Europe’s resistance to Chinese investment has stalled

{"text":[[{"start":5.9,"text":"As Viktor Orbán departs the lavishly appointed prime ministerial residence in Budapest, the outgoing Hungarian prime minister will leave more than a corrupted and defiled state. He will also bequeath the problem of dealing with a string of Chinese investments in electric vehicles, batteries and rail links, whose production is criticised at home and abroad for low environmental and labour standards and undercutting companies in other EU states."}],[{"start":33.7,"text":"Chinese greenfield outward investment may create jobs and local production and bring invaluable green tech as oil prices soar. But in the US and the EU in particular, some governments struggling to build critical advanced industrial mass and establish independence from a geopolitical rival see Chinese companies as barbarians inside the gates. In the EU, an expanding toolbox of increasingly powerful instruments to manage those incursions is so far proving ineffective."}],[{"start":null,"text":"

"}],[{"start":61.550000000000004,"text":"Foreign direct investment is often seen as a good thing, and a better alternative to imports. American auto protectionism in the 1970s and 1980s created Japanese (and later European) “tariff-jumping”, which involved their companies setting up production in the US and bringing cheaper, better cars to the US car market. But unlike misplaced US worries about Japan as a strategic competitor, handing control to a true geopolitical rival like China is a genuine problem. Although Donald Trump sometimes muses about encouraging Chinese car production to the US, so far he has maintained bans on Chinese auto technology inherited from Joe Biden. He now faces the challenge of Canada and Mexico, fellow signatories to the USMCA trade deal, welcoming Chinese FDI."}],[{"start":null,"text":""}],[{"start":108.7,"text":"The dynamic of a central strategy being undermined by the self-interest of constituent powers is even clearer in the EU. Orbán’s enthusiasm for Chinese investment is almost matched by that of Pedro Sánchez, Spain’s relatively China-friendly prime minister. As Pálma Polyák of the Max Planck Institute in Cologne, who has researched the subject, says: “Europe’s internal divisions undermine its ability to respond strategically and secure a favourable position in an emerging global green division of labour.”"}],[{"start":null,"text":""}],[{"start":140.1,"text":"All this leaves European Commission president Ursula von der Leyen casting around for effective tools to construct a geopolitical EU. Brussels has tried to reduce Europe’s dependence on China, so far without much effect. "}],[{"start":154.15,"text":"In 2024, the Commission attempted to manage Chinese import penetration of the EU EV market by imposing an array of carefully calibrated anti-subsidy duties. The tariffs were agreed only after a bruising battle between member states, with Germany sceptical because of its own position in the Chinese market."}],[{"start":171.65,"text":"Noah Barkin of the Rhodium Group consultancy says the strategy has widely been accepted as a failure: “It took over a year, it was hugely divisive, it wasn’t prohibitive for Chinese carmakers and there was retaliation from Beijing,” he says. Indeed, Barkin says recent Chinese investment in the EU has been tempered by the realisation they can still export to Europe from elsewhere."}],[{"start":193.15,"text":"Moving from trade to investment, the Commission created the foreign subsidies regulation. This is in theory a very powerful tool authorising invasive investigations into market-distorting state handouts received by foreign companies operating in the EU. But after an initial flurry of investigations in 2024, including dawn raids of a Chinese security scanning company called Nuctech, the investigations are going slowly and without dramatic findings. The Nuctech case took more than 18 months to proceed to a full investigation. In March 2025 the Commission opened its most high-profile case, into the Chinese car company BYD and its Hungarian investment, but with no decisions yet. One of the few FSR cases to complete involves an energy company from the United Arab Emirates, which ended up making some fairly modest adjustments to comply."}],[{"start":246.35000000000002,"text":"The newest set of tools to regulate FDI, the Industrial Accelerator Act, is more invasive yet. But again the enthusiasm among some commissioners has run into strong opposition from member states."}],[{"start":260.6,"text":"It’s an open question how much, and how, a trading bloc like the EU should try to build autonomy from China. It’s clearly a long way from having the political will to do so. Von der Leyen’s “geopolitical Commission” remains aspiration rather than reality."}],[{"start":283.85,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777021979_1032.mp3"}