EU firms resist European Commission plan to screen private investment in China

The investments strengthen the German economy, secure jobs and promote prosperity, German industry group says in submission

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A plan by Brussels to screen private EU companies’ investments into China was announced by Ursula von der Leyen in March last year, and elaborated on in a white paper in January. Photo: AP

Published: 12:00pm, 29 Jul 2024Updated: 4:44pm, 29 Jul 2024

Businesses and governments in the European Union are pushing back against Brussels’ plan to screen private companies’ investments into China, casting doubt over the policy’s viability.

The European Commission plan would “be a major interference in entrepreneurial decisions and international investment flows”, the Federation of German Industries (BDI) said in a written submission to the commission’s consultation on screening outbound investments into certain hi-tech sectors of the Chinese economy.

“German companies use foreign direct investment (FDI) to gain market shares worldwide. Such investments strengthen the German economy, secure jobs and promote prosperity. BDI therefore rejects any new mechanisms to control foreign direct investment.”

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The plan was announced by commission chief Ursula von der Leyen in March last year, and was fleshed out in a white paper in January as part of the EU’s proposed economic security strategy (ESS), which does not name China directly but was written with Beijing in mind.

The German politician doubled down on the intention to screen investments in a manifesto published ahead of her re-election last week to another five-year term at the helm of the EU’s secretariat.

“We will complete the review of the foreign direct investment screening framework, build a genuine coordinated approach to export controls and address risks from outbound investments,” the manifesto said, naming two other key pillars of the ESS, the cornerstone of von der Leyen’s plans to de-risk the EU’s relationship with China.

Brussels fears that advanced technologies could fall into the hands of the Chinese military, with officials often pointing to a lack of clarity around which buyers have links to the defence sector.