MEPs propose tighter EU foreign investment rules to restrict Chinese access

Three MEPs have agreed in a report to be published Wednesday to tighten the requirements for foreign direct investment in the EU, restricting access to the European market for Chinese investors, Euronews has learned.

The report comes from the European Parliament’s rapporteurs on the proposed Industrial Accelerator Act, MEPs Christophe Grudler (Renew), Pierre Jouvet (S&D) and MEP Anna Cavazzini (The Greens). The act was presented by the European Commission last March and creates a European preference on the EU market to favour products made in Europe, in a move to protect strategic sectors of EU industry from foreign competition.

China has threatened several times to retaliate against the legislation, which is still under discussion, putting access to the EU market at the top of the agenda in some ongoing trade negotiations with Brussels.

The exclusive details of the report obtained by Euronews show that in sectors where China is dominant, among them electric vehicles, solar panels, critical raw materials and batteries, the three rapporteurs want to impose strict requirements on investments exceeding €50 million, a threshold lower than the €100 million initially proposed by the Commission.

For such investments, any investor from a country holding 40% of the sector’s global market share will have to meet six conditions: own no more than 49% of the share capital of the EU target; make the investment through a joint venture with an EU entity; transfer technologies to Europeans; ensure that at least 60% of the workforce consists of EU workers; reinvest at least 1% of annual revenue into research and development within the EU; and source at least 30% of manufacturing inputs from within the bloc.

A signal to Beijing

The rapporteurs have added to the Commission’s proposal investments in other sectors such as wind power, electrolysers and heat pumps, making it necessary for the investor to meet at least three of the conditions above.

The report also restricts access to public procurement and public support schemes to products made in the 27 EU member states.

The Commission will only be allowed to extend the scope to products coming from non-EU countries under strict conditions, such as the application of reciprocal access for Europeans to foreign countries’ public procurement.

This follows intense lobbying from EU foreign partners, which want their products to be recognised as “made in Europe” to access the EU market. Many, such as the United Kingdom, argued that EU value chains were too intertwined with their own market to exclude them.

The report by the three MEPs will now have to be adopted by EU lawmakers before discussions start with EU member states on this future legislation.

However, it sends a signal to China that Europeans will not give up in their attempt to protect the EU market from China’s aggressive industrial policy.