In 2016, the Chinese company Midea’s offer to acquire the German robotics company Kuka sparked a truly unprecedented reaction both within the German government and in the wider German political world. Concerns about transferring strategic know-how “to foreign hands” prompted a group of German politicians to call on the country’s business world to form a German consortium that would bid to keep Kuka in Germany. Hands. The mobilization then found itself in a vacuum, as the will of the company’s shareholders prevailed, and there was no readiness on the part of the German companies. After all, this was the same year that China’s investment in the EU paid off. and in the UK they peaked at a dizzying height of €47.4 billion.

The reaction of German politicians at that time was the first manifestation of a belated awakening of Europeans, who began to worry about the consequences of years of Chinese capital intrusion into European industry. Since then, various factors have intervened to heighten European fears, geopolitical risks such as the multifaceted tug-of-war between Beijing and Washington, the trade war between the world’s two largest economies, and aggressive competition between them. for world domination in technology. Until now, geopolitical factors have put pressure on the EU. To pick a side, Beijing’s recent alliance with Moscow has forced it to seriously rethink its relationship with the world’s second-largest economy.

Chinese investment fell 22% from 2021 and 77% from 2016 levels.

The change in Europe’s attitude was formalized by German Chancellor Olaf Scholz during a week when he invited EU representatives. reduce its dependence on China, as the element of competition and rivalry has intensified “from the Chinese side” in relations between the two sides. His announcement coincided with Italy’s pledge to withdraw from the new Silk Road it joined in 2019, causing a sensation as the only G7 country to join the project under Chinese influence. After all, this was preceded by an earlier statement by Commission President Ursula von der Leyen that this was not a spin-off of European economies from China, but “a prudent risk-mitigation process” with China.

All these positions reflect the achievements of many European countries, starting with Germany itself, as well as Italy, Britain, Denmark and the Netherlands, to stop China’s advance by banning Chinese takeovers of European companies.

The result is reflected in a rapid decline in Chinese investment in the EU. and in the UK, which were capped at €7.9bn last year, a 22% drop from 2021. However, as the United Nations Industrial Development Authority (UNIDO) points out, this is a dizzying 77% drop compared to 2021. level of 2016 and is associated not only with a change in the attitude of Europeans, but also with the control that Beijing has introduced regarding the movement of capital.

US escalates war

At the G7 summit, the finance ministers of the world’s seven most powerful economies will consider imposing strict controls on investment in China. However, according to analysts, this will be a double-edged sword, and the implementation of the measure will be extremely difficult. However, the issue of China will be on the agenda and in the spotlight, while Japan, host of this year’s G7 summit, is making efforts to change its supply chains and limit its heavy economic dependence on Beijing.
The problem, however, is that not all parties see the problem in the same way, as the severing of trade relations with the world’s second largest economy could be a serious blow to export-oriented economies such as Germany and Japan. Washington is stepping up pressure for tougher concerted action against China. US Treasury Secretary Janet Yellen stressed this week that many G7 members share Washington’s concerns about China’s actions, such as the “economic coercion” it imposes on businesses in other countries. He also added that these countries are considering countering such behaviour. Commenting on Washington’s efforts to form a united front against China, the US Treasury Secretary stressed that “negotiations are underway between partners in the G7, and we expect that these negotiations will continue, at least informally.”

In particular, Germany is particularly concerned about the issue of China, which it now sees as a strategic rival, and is inclined to reconsider its relationship with Beijing. She remains cautious, however, as she worries that she may appear to be supporting the G7 front against China. In fact, diplomatic sources report that Berlin expressed reservations when this was discussed at EU level. the imposition of sanctions against China for its support of Russia after its invasion of Ukraine. According to government sources who spoke to Reuters on condition of anonymity, the introduction of strict investment controls will be limited to areas of high strategic importance.

Japan also remains wary of imposing strict investment controls on China for fear of the strong impact it could have on international trade and the Japanese economy. A source close to the G7 talks spoke to Reuters on condition of anonymity and indicated that it would be extremely difficult to impose tight controls on investment in China. He actually stressed that “the United States is making big profits on its investment in China, and it raises a reasonable question whether such restrictions are really possible.”

Source: REUTERS

List of Chinese takeover bans grows

China is Germany’s biggest trading partner, which means Berlin’s tough stance on Chinese capital could have serious repercussions for Europe’s largest economy. This is evidenced by the position taken by the German chancellor a few months ago when he decided to approve the acquisition of a container terminal in the port of Hamburg by the Chinese company Cosco Shipping Ports, despite the sharp reaction of the Minister of Finance and Defense. ministers of foreign and internal affairs. However, authorities in Germany, as well as Italy, the UK, the Netherlands and Denmark, have intervened in recent years to ban takeovers of technology companies or strategic infrastructure.

German authorities intervened and blocked a takeover of Germany’s Elmos Semiconductor by China’s Sai MicroElectronics, British authorities blocked a takeover of Hong Kong’s Super Orange electronics company Pulsic, and Italian authorities blocked a takeover of Alpi Aviation’s military drone group from Chinese state-owned companies. . After all, lately Rome has been looking for ways to limit Sinochem’s influence on Pirelli, despite the fact that the Chinese company is the largest shareholder in the Italian car tire industry. In addition, a survey by research company Rhodium Group was released during the week, according to which more EU member states are now scrutinizing investments by Chinese companies much more carefully, while increasing the power of regulators to review already issued licenses. Specifically, they say Belgium, Estonia and Ireland will set up mechanisms this year to revise licenses already granted to Chinese investment. After all, the Netherlands is planning to reform its own foreign investment control system, which will give the competent authorities the right, even retrospectively, to check investments when it comes to sensitive technologies and energy sectors.

Bans on takeovers of European companies by Chinese companies and on mergers between Chinese and European companies have restricted Chinese industries from investing in green economy and, in particular, electrification. Over the past five years, Chinese battery manufacturers have invested 160.1 billion euros in Europe.

Olaf Soltz

Outlining the changes in the EU’s relationship with China, German Chancellor Olaf Scholz noted that “our relationship with China had three dimensions: partnership, competitor and systemic rival, but now the dimension of competition and rivalry has undoubtedly increased.”

10 of 16 acquisitions and mergers of European companies by Chinese were banned in 2022 by the authorities of Germany, Italy, the UK and Denmark.

Mystery

Describing Rome’s dilemma over joining the Silk Road, Francesca Ghiretti, an analyst at the Mercator Sinology Institute, noted that “Italy is stuck between two rocks, and the issue of its cooperation with China is a real diplomatic puzzle for Meloni.”

57% of Chinese capital placed in Europe in 2022 was in the green investment sector.

Consequences

Commenting on the consequences of abandoning Chinese capital, US national security adviser Jake Sullivan recently stressed that “it is dangerous now to ignore the economic dependence cultivated by decades, years of economic liberalization.”