BOFIT Viikkokatsaus / BOFIT Weekly 2017/38

In mid-September, Jean-Claude Juncker, president of the European Commission, suggested that the EU create a new framework for overseeing acquisition activity of non-EU firms inside the EU area. The European Commission is particularly concerned about foreign firms taking over companies involved with advanced technology, logistics, data communications, energy or other businesses in strategic sectors. The European Commission said it would begin to analyse extra-EU direct investment and create a coordinating group of member-state representatives to discuss concerns and solutions to issues in the area of foreign direct investments.

A significant increase in Chinese investment in Europe is a key factor behind the European Commission's proposal. Twelve member states, however, already have national foreign investment screening systems in place that allow these countries to restrict foreign access to strategic technologies and critical sectors. Thus, while French president Emmanuel Macron called upon the EU to act on the matter this summer, many member states consider their national screening systems as sufficient and fear implementing the European Commission's proposal would only increase bureaucracy.

Unsurprisingly, China condemned the EU plan and claimed it supports free flow of trade and investment. OECD monitoring, however, finds China to be one of the most vigorous limiters of foreign investment, while EU members tend to be among the most easy-going. This contradiction increases pressures in the EU to limit the activities of Chinese firms.