Sharp divisions are emerging between countries in western and eastern Europe over whether to impose restrictions on Chinese investments in key infrastructure projects. Because the European Union works on consensus, it’s seems increasingly likely that any investment limits will be bilateral rather than region-wide.
With support from German Chancellor Angela Merkel, French President Emmanuel Macron has pushed for the enactment of stricter rules for Chinese companies trying to buy European firms. He has complained that Beijing’s restrictions on foreign investment in China increase the need for counterbalancing limits on Chinese investments in European firms.
But an effort by the European Commission, which proposes legislation, to more closely monitor investments from third countries, has run into stiff opposition in the European Council, where each member state has a vote.
“China already has a significant influence on critical infrastructure in Europe.”
Another French initiative, to allow countries to discriminate against foreign companies in awarding contracts for public works projects, has also run into opposition. “There is little indication that this proposal will win a majority in the council,” said one European diplomat.
Political support for Mr. Macron’s measures largely depend on how dependent a country is on outside investment. Eastern European countries such as Poland and Hungary, which desperately need foreign investment, are hoping to win large contracts from Chinese firms as part of the Silk Road project, which Chinese President Xi Jinping has proposed to expand land and sea transport links between China and Europe.
At a meeting of 16 Eastern European nations in Budapest last November, Prime Minister Viktor Orbán of Hungary noted that EU states are in a “fierce competition” for Chinese investment. He told Chinese Prime Minister Li Keqiang at the meeting that European investment is not sufficient on its own to develop the region, so he said that China is welcome as a partner.
The summit also saw the official start of construction of a high-speed railroad between Budapest and Belgrade, which is to be built with financial support from China. Beijing is spending €3 billion on the railway to improve connections with the port of Piraeus in Greece, which since 2009 has been leased to the China Ocean Shipping Company (COSCO) for a rent of €100 million a year. Construction of the rail line had been delayed because the awarding of the contracts violated EU rules, according to the commission.
In contrast to Hungary’s open support for Chinese investment, Germany passed rules on foreign investment deemed important to national security, affecting mainly technology and infrastructure. While not targeting any specific country, the directive was adopted after Chinese companies spent €9 billion in 2016 on 35 German companies.
The investment directive only applies to share purchases greater than 25 percent. The State Corporation of China, one of the world’s largest companies, caused an uproar in Germany when it announced that it is interested in buying a 20 percent stake in 50Hertz, a private company that control’s a 10,000-kilometer (6,200-mie) long electricity network. The Chinese have also expressed interested in acquiring stakes in other European infrastructure companies, especially in the energy sector. This has aroused renewed concern in Germany.
“We must not look just at individual investments but also have the overall picture in sight, such as China’s increasing interest in critical infrastructure,” said Christian Hirte, the deputy head of Ms. Merkel’s Christian Democratic group in the German parliament.
The United States has a special commission designed to look at foreign investments that might raise security concerns called the Committee on Foreign Investment in United States. It recently blocked a Chinese company from buying MoneyGram, a US money transfer service.
But Jost Wübbeke, head of the economic program and technology at the Mercator Institute for China Studies in Berlin, warns that Europe has few options to examine or prevent such deals. “The Chinese state already has a significant influence on critical infrastructure in Europe because of its numerous company shareholdings,” he said.
Till Hoppe, a correspondent for Handelsblatt in Brussels, Klaus Stratmann, who covers energy policy for Handelsblatt, and Stephan Scheuer, who is head of Handelsblatt’s feature desk, contributed reporting to this article. It was adapted into English by Charles Wallace, an editor with Handelsblatt Global in New York. To contact the authors: firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org