China’s Direct Investment in Europe: Is There a Need for European Regulation?

The expansion of China’s foreign direct investment (FDI) in Europe has been quite spectacular in recent years, not only compared to FDI coming from other countries, but also to Chinese FDI to other world regions. In December 2010, the EU Commissioner responsible for industry voiced concern about increasing Chinese outward FDI and the need to establish a new authority with the power to block foreign takeovers of strategic European businesses to protect Europe’s advanced technology. In an interview, he referred to the Committee on Foreign Investment of the United States (CFIUS) as a possible model. It is unlikely that such an initiative would be successful in Europe, as most European national and regional governments take special measures and incentives to promote and attract Chinese investment. This paper will discuss the recent development of China’s FDI in Europe in general and geographical patterns and sectorial distribution of Chinese multinational companies in particular. The impact of Chinese investment on European host countries and regions will also be discussed to assess the necessity and possibility to have a European regulation on Chinese FDI.