China’s investments in Europe plunge amid coronavirus, squeeze on foreign buyers
- Chinese and Russian purchases in particular can expect to face review and scrutiny under the EU’s investment screening mechanisms
- The screening tools were established after concerns were raised about Chinese investments in European infrastructure sites and technology firms
A new report from the EU shows that Beijing’s share of the bloc’s total inbound investments dropped to 2.5 per cent in 2020 from 4 per cent in 2019.
While there was a broad decline in overall investment in Europe, it was more pronounced for China and Russia, two nations that have prickly relations with the EU and whose purchases could be expected to be scrutinised by the EU’s screening mechanisms.
Last year, the 20 EU member states with foreign direct investment (FDI) screening tools of their own referred 265 cases to the European Commission for review. Of those, 80 per cent passed review in a short first phase, with 14 per cent going to a second phase of more substantial evaluation.
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In total, the EU offered a final opinion on just eight transactions, with only 2 per cent of all inbound investments blocked.
A senior EU official, speaking on background, said the number may have been kept so low because the screening mechanism acted as a deterrent against investments that may have otherwise come under close scrutiny.
The EU would not divulge details of the individual transactions but said the top five sources of deals that were referred for review were the United States, Britain, China, Canada and the United Arab Emirates.
One of the deals blocked was in the semiconductor sector, the official said, while 50 per cent of those that progressed to the second review phase were in manufacturing.
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The screening tool, launched in March 2019 amid concern over Chinese investments in key European infrastructure sites and technology firms, was used sparingly last year, the report showed.
Before its introduction, Chinese buyers had bought stakes in a host of European ports, including the Piraeus port in Greece, Zeebrugge in Belgium and Duisburg in Germany, prompting officials to propose legislation in 2017.
In September of this year, Chinese conglomerate Cosco bought up a 35 per cent stake in the Port of Hamburg, Europe’s third busiest, with the EU keen to stress that the rules were not designed to block all investments from any single nation.
In 2020, China accounted for 2.45 billion euros (US$2.76 billion) of 98 billion euros total investment in the EU, down from 13.4 billion euros out of 335 billion euros in 2019.
According to the report, more than three-quarters of Chinese investments in the EU since 2013 have been linked to the Made in China 2025 plan to install China as the global leader in future technologies.
Earlier this month, The Wall Street Journal reported that two Chinese state firms took control of an Italian military drone maker in 2018, using an offshore firm and without the knowledge of authorities in Italy and Europe.
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The case has fuelled concerns in Brussels that state-backed entities might be using corporate loopholes to breach the screening rules.
“We wish to ensure that investments into – and exports of – critical EU assets, including certain technology, goods and infrastructure, are carefully monitored for potential risks or misuse,” said Valdis Dombrovskis, the EU’s commissioner for trade.
“Our intentions are transparent: trade and investment must be consistent with the EU’s values and supportive of human rights and international security,” he added.
The report found that “more than 90 per cent of these cases” referred to the EU were from five member states: Austria, France, Germany, Italy and Spain.
