Abstract
While China is fast becoming an important outward direct investor, its companies are showing an increasing interest to locate in Europe and the European Union (EU). It has been suggested that this can partly be explained by the more lenient attitude of the European countries compared to the US, where some acquisitions were abandoned when they ran into political opposition based on security concerns. Yet, also in Europe, the media follow rather closely each new Chinese entry, and certain politicians have started to criticise the take-over of technology-oriented companies, especially by Chinese state-owned firms. Against the background of a very open foreign direct investment (FDI) policy as measured by OECD FDI Restrictiveness Index for the EU and the individual countries, an overview is given of the pre- and post-establishment obstacles to direct foreign investment. Also, the EU policy measures that directly or indirectly deal with incoming direct investment are discussed. Within the context of the EU competition policy and the merger regulation, the EU Commission has cleared five cases of take-over by Chinese state-owned enterprises. Although the Lisbon Treaty authorises the EU Commission to take charge of investment policy as part of the EU commercial policy, it will take time to realise this. If the announced negotiations about an investment treaty between China and the EU could work out the necessary balance, it would be an important step in achieving more reciprocity between their respective investment regimes.
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Notes
This overlooks the fact that Chinese privately owned companies are also venturing into Europe, and many small- and medium-sized entrepreneurial firms have located in EU countries, especially in East and Central Europe, but increasingly also in other European countries (Zhang, Yang, & Van Den Bulcke, 2011).
Only during the first month of 2012, several mega-M&As involving Chinese companies were concluded or announced. Examples are the take-over of German Putzmeister by Sany Construction Machinery (€360 million); the acquisition of a 21 % stake in Energias de Portugal by China Three Gorges Project Corporation (€800 million); the participation of 25 % in the equity capital of the Portuguese firm Redes Energeticas Nacionais by China State Grid (€387 million); the acquisition of 48 % of the shares in the regional French airline Aigle Azur by Hainan AIrlines (US$40 million) and the 10 % stake in Heathrow Airport Holdings Ltd by China's sovereign wealth fund, China Investment Corporation (CIC) (€415 Million).
In 2011, when Chinese tycoon Huang Nubo wanted to buy a 300-km2 farm in the north-eastern part of Iceland to build a golf course, hotel and resort, the deal was rejected by Iceland's government as foreign ownership of its land is prohibited. However, according to the managing director, Thordur Hilmarsson, of ‘Invest in Iceland Agency’, the parliament of Iceland, which by the way is the oldest in the world, is considering amending its laws to become more flexible towards IFDI.
According to notifications made by countries adhering to the OECD National Treatment Instrument, all 39 countries covered in published compilations of discriminatory investment measures report that they discriminate against foreign investors in one or more critical infrastructure sectors. Transport is the most targeted sector—all 39 countries report having discriminatory measures in this sector. In many cases, these discriminatory investment policies are minor (e.g. limited to ‘cabotage’ and investments in vessels flying the national flag). Twenty-nine have discriminatory policies in post and telecommunications; 28 in energy; 25 in radio and television; 22 in agriculture/food and in defence; 18 in drinking water and treatment systems; and 17 in banking and finance (OECD, 2008).
The EU has been preparing for an investment treaty with China since the summer of 2010, when a ‘Joint EU-China Investment Task Force’ was set up, followed by a Steering Group at the end of that year. Between May and July 2011, the EU Commission held a public consultation on ‘The future investment relationship between the EU and China’ and in September 2012, a joint press communiqué at the 5th EU-China Summit reconfirmed the commitment of both parties to launch the negotiations about such an agreement. In May 2013, the Commission asked for a mandate from the member states to open negotiations on an investment agreement with China.
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Daniel Van Den Bulcke is deceased.
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Zhang, H., Van Den Bulcke, D. China’s direct investment in the European Union: a new regulatory challenge?. Asia Eur J 12, 159–177 (2014). https://doi.org/10.1007/s10308-014-0383-9
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DOI: https://doi.org/10.1007/s10308-014-0383-9