The European Union began to tighten restrictions on Chinese capital in order to prevent key technology spills in strategic industries.
According to the British Financial Times on August 13, Jean-Claude Juncker, the president of the Executive Commission of the EU, will announce measures to tighten regulations on foreign capital inflows during a European Parliamentary address next month.
This move comes amid growing concern about Chinese money as Chinese capital recently began aggressive mergers and acquisitions in foreign countries. In the EU, as European strategic companies were taken over by Chinese companies, it causes concern about technology leakage and there are increasing complaints about the fact that EU capital is excessively restricted in China.
This measure is drawing attention as the US is considering sanctions against China's unfair trade practices. With growing dissatisfaction about China's unfair trade practice, the United States will begin an investigation into China's trade practices, including the violation of intellectual property rights, by the US Trade Representative (USTR) from August 14 under the instruction of US President Donald Trump.
According to the FT, only 13 of the 28 EU member nations have a system to examine whether or not foreign capital’s mergers with and acquisition of companies of their nations would pose a threat to national security.
The EU Executive Commission's new policies will encourage other EU member states to adopt this review system by improving existing systems in some EU countries that monitor foreign capital inflows, the commission’s internal sources said.
According to the newspaper, the EU Executive Commission is likely to introduce a nonbinding guideline to coordinate the introduction of a system between EU member states to monitor foreign capital inflows as the most likely measure to be introduced next month.
The FT, however, said the commission can prepare a binding bill to introduce an EU-wide regulatory system. In this case, the commission should obtain consent from the governments of member states and the European Parliament.
According to a report by Germany's think tank Mercator Institute for China Studies and research company Rhodium Group, last year China's FDI amounted to 35 billion euros, up by more than two-thirds from a year before.
In the EU, discussion about regulations on foreign capital inflows have recently surfaced, but in some countries including the US, regulations on Chinese money have been made at certain levels. In the United States, the Committee on Foreign Investment in the United States (CFIUS) has long been reviewing foreign capital, preventing China's telecom equipment maker Huawei from investing in US companies. Australia has made it mandatory for foreign capital inflows into the domestic industry to receive reviews by the Foreign Investment Review Committee since last year against the influx of Chinese capital into the nation.