Will Europe Restrict Chinese Investment Into The EU?

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The Chinese economy is in trouble. A credit crisis - led by the real estate sector looks likely and now the US government has slapped restrictions on the types of Chinese companies and sectors that US investors may invest in. Now its Europe’s turn to potentially do the same.

The onset of the holiday period means that there has so far been little detailed EU response to the long-awaited US outbound investment restrictions on investment in Chinese companies.

To date, in addition to the EU Economic Security framework, much attention has focused on curbing inward investment in technologies and infrastructure by the likes of China, and in particular ‘economic coercion’ on individual member states by foreign countries. While investment in Chinese enterprises by European multinationals, corporate VC’s, private equity and VC’s is not as large as that by the USA . European FDI in China is dominated by Germany and focused on autos, pharma and consumer sectors, there contours are there to imagine what a European outbound policy might look like.

Pressure for such a policy has come from the Dutch, the Germans and some smaller states. To date, the EU has trod a fine line between not ‘decoupling’ from China and ‘de-risking’, and so far restrictions on European companies operating in China have, in their implementation, been less severe than we had thought. For example, instead of hard investment restrictions, we might see the introduction of an investment monitoring system.

 

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