Economy & Politics

Important companies in China’s hands – what is the EU doing?

German companies are vulnerable when supply chains break, for example in times of crisis. Photo: Daimler AG / Mercedes-Benz AG – Global Commun

The EU states do not speak with one voice to Beijing. In addition, Brussels often does not even know when state-owned companies from the Far East are investing in this country. That can be dangerous for the economy.

Brussels – A few days before the EU-China summit, the European Court of Auditors is ringing the alarm bells. The EU knows too little about China’s investments in the EU. The commission does not have the necessary data to produce an analysis of the investment strategy pursued by the Chinese state with a lot of money since the turn of the millennium. The Belgian member of the Court of Auditors, Annemie Turtelboom, speaks in her 50-page report of a “black hole” in data and information. “If the EU cannot get a proper picture of the economic activities of Chinese companies in the EU, then it is not in a position to develop an effective strategy for dealing with China.” Turtelboom compares the EU-China -Politics with a political blind flight: “It’s like driving a car but not having a map with you.”

China – Europe’s strategic rival?

Until recently, China was still considered a developing country by the EU. Only since last year has the EU Commission identified China as a possible strategic rival. Since 1995 the Chinese Communist Party has imposed a global economic expansion course on the country. In many cases, state-owned Chinese companies go shopping abroad. According to the findings of the Court of Auditors, the Chinese share of foreign investment in the EU is not even very high: it was 0.3 percent in 1995 and rose to three percent by 2018. An overview is difficult because a large part of the investments first enter the EU via the Luxembourg financial center and are no longer distributed from there in a traceable manner. A number of strategically important companies in Europe are now in Chinese hands. For example, state-owned companies bought the Italian auto supplier Pirelli for seven billion dollars in 2015. The company COSCO has acquired parts of the largest European freight ports, such as Piraeus, Valencia, Amsterdam and Rotterdam.

While the EU is open to foreign capital from China, China only grants access very restrictively: While in 13 Chinese key sectors – from banks to insurance to energy and automotive construction – foreign investors are only allowed to participate in joint ventures or minority stakes, for Chinese companies in the EU no restrictions. There is also no question of equal opportunities within the EU. While EU companies – apart from Corona times – are not allowed to receive any money from the state, the state-owned Chinese companies benefit from state subsidies. It has even happened that state-owned Chinese firms are paid for with EU funds. For example with the construction of the Peljesac Bridge in Croatia. The Croatian authorities awarded a major contract to a Chinese construction company for the project, which received EU funds of 357 million euros.

No EU team game

Turtelboom warns the EU member states to coordinate better with China. “We have to get the EU countries to see themselves as 27 players on a single team.” Currently, many member states are pursuing China policy on their own account. 15 EU countries have signed so-called “Memorandum of Understanding” (MoU) with China and thus recorded their will for joint economic activities. Significantly, however, not a single EU country has considered it necessary to inform the EU Commission about it.

China even managed to enter into formal cooperation with 17 EU countries from Eastern and Central Europe in 2012: The “17 plus 1” formation is intended to promote investment and trade between China and the 17 EU countries. After all, the EU wants to take a closer look at Chinese investments in the future. The member states are supposed to inform the EU Commission about planned large deals in strategically important sectors. However, the EU Commission should not be given the opportunity to prohibit investments.

Turtelboom has also identified two risks to which the previous EU-China policy does not provide any answers. The high dependency of many companies in the EU on preliminary products from China makes them vulnerable. “If the supply chains of Chinese companies break, the EU economy can be hard hit.” Many local companies have experienced this in the Corona crisis: They had to cut back on their production in February due to supply bottlenecks from the Far East. When the number of infections rose in Europe, respiratory masks could not be imported in sufficient numbers from the Far East.


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