EU intensifies monitoring of Chinese investment

On February 14, the EU parliament approved by a large majority new rules on screening investments and acquisitions of third-country companies seeking to make inroads into strategic EU sectors. The new rules enter into force in October 2020.

The new system gives the European Commission opportunities to investigate and comment on third-country investments in EU strategic branches. The purpose of the legislation is to assure that foreign state-owned enterprises are unable to threaten fundamental EU interests such as security and public order. While China was not specifically named, the investment activities of Chinese state enterprises appear to have provided impetus for the legislation.

Even with the European Commission’s new authority, the power to permit or prevent foreign investment remains with EU member states. The new system calls for better exchanges of investment information among member states, but does not require every state to have its own monitoring regime. About half of EU states have third-country investment monitoring schemes in place.