Overall, the tightening of the European regulatory environment is logically perceived as increasingly constraining for China’s business activities. This is made clear in the 2019 and 2020 reports of the China Council for the Promotion of International Trade, a publication titled "Report on the Investment Environment in the European Union" (欧盟投资环境报告).8 The 2019 report starts with a positive assessment of the EU-China investment relationship, before noting a few problems arising from the perspective of Chinese interests in relation to the investment screening system. The criticism points to a lack of predictability in the investment screening process, given that there are no EU standards to determine whether a transaction affects security and public order. This raises the "costs of corporate compliance" (增加了企业合规成本). The survey shows widespread concern. 85.34% of the companies surveyed are concerned that the European screening will lead to unfair treatment (不公平对待) of Chinese investors. The 2020 report reiterates the issue of corporate compliance and focuses on the looming problem of "excessive regulations" as a constraint to Chinese business operations in Europe.
The report recommends moving away from an extensive but unclear approach of security and to adopt instead a "clear and exhaustive review list" (明确而穷尽的审查清单) that would create more predictability. It also recommends, to improve transparency, the creation of convenient communication channels for foreign investors so that they can get a precise understanding of the relevant national policies below the EU level.
In this context, the Chinese analysts also address the scope that remains for future mergers and acquisitions (M&A) deals. Meng Ji'an, a partner of Hawking Luwei International Law Firm, advises Chinese investors to avoid sensitive areas and to focus their European investment on sectors such as retail and fashion. Legal compliance is important, and it is worth considering starting with small companies and start-up firms. Xu Liang, another partner with the same law firm, advises companies to look at Central and Eastern Europe as a good entry point, given that FDI is a less sensitive issue there than in Western Europe.
Further to this approach of focusing on the opportunities that remain for Chinese business expansion in Europe, Leng Shuai argues that "as long as the M&A transaction falls within the scope of legality, its final cost and whether it will be completed or not is not going to be the main concern of the government". Leng Shuai lists the sectors covered in the EU regulation, which invites the Commission and Member States to evaluate the effect of a particular transaction on critical infrastructure, critical technologies and dual-use items ("including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies"), the supply of critical inputs with an impact on energy and food security, access to sensitive information including personal data, but also the impact of the freedom and pluralism of the media.
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