Foreign Direct Investment (FDI) Screening: European and Chinese perspectives

Abstract

As one of the most open economies in the world, the European Union used to maintain an open attitude towards foreign direct investment from all over the world. Except for a few production areas involving national defense and encryption technology, foreign direct investment in other fields does not need to be reported. It is given to the commercial departments of various countries for approval, but it is up to the enterprises to decide on their own. However, in recent years, EU policymakers are worried that European proprietary technology and consumption data will be transferred to China, which will cause some national security and social order problems. The European Union established the "EU Foreign Direct Investment Screening Framework Regulations". The promulgation of this regulation established a cooperation mechanism at the EU level, stipulating the steps of foreign investment review, the areas that will be mainly reviewed, etc. Investments in these specific fields by "non-EU investors" are subject to EU investment review, and investments in these fields are likely to be opposed by the EU. This article will focus on the introduction and analysis of the EU screening mechanism and the Italian government's "Golden Powers Policy" as a representative of the EU's tightening control of foreign direct investment. Since 2012, Decree N.21/2012 has stipulated the power of the Italian government to review foreign investment, which has developed into the current "Golden Power". The "Golden Power" grants the government special veto power over any transaction that changes the control, ownership, availability, or use of a "strategic asset." In short, before the control, ownership, and use rights of "strategic assets" change, an application must be made to the government, and the transaction can only proceed with the government's approval. Since the 2019 Coronavirus pandemic, the Italian government has expanded to more aspects. Faced with the increasingly stringent foreign investment review mechanism of the EU and EU member states, China, as an important trading partner of the EU, has also adjusted its corresponding laws and regulations and made new regulations on foreign direct investment review. From the perspective of China's foreign investment review, two laws and regulations are mainly introduced. The first is the 2019 Foreign Investment Law, and the second is the Foreign Investment Security Review Measures. Based on introducing the content of the regulations, this article will focus on exploring the relationship between the foreign investment review mechanism of the EU and EU member states (especially Italy) and China, and whether or to what extent these review methods in China are influenced by the EU review mechanism.