BRUSSELS — The EU’s attempt to stop China from buying out its top chipmakers and AI companies is being hollowed out from within.
National capitals are pushing to weaken rules that would require them to screen foreign investments in sensitive technologies, such as semiconductors or artificial intelligence, according to the latest draft compromise text on the review of the rules governing foreign direct investment (FDI) screening seen by POLITICO.
The FDI review is part of a signature initiative from European Commission President Ursula von der Leyen’s first mandate: a new economic security strategy for the EU. As part of the agenda she proposed to revamp rules in January 2024 governing how EU countries scrutinize inbound investments.
The strategy comes as part of a broader EU-wide effort to rein in foreign investors from taking control of European companies in strategic or sensitive sectors, such as when Chinese shipping giant Cosco attempted to buy a container terminal in the Port of Hamburg two years ago.
The draft document waters down the original Commission proposal by narrowing the list of strategic sectors subject to mandatory FDI screening, where the EU executive said that EU countries would be required to screen foreign investments into AI, chips, quantum technologies, energy technologies, space, drones or critical medicines.
But while it adds more detail — explicitly naming “core components or software of semiconductor manufacturing equipment,” lithography, microprocessors and memory chips — the new Council text stops short of requiring national authorities to act.
Instead, the new text, dated April 14, only recommends that EU governments “take [those sectors] into consideration” when assessing whether a foreign investment poses a threat to security or public order.
By contrast, in its own position on the rules, the European Parliament doubled down on the Commission’s original intent — seeking to add more sectors that capitals must monitor such as aerospace, rail transport or the automotive industry.
Diplomats from national capitals do not expect their final position to significantly change before institutions enter into negotiations to finalize the legislation. Agreeing on which sectors should be subject to screening will likely be the most contentious aspect of those talks.
The latest draft, which was discussed by EU trade diplomats last week, comes after POLITICO reported that capitals wanted to ditch the list of sensitive sectors altogether during the Hungarian presidency of the Council of the EU in the second half of last year.
Trump’s shadow
While the rules were drafted amid fears of Chinese takeovers, the European Union is currently more worried about corporate acquisitions by U.S. companies — such as American private equity CD&R buying a subsidiary of French paracetamol-maker Sanofi, or the failed attempt by American industrial machinery giant Flowserve to acquire control of French nuclear firm Segault in 2023.
Now that Trump is in power, the EU executive is clearly worried.
“We cannot afford discussing this for months and months,” said Damien Levie, who heads the FDI screening unit at the Commission’s trade department, citing a changing global security environment in which, for example, the United States is no longer “unequivocally” on the EU’s side.
Levie said at an event last week that he hoped member countries would be in a position to agree “in the coming weeks” on a Polish presidency proposal of the text, which “fine-tunes” an earlier proposal by the Hungarians.
Investing from scratch
Another substantial difference compared to the Parliament’s position is that EU countries want to remain free to decide whether to include so-called greenfield investments in their mandatory screening — which is when a foreign company sets up an entirely new operation in the EU, like building a factory from the ground up.
“Greenfield foreign investments should fall within the scope of this Regulation. However, they should not fall within the minimum scope of screening mechanisms,” adds the text, prepared under the current Polish presidency.
The Parliament’s own position — set to be voted on May 7 in the plenary — states that EU countries should screen greenfield investments in sensitive sectors.
European lawmakers also sought to give the European Commission an adjudicatory role when an investment is disputed between capitals. In their own position, EU capitals don’t give the EU executive such a role.
The draft text is still subject to change before countries adopt their position.
This story has been updated with comments from Damien Levie of DG TRADE.
The post EU countries soften push to stop Chinese tech buyouts appeared first on Politico.
