A Bid for Europe to Clone CFIUS
Observers of the FDI scene might have come to believe that China’s outbound foreign direct investment (OFDI) program would be unequivocally welcome for its global stimulus effect. A recent editorial in the Financial Times initially concedes that China’s investment strategy will benefit both Europe and the investing companies. It then asserts a contradictory view.
In a piece decidedly protectionist, two Dutch researchers assert that Europe needs to screen Chinese investment.
The main issue is not the Chinese taking over European companies of great strategic importance; it is how to respond to the longer-term accumulation of economic power in Europe by a country such as China.
The writers suggest that the EU emulate the U.S. and establish a regulatory body similar to CFIUS with jurisdiction over all of its member nations. The union-wide solution is necessary to prevent Chinese investors from playing one country against another, say the authors. The editorial then raises the Trojan Horse rationale for regulation:
What has already caused anxiety in some European countries, particularly Germany and France, is the fact that the leading Chinese companies, banks and investment funds are state-controlled. Because Europeans regard China’s autocratic political system as incompatible with their own democratic norms, the growth of Chinese influence in European companies is a highly sensitive issue.
An effective, non-politicized regulatory body that screens solely for issues of national security, and not broader issues of economic security, may or may not be beneficial to the EU. Conjuring up threats of stealth investment by Chinese state-owned enterprises is not likely to lead to a dispassionate, reasoned evaluation of the proposal. There is also the equally important question of how to insure that a regulatory screening body chartered to protect national security does not morph into a Trojan Horse for wider nationalist or protectionist agendas.
