The Application of Regulation 452/2019 in Response to Chinese Foreign Direct Investment

Abstract

The Regulation establishing a framework for screening of Foreign Direct Investments (FDI) into the European Union (EU) represents a new chapter for the EU’s foreign policy. FDI is a divisive topic within the EU, particularly FDI originating from China. This article seeks to add to the existing literature by assessing the effectiveness of the Screening Regulation towards this Chinese FDI. This assessment shall elucidate the interplay of this Regulation with the internal market, the free movement of capital, freedom of establishment, and the duty of sincere cooperation in response to Chinese FDI. Whilst the Regulation has proven its effectiveness, several deficiencies still exist, brought to light by recent developments such as the COVID-19 pandemic and the Belt and Road Initiative (BRI). By framing this article against the backdrop of the golden shares case law, these deficiencies are highlighted and addressed. Allowing EU Member States (MS) to safeguard their public order and security considerations in screening through national measures would allow for a better control over their markets in conjunction with the Regulation, although further development is needed. Foreign direct investment, Chinese State-Owned Enterprises, Chinese economic statecraft, European External Trade Policy, EU trade policy, EU foreign policy, Bilateral Investment Treaties (BIT), Freedom of establishment, Free movement of capital, Golden shares