China-Europe partnership benefits all
New investment ties amid protectionist threats
In recent years, EU-China investment relations have basically revolved around two key issues－ongoing negotiations on a bilateral investment treaty, and the EU's recent initiative to introduce a joint screening procedure for investments in sensitive areas such as media and aeronautics.
But given the new protectionist threats to global trade and investment, there is an urgent need for improved and constructive dialogue between China and the EU.
But this is not possible unless both sides lay the foundations for a level-playing field in their relationship. For China, this means gradual liberalization of sectors heavily guarded against foreign direct investment. And by preparing a credible road map and timetable for further opening up, China can increase its productivity and help avoid major social disruptions.
A joint investment screening procedure to protect strategic EU sectors from foreign takeovers has been proposed against the backdrop of multiple crises plaguing the EU. Greater strategic autonomy shows the need for a careful and joint approach to protect public order and security. Essentially, this mandates a framework which is transparent, predictable and nondiscriminatory toward Chinese investors. At the moment, only 12 EU states have national systems for screening foreign investments, but the coalition of the willing is growing, especially among the largest recipients of Chinese FDI.
For EU members, it is a source of concern if the investor is a State-owned enterprise, or if the investment is in infrastructure projects in fields such as energy or communications. But rising peer pressure among EU member states wary of China's surging merger and acquisition spree in critical sectors is a greater obstacle on the road. China's leadership has the opportunity to address the European public's and policymakers' concerns by implementing SOE reform and making public subsidies to companies engaged in FDI more transparent.
Rapprochement between China and the EU on these issues would be welcome news for the future of the rule-based world order, which will indirectly curtail protectionist impulses worldwide. Let's hope this will happen sooner than later.
