The European Union is raising industry defences through a crackdown on Chinese investments and new boost to competitiveness

Translated by Martina Ravasi

The European Union is accelerating the establishment of its own strategic industrial policy, whose aim is to reinforce the competitiveness of European companies and reduce dependency on third countries. At the core of debates there is the Industrial Accelerator Act (IAA), presented last March by the European Commission. The aim is to support industrial capabilities and decarbonize strategic sectors.

Debates are now becoming increasingly relevant regarding China. Indeed, speakers from the European Parliament have proposed cracking down on conditions for direct foreign investments in those sectors where Beijing has a dominant global position. These sectors include electric vehicles, batteries, solar panels and critical raw materials. The threshold for having investments controlled would be reduced from 100 to 50 million euros.

For those investors coming from countries holding more than 40% of the global market in a specific sector, the European Parliament has very strict conditions to impose – a 49% maximum participation, as well as the obligation to establish a joint venture with a European partner, the technology transfer and the employment in the EU of at least 60% of the workforce. Additionally, investors must allocate at least 1% of their incomes in research and development in Europe and they must buy at least 30% of manufacturing components from European suppliers.

Furthermore, the parliamentary proposition includes some sectors – such as wind energy, electrolyzers and heat pumps. At the same time, it introduces more severe criteria for the access to public tenders and support programs. The aim is to privilege made-in-the-EU products and subordinate a potential opening to third countries in conditions of reciprocity.

Against this background, IAA is much more than a defensive tool. Indeed, the Commission aims to reinforce the European industrial basis, as well as accelerate the transition towards low-emission production and encourage the creation of lead markets for technology and sustainable products. The focus is addressed to specific sectors – steel, aluminium, cement, batteries, as well as the solar sector and sustainable chemistry.

Italy is concerned too, since it may benefit from a European framework where low-emission industrial productive chains are valued. For instance, let's take the Italian steel sector, where a large amount of steel is taken from scrap-fed electric ovens. Therefore, the adoption of European standards in favour of sustainability could reinforce the competitiveness of Italian companies.

However, the issue of financing keeps unsolved. If the EU wants to compete with the US and China, new guidelines must be balanced with adequate investments. According to the very first analyses, financial resources that have been currently planned still seem to be limited comparing to the needs for this challenge.

The crackdown on Chinese investments marks a potential change of paradigm. Indeed, we're shifting from a traditional opening of the European single market to a new policy opting for technological sovereignty, supply chain security and strategic autonomy. The text of this policy is still to be voted by the European Parliament and afterwards it will be negotiated with member States. Against this background, the message for Beijing is clear. The EU wants not only to defend its own market but also to rebuild its industrial capability within its borders.

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