The EU’s Foreign Direct Investment Screening Framework: Current Status and Future Implications

The EU framework for FDI screening came into full force in 2020. In critical and strategic areas such as infrastructure, energy, cutting-edge tech, data and cyber security, finance, raw materials, media, and EU-funded projects, it was intended to prevent high-tech leakages and protect EU companies’ existing and future profits against rapidly emerging external investment and following intervention. Inward FDI screening is not a quite new approach in the EU. Before this EU-level framework introduction, 14 EU member states already screened FDI inflows in their domestic markets. Now, the member state-level screening work has been expanded to the EU level for common and unified action. Although the EU insists that its financial markets remain open to foreign investment and the framework is a supplementary mechanism for the member states’ national-level regulation, the introduction of the FDI screening framework lies between protectionism and openness. This article describes an investigation into how the EU’s inward FDI, which is represented by Chinese state-owned enterprises, threatened and intervened in EU companies. China’s emergence in the EU market, its aggressive acquisition of critical industries, and its related national security issues are addressed. Also, by reviewing potential concerns about the framework, this article suggests the possibility of ever-closer cooperation or division between member states.