Yet the crisis is also creating buying opportunities in Europe and elsewhere. Past crises saw Chinese firms acquire discounted assets around the globe. However, an opportunistic Chinese buying spree in the wake of the Covid-19 crisis is less likely today, given increased public scrutiny and tools to screen investment in recipient countries. The authors expect Chinese outbound investment to increase during the remainder of the year from a very low base, but a return to boom levels of 2015-2016 levels is unlikely.
Chinese firms are looking for alternative ways to interact with European entities
As acquisitions and other equity investment have become more difficult, Chinese firms are pursuing alternative ways to interact with European entities. Chinese companies have stepped up research and development (R&D) collaborations with EU companies, universities and governments, among other channels. Though most of these partnerships are benign and desirable from a European perspective, some raise important concerns. Problematic cases exist, including those that facilitate the transfer of critical and dual-use technologies to China´s military-industrial complex or contribute to the state’s ability to exert mass control over its population.
Europe needs to get better at identifying problematic tie-ups
As with investment screening, EU leaders need to find solutions that address specific concerns while preserving Europe’s economic openness. The authors argue that scrutiny should be expanded to cover R&D collaborations. Failure to act will invite pushback from key allies and OECD partners, risking costly and unnecessary decoupling. Researchers, whether at companies or universities must understand China’s firms and policies better, to identify and mitigate against risks. Addressing these challenges, MERICS and Rhodium Group give initial recommendations on how to respond.
You can read the full report “Chinese FDI in Europe: 2019 Update, Special Topic: Research Collaborations” online here.