Who Wants to Do Business in Europe Will Not Only Be Able to Invest Money, They Will Also Have to Provide Technology

Accepting the bitter truth that Europe is no longer a leader in technological innovations, especially in green technologies, where China has advanced far ahead, Brussels is now trying to bridge this gap, if not completely eliminate it, then at least mitigate it. To achieve this, it intends to use the same weapon that China has used in the past to acquire Western technology and accelerate its development. As reported by the Financial Times citing a statement from European Commissioner for Industry Stéphane Séjourné, the European Commission will present revised rules on foreign investments in December, primarily aimed at Chinese investors.

Trump’s Agenda

In short, the conditions for opening a factory in Europe will be the employment of exclusively local workers along with the simultaneous transfer of technology in certain sectors, such as the production of batteries for electric cars. A similar approach was previously taken by the Chinese government. Realizing about 40 years ago that the only way for China to develop rapidly was to open up to the world, Beijing allowed Western companies into its vast market. However, a foreign company that wanted to open a factory in China had to do so through a joint venture with a Chinese partner. In return, the partner received the transfer of technology.

Stéphane Séjourné explained that the goal is for foreign investments to stimulate economic growth in Europe, not for factories of foreign investors to serve solely as entry points to the European market. The French politician claims that this is an ‘identical agenda’ to when U.S. President Donald Trump speaks about the reindustrialization of the United States. Recall that the current U.S. administration claims that ‘reciprocal tariffs’ will result in hundreds of billions of dollars in investments in America to restore its former industrial base. The European Union announced $600 billion in investments (although it is not known over what period and who will specifically invest such money). Despite Trump’s practically extortionate style, for many global companies, the U.S. market is too important to abandon due to tariffs. This is not only true for the industry – at the end of July, Bernard Arnault, the owner of the luxury goods giant Louis Vuitton Möet Hennessy, announced the opening of a fourth factory in the U.S.

CATL’s Chinese in Spain

However, Europe will use other tools of industrial policy, rather than tariffs, Séjourné added.

– We protect our market, but I value the use of conditions for foreign investments more if someone wants to produce in Europe – claims the European Commissioner.

Of course, in the new European legislation, China will not be specifically named, but when looking at the data from foreign investment statistics, it is quite clear who Brussels is targeting. Just last year, direct investments from China to Europe jumped by 80 percent compared to 2023, reaching €9.4 billion.

One of the world’s leading manufacturers of batteries for electric cars, Chinese CATL, is particularly in the focus of the European Commission. Incidentally, the U.S. Department of Defense placed CATL on a blacklist in January due to alleged ties to the Chinese military, which the company denied. This Chinese manufacturer has battery technology more advanced than that of any European manufacturer and has already opened a factory in Germany. At the same time, it has begun constructing a €7 billion factory in Hungary, and will invest €4 billion in a factory in Spain. The latter factory is being built near Zaragoza as a joint investment with Stellantis. The Chinese have announced that they will employ three thousand Spaniards, but will also bring about two thousand of their workers from China. Spanish union leaders believe that Spanish workers will be responsible for the rougher jobs, while their Chinese colleagues will have exclusive access to the details of battery technology. Security policy analysts remind us that the current industrial policy of President Xi Jinping aims to create a ‘self-sufficient fortress’ in China while simultaneously increasing the rest of the world’s dependence on Chinese industrial goods. In this context, sharing technology that is a jewel in the crown is not a desirable option for the Chinese.

Weak Regulation Will No Longer Be an Asset

Representatives of the Spanish government state that they strongly support stricter EU rules on foreign investments, adding that they expect the new regulations to ‘strengthen European economic security and resilience.’ In recent years, in a bid to take a slice of the pie from the European green transition, several Chinese companies have invested in hydrogen technology projects. These investments are in Germany, Spain, and Scandinavian countries. From European associations dealing with hydrogen technology, it can be heard that the current regulations require that companies applying for European money for hydrogen technology cannot purchase more than a quarter of the components for obtaining that gas from China. However, with investments from Chinese manufacturers, this rule can be easily circumvented.

Chief Economist of the Central European Institute for Asian Studies Martin Šebeňa believes that the revision of EU investment rules will significantly reduce the race among member states, especially those in Eastern and Southern Europe that attract foreign investments with the promise of weak regulatory intervention. In the electric vehicle sector, the new rules will affect not only Chinese manufacturers but also Japanese and Korean ones that have built stronger ties with European suppliers over the years. The presentation of the European Commission’s proposal is expected on December 10. What they think about it in Beijing is still not officially known.