as demonstrated by the enormous current effort put into disentangling the EU from the Russian gas monopoly. There are considerations of dependency particularly with foreign, state-owned companies in strategic sectors, also from China.

“For European citizens to trust it, the international trading and investment system must be based on clear, common rules. EU member states should coalesce around a third way that is neither protectionist nor free-trading, naïve to the risk of Europe’s exposure.”

Rasmussen Global CEO Anders Fogh Rasmussen has also written on the topic in the Financial Times. 

Download the report in PDF here

Or view it on our website here

 

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