New EU screening framework also targeting Chinese FDI is finally in place

The facts: One and a half years after European member states approved it, the EU framework for screening foreign direct investment (FDI) finally became operational on October 11. It provides the EU Commission and member states with a mechanism to exchange information about investment projects by third country investors. The Commission can now issue an opinion if it sees an investment posing a threat to the security or public order of more than one member state. The tool targets all investments into sensitive areas of the economy, which have been increasing during the last decade. 

What to watch: Brussels has more proposals in its pipeline that could strain relations with China. For example, it is finalizing plans to tighten export controls on technology used for espionage and surveillance. It is also working on an ‘anti-coercion’ mechanism to use against trade bullies and new standards for ‘greener’ car-battery imports, a sector dominated by Chinese manufacturers. On the political stage, Brussels has put forward a proposal on sanctions for human rights violations – a step that might concern Beijing in light of the EU’s criticism of China’s actions in Xinjiang and Hong Kong.

MERICS analysis: "The new tools and proposals show that the EU’s China policy is becoming truly multifaceted to address the many challenges that are part of the EU’s relations with China. FDI screening and anti-coercion tools can serve Brussels in defending Europe’s strategic autonomy and economic sovereignty. Better export controls and a human rights sanctions regime would allow the EU to act in line with its values,” says MERICS expert Lucrezia Poggetti. 

Media coverage and sources:

• EU Commission: EU FDI screening regulation enters into force
• Politico: Europe to crack down on surveillance software exports 
• EU Commission: Towards a European framework to address human rights violations
• Euractiv : Dombrovskis announces defense instrument against trade bullies
• Euractiv : EU pushes new standards for ‘greenest’ car batteries on earth

This short analysis is part of the October 22, 2020 issue of MERICS China Briefing.