Regulating Foreign Investments

Mainly in technologies and national priority areas

Christine Roy on Unsplash
Christine Roy on Unsplash

The pandemic has painfully highlighted the need for independent industries and supply chains, and national control over some technologies. India, Japan, the EU, to name but a few, have amended their regulations regarding Foreign Direct Investments (FDI). Without directly singling out China, some countries make no mystery that they are trying to restrict Chinese acquisitions in the areas of technology and national priorities. They will have to find an equilibrium between the need for FDI and restricting Chinese intervention. The WTO’s reaction and the increasing tension between the US and China are factors that will likely add a geopolitical dimension to the change in norms regarding FDI. It is worth noticing that each country has its own interests in regulating FDI, some independent from Chinese investments.

Hear from the experts:

Meet the experts:

Click on the photo to contact the expert

Read more about the Trend:

Indian government sets up a panel to screen all Chinese foreign investment proposals

Kirtika Suneja & Deepshikha Sikarwar, The Economic Times (01.10.20)

India has set up a screening panel to vet all Chinese foreign investment proposals and those considered “non-controversial” could be approved. More than 100 proposals involving foreign direct investment (FDI) from China are pending.

TikTok was just the beginning: Trump administration is stepping up scrutiny of past Chinese tech investments

Washington Post (29.09.20)

After TikTok, the federal government is stepping up its scrutiny of past Chinese investments in U.S. tech start-ups, sending a flurry of inquiries about deals that are at times years old. The Committee on Foreign Investment in the United States (CFIUS) gathers details from the companies, and it can decide whether to probe the matter further and even push the foreign investor to divest, as it did in the case of TikTok.

China tech faces double compliance challenge in Europe

Min-Si Wang, Technode (06.05.20)

Chinese tech firms such as Huawei and Bytedance have developed their global presence through aggressive R&D and physical presence in the European Union (EU). Huawei, for instance, filed the highest number of patents in 2017 out of any company in the EU and booked billions in contributions to the EU economy the same year.

How coronavirus is changing the rules on foreign investment in essential areas

Anastasia Ufimtseva, Daniel Shapiro, Jing Li, The conversation (06.05.20)

Despite the G20 commitment to keep foreign direct investment (FDI) and trade going during COVID-19, some countries are placing restrictions on incoming investment. For them, strategic industries like health care are a primary area of concern. How do these measures manifest in practice and why are they being implemented by host countries? While investment screening measures are not new, the scope of their expansion is.

A less direct approach: Amended FDI regulation is problematic under the WTO law

Prabhash Ranjan & Jay Manoj Sanklecha, Financial Express (29.04.20)

India recently amended its FDI policy by subjecting investments from countries with which it shares a land border to screening under the approval route and making them ineligible under the automatic route. The policy doesn’t name China, but it is clear that this aims to prevent opportunistic Chinese investors from acquiring, on the cheap, Indian companies weakened by the Covid-19 crisis. However, China has objected to these changes, arguing that it violates the WTO principle of non-discrimination.

Foreign investment is drying up thanks to COVID-19. But there may be a silver lining

Cristián Rodriguez Chiffelle, Peter Vanham, The World Economic Forum (24.04.20)

- The COVID-19 case has created massive uncertainty in global capital flows.

- Governments might be wise to introduce short-term protections, but they must not be over-cautious.

- The post-crisis winners will open early to foreign investment.

China’s protest of India’s revised FDI Policy: A process of de-globalisation begins opine experts

Huma Siddiqui, Financial Express (22.04.20)

Anticipating greater control of Chinese investors or eventual hostile takeover, the government of India changed the norms of investment from China. The new rule also applies to third party investment if it is funded partly by China.

COVID-19 Affects European Foreign Direct Investment Reviews: New EU Guidance Potentially Heralds Increased Protectionism

JDSupra (22.04.20)

Our European Antitrust, Mergers & Acquisitions, and International Trade & Regulatory Groups examine changes in the way European competition authorities will review foreign direct investment (FDI) during (and potentially long after) the coronavirus pandemic.

- New guidance issued ahead of binding, EU-wide FDI Regulation in October 2020

- Screening system recommended to prevent predatory foreign M&A of strategic assets

- EU governments may use special “golden shares” with additional veto rights to block certain transactions

As global economies dwindle, world wakes up to China’s hostile takeovers amid pandemic

Geeta Mohan, India Today (21.04.20)

As the coronavirus pandemic continues to batter economies across the world, including India and the European Union countries, China is swiftly taking over companies in the dwindling economies.

Keeping an eye on Chinese FDI

Suman Layak, The Economic Times (19.04.20)

As a safeguard measure, the government of India wants to scrutinise FDI originating from China.

NATO warns allies to block China buying spree

Teri Schultz, Deutsche Welle (17.04.20)

Will the financial fallout from COVID-19 make European infrastructure vulnerable to the Chinese government's checkbook? Some experts warn that Europe is already in precarious straits. Teri Schultz reports from Brussels.

EU aims to bar ‘predatory’ takeovers of weakened firms with AFP (17.04.20)

EU trade ministers vowed on Thursday (16 April) to protect strategic European companies weakened by the virus-triggered downturn from “predatory” takeovers.

EU trade chief urges tougher defences against foreign takeovers

Jim Brunsden, Financial Times (16.04.20)

The EU’s trade commissioner has urged countries to toughen their vetting of foreign takeover bids, warning that the coronavirus pandemic had left the bloc’s “strategic assets” vulnerable to acquisition from abroad.

China Is Bargain Hunting—and Western Security Is at Risk

Elisabeth Braw, Foreign Policy (15.04.20)

Beijing could use the coronavirus-induced economic crisis to go on a buying spree. The U.S. and European governments must restrict the purchasing of distressed companies in sensitive sectors.

EU Foreign Direct Investment Screening: Protecting Strategic Assets and Technology During the Corona Crisis

Sophie-Charlotte Fischer, CSS ETH Zurich (15.04.20)

The criticality of medical goods and volatility of European economies resulting from the corona crisis increase the risk of opportunistic acquisitions of strategic assets and technology via foreign direct investments (FDI). The EU Commission and Member States are stepping up the protection of European economies to contain the fallout of the crisis.

Impact of Covid-19 On FDI Regimes

S&R Associates, BloombergQuint (15.04.20)

In the last few years, countries such as the United States have intervened in or blocked proposed foreign direct investment (FDI) transactions to address national security concerns, with a particular focus on China. The Covid-19 pandemic has not only brought healthcare and critical infrastructure into focus from an FDI perspective but has also weakened companies in other sectors and made them eas

MPs summon China-owned firm execs over security concerns

Simon Jack, BBC News (14.04.20)

There are concerns that the Chinese owner of Imagination Technologies has renewed efforts to transfer ownership of sensitive security software to companies controlled by China. Lawmakers worry the coronavirus crisis is diverting attention from controversial technology transfers. The fear is that networks in the UK, Europe and the US could be compromised.