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European Commision studies proposals to regulate foreign investment

By Fu Jing in Brussels | | Updated: 2017-07-27 21:54

The European Commission has confirmed it has set up a working group to explore "possible actions" to screen foreign takeovers in strategic sectors.

Critics said any screening of foreign investment is directed at China but could be opposed by many member states, who don't want the commission getting involved in domestic matters.

European Commission President Jean-Claude Juncker will announce the proposals on Sept 13 when he delivers his annual state of union address to the European Parliament.

A European Commission source said that President Juncker had set up a dedicated Commissioners' group on trade and harnessing globalization to elaborate first possible actions."The objective is to present such possible actions at the time of the President's State of the Union speech in September," they said.

But analysts wonder if the European Commission can take any meaningful action. Fredrik Erixon, director of Brussels-based think tank European Center for International Political Economy, said: "It remains to be seen if the Commission proposal actually will work. Member states guard their sovereignty on these matters because, on inward investment, they often compete with each other and jockey to offer better advantages."

While media in Europe has suggested that the bloc's strengthening of regulation in investment in strategic sectors is targeting China, Erixon said he thinks it is also aimed elsewhere.

"China is in the limelight because it has resourceful investors and because there has been a number of high-profile M&As by Chinese firms. But a policy like this is also argued on the basis of non-Chinese concerns," he said.

Erixon also said concerns about sovereignty and security concerns is an issue for member states, not the commission and countries such as France and Germany have resisted previous attempts at commission regulation.

Erixon said the policies are anti-growth and often it is protectionism masquerading as security policy. "If there is security concerns over investment today, member states have all the power they need to act and, in my view, the new attempt is just a ploy to get tighter controls over the ownership of companies where there simply is no security concerns," Erixon said.

Dries Lesage, director of the Ghent Institute for International Studies of the Ghent University in Belgium, cited the example of Chinese auto company Jeely's acquisition of Sweden's Volvo several years ago, which preserved a Belgian plant employing 5,000 workers. Lesage said, "We are not caring whether the investment is Chinese or Swedish. The result is that the jobs are safe."

Against the backdrop of United States' growing isolationism, Lesage urged the European Union to reshape its vision of foreign policy by actively engaging global powers, such as China and Russia, instead of following the US.

The European Commission source said it showed concerns in May about foreign investors, notably state-owned enterprises, taking over European companies "with key technologies for strategic reasons" but maintained that openness to foreign investmentwas a key principle for the EU.

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