New System Of Screening Foreign Investment Passed In EU Aimed At China

A system that would result in greater scrutiny of foreign investment – notably from China, was passed by lawmakers of the European Union which, according to statements, would help the EU to better protect strategic technologies and infrastructure in the block. This new system was passed through a vote which had 500 in favor, 49 against with 56 abstaining.

According to analysts, this new plan was designed in the wake of increasing Chinese investments in the EU and this new law would allow the European Commission greater powers to examine in more detail any foreign investment in some of the critical sectors in the region and following which the Commission would also be able to comment on whether such investments are detrimental to the security, technology and infrastructure sectors of Europe.

While there is no mention of China in the proposed legislation, but the complaints about foreign investments by state-owned enterprises and technology transfers that had been made by the supporters of the legislation were primarily related to China.

“All the powers in the world – the United States, Canada, Japan to China – have had their systems of screening, the United States with CFIUS since 1975. Only Europe had no screening system,” Franck Proust, the leading EU lawmaker on the plan, said on the eve of the vote.

“We’re not looking to bar foreign investment. It is essential for EU countries, we need it. It’s to pay attention to the investments that are strange, that do not make economic sense but are political.”

There were some EU members such as Greece, Cyprus, Malta and Portugal were initially opposed to the legislation that was demanded by bigger EU countries including France, Germany and the earlier government of Italy.

Those countries that opposed the legislation including Greece, welcomed Chinese investments. For example, the largest port in Greece – Piraeus, is had China’s COSCO Shipping as its major stakeholder.

But currently, that mood has seen some shift. For example, a closer look into the relationship between the Chinese telecom giant Huawei and the Chinese security and spy agencies is being accorded by the EU and there are concerns about how Chinese agencies can make use of the equipment supplied by the company for the telecommunication projects in the block. Al such allegations have been denied by Huawei repeatedly.

The EU executive had initially proposed some softer measures but the European Parliament lawmakers demanded tougher screening. Such measures include making it mandatory for the Commission to initiate an investigation about an investment is it was flagged by a third of EU members and other EU members would also be mandated to cooperate.

The new legislation also added on the list for ‘critical sectors’ and which now includes aerospace, health, nanotechnology, the media, electric batteries and the supply of food.

Under the new system, individual countries would no longer be required to carry out screening of contentious foreign investments. Currently, only about half of EU countries members have this system in place.

(Adapted from Reuters.com)

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Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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