EU to tighten rules on foreign investment to fend off China

STRASBOURG (France) • The European Union is hammering out the first bloc-wide rules to prevent foreign investments from threatening national security, as Chinese acquisitions foster political unease.

Negotiators representing EU governments and the European Parliament may agree on draft legislation to screen foreign direct investments (FDI) tomorrow, according to Mr Franck Proust, a French member of the 28-nation assembly.

Both sides have settled on 95 per cent of the text and the goal at the meeting in Brussels is to bridge differences over the remaining part, which includes the politically sensitive matter of how far EU members can push concerns about FDI with their peers, said Mr Proust.

Concerns are mounting across the Western world about national-security risks tied to foreign investment, particularly by China.

Last year, US President Donald Trump blocked a Chinese-backed investor from buying Lattice Semiconductor, as a result of national security worries. Germany also moved to shield cutting-edge technologies after a bid by China's Midea Group for robotmaker Kuka prompted an outcry.

Earlier this year, the German government stopped a Chinese bid for the first time, by vetoing the potential purchase of machine tool manufacturer Leifeld Metal Spinning.

"We are making up for lost time," Mr Proust said. "All the world's other powers have their own investment-screening systems. Only Europe doesn't have such a tool."

The European Commission, the EU's regulatory arm, proposed in September last year a bloc-wide "cooperation mechanism" for foreign direct investments through a combination of data collection, information exchange and peer pressure.

The law would create an alert mechanism for future foreign investments in Europe and a centralised database of the ones that occur after the system enters in force, without taking the ultimate power of approving deals away from individual EU governments.

The goal of the proposed European investment-screening framework is to limit foreign threats to "critical infrastructure", including in the energy, transport, communications, data, space and financial industries, and to "critical technologies" such as semiconductors, robotics and artificial intelligence.

In backing these provisions, the negotiators for EU governments and Parliament have agreed to add areas such as water, health, defence, media, biotechnology and food security to the scope.

EU governments would be allowed to request information and offer comments on a foreign investment in a particular member country. In addition, the commission could ask for information and issue an opinion.

The nation in which the investment was planned would have to give "due consideration" to any comments and opinion, as well as take "utmost account" of any commission view regarding a foreign investment deemed to affect a European project or programme.

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A version of this article appeared in the print edition of The Straits Times on November 19, 2018, with the headline 'EU to tighten rules on foreign investment to fend off China'. Print Edition | Subscribe