Germans do not want EU controls on direct investment in China
European Union businesses and governments oppose Brussels' plan to screen private companies' investments in China , casting doubt on the feasibility of the policy. Above all, German companies are opposed, as they are extremely exposed to the eastern country.
The European Commission's plan "would constitute a serious interference in business decisions and international investment flows," the Federation of German Industries (BDI) said in a written document submitted to the Commission's consultation on the screening of outbound investments in certain sectors hi -tech of the Chinese economy.
“ German companies use foreign direct investment (FDI) to gain market share globally. Such investments strengthen the German economy, secure jobs and promote prosperity. The BDI therefore rejects any new mechanism for controlling foreign direct investment."
The plan was announced by Commission chief Ursula von der Leyen in March last year, and was then set out in a white paper in January as part of the EU's proposed Economic Security Strategy (ESS), which she does not name China directly but was written with Beijing in mind. The German politician reiterated her intention to shield investment in a manifesto published ahead of her re-election last week for another five-year term at the helm of the EU secretariat.
“We will complete the review of the foreign direct investment screening framework, build a truly coordinated approach to export controls and address the risks arising from outbound investments,” reads the manifesto, which cites two other fundamental pillars of the European Investment Strategy. security, the cornerstone of von der Leyen's plans to reduce risks in the EU's relations with China.
Brussels fears that advanced technologies could end up in the hands of the Chinese military, and officials often point to a lack of clarity over which buyers have links to the defense sector. A fear that is certainly not stopped by the ban on investments, both because there are many other methods for filtering technologies, and because it is always taken for granted that Beijing is a technologically backward country, which it is not.
The proposal was coordinated with the United States, which last year launched its own mechanism to stem the flow of capital into some Chinese industries. Initially, the tool proposed to screen investments in four hi-tech sectors: semiconductors, artificial intelligence, biotechnology and quantum computing.
The Commission has drawn up a second list of six technologies that it should follow. But as it stands, outbound investment screening appears to be the pillar least likely to be achieved. “The introduction of state controls on the outgoing investments of European companies is not the right way to achieve economic security, as it would constitute a major interference in the sphere of companies' commercial decisions and international investment flows,” we read in a document presented by SEMI Europe, the industry association representing the global electronic manufacturing and design supply chain.
BusinessEurope , an advocacy group representing national-level business chambers in EU member states, said it has a cautious approach to “any limitation on outbound investment that does not result from sanctions.” “There is a potential chilling effect that should not be underestimated, as it can have a significant impact on research and innovation, the operations of European companies globally and inbound investments,” the document reads.
Groups in the Netherlands and Sweden have also expressed skepticism, joining a chorus of voices against a policy proposal that remains deeply unpopular even among national governments. According to diplomatic sources, only one of the EU's 27 member states – Lithuania, arguably the country most critical of China – has expressed full support for Brussels' plans to screen outbound investments.
German factory in Shanghai – Reuters
Some capitals struggle to see the need for a tool that could be administratively burdensome, especially given the low levels of EU investment in these sectors of the Chinese economy. Tobias Gehrke, a geoeconomics expert at the European Council on Foreign Relations, said von der Leyen's best chance of passing the instrument would be a "political agreement" with the United States: "Screening of outbound investments has always had a strong connection with the United States. It was part of a policy package that demonstrated the EU's seriousness about the risks of technology leaks."
Because the issue of technological/military transfer to China is a problem that is felt above all in Washington, more than in individual European capitals, so the Commission, if it wants to impose this policy, will have to force it from the USA.
However, minimal investments
A recent report by the Institut Français des Relations Internationales (IFRI), a Paris-based think tank, found “very modest” European investment in the four sectors in China, “between 2% and 4% per year” of all capital between 2019 and 2023. These investments are dominated by German companies, with 49 cases found in the last 20 years, compared to France (36), the Netherlands and Portugal (both 12 cases).
Furthermore, there is a strong feeling in some capitals that if another pillar of the strategy – a unified export controls regime across the EU – can be achieved, the need for exit screening will be alleviated. Supporters of an EU-wide export control regime point to US interference with Dutch chipmaking equipment giant ASML, which had to stop shipping its lithographic machines to China. high range under pressure from Washington. The company itself is pushing for the EU to harmonize the different regimes existing in its capitals, arguing that 27 voices would be stronger than just one to oppose the United States.
“With regards to Europe's economic security, better coordination of export controls should be assessed as the main tool to prevent technology leaks in sectors critical for national security, since these already take into account technology transfers ”, we read in the document presented by SEMI Europe, of which ASML is a member. The Commission is now preparing to begin a monitoring period with the 27 Member States, during which it will note investment flows in the four sectors, followed by a risk assessment report.
However, the issue of direct investment is especially important for Berlin, whose companies are trying to grow through FDI in China, as domestic conditions are no longer positive. However, the export of growth only benefits national development in a limited way.
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The article Germans do not want EU controls on direct investment in China comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-tedeschi-non-vogliono-i-controlli-della-ue-sugli-investimenti-diretti-in-cina/ on Mon, 29 Jul 2024 08:00:30 +0000.