Eu considers mandatory technology transfer for chinese investments!

The EU Trade Commissioner and the Danish Foreign Minister stated that the EU is considering setting prerequisites for Chinese companies investing in Europe, including technology transfer and the transfer of know-how. This is a new initiative aimed at enhancing the competitiveness of EU industries.

Bloomberg, citing knowledgeable sources, reported that the sectors involved include key digital industries and manufacturing, such as automobiles and batteries. The EU will also require investment enterprises to use a certain amount of EU goods or labor and increase the value of products within the EU. Sources also indicated that although these rules, expected to be implemented in November, will technically apply to all non-EU enterprises, their aim is to prevent the strength of Chinese manufacturing from overwhelming European industry.

Reuters reported that the European Commission is expected to submit a comprehensive report on this issue by the end of the year. Danish Foreign Minister Lars Rasmussen stated that many Europeans believe that as long as they follow the rules, they can be winners. He mentioned that the EU should learn from the experiences of the United States and China in setting conditions.

"If we invite Chinese investors into Europe, it must also be based on some form of technology transfer," he said. "I don't think we have completed this discussion yet, but we are facing a new situation."

Foreign investment must be accompanied by technology transfer?

The European economy continues to be sluggish, with weak growth and lackluster investment. Germany, the largest economy in Europe, is showing weak performance. As various industries across Europe seek ways to protect their business models, lobbying groups are urging the European Commission to consider taking stringent measures in response to China's technological advantages in certain fields.

Bloomberg quoted Victor van Hoorn, the director of a European clean technology industry organization, as saying, "Foreign investments, such as in batteries and other clean technologies, must be accompanied by technology transfers and skills training for the European workforce. This needs to be agreed upon at the EU level."

Disputes and Challenges

Once these proposals are implemented, they will face numerous legal, political, and commercial challenges.

Foreign Companies' Rebound and Investment Intentions Impact
For investors, technology transfer may mean losing a competitive edge and a high risk of intellectual property leakage. This could lead some Chinese companies to reduce their willingness to invest in Europe or to establish more complex legal structures to circumvent these issues.

International Trade and WTO Rules Issues
Forced technology transfer may violate the principles of "non-discrimination" and "non-compulsory transfer of intellectual property" in WTO or bilateral investment agreements. The Chinese side has expressed opposition to this practice, considering it to have a serious protectionist nature.

Operability issue
How is the extent of "technology transfer" or "intellectual property sharing" defined? What technologies are to be shared? Is it fundamental proprietary technology, product design, software, or production processes? All of these need to be very precisely specified in the legal text.

The difficulty of policy unification and coordination among member states
The sensitivity of EU member states to foreign investment policies varies. Some countries welcome foreign investment even with conditions, while others are more conservative. If a policy is proposed by the European Commission, it still requires the support and legislative cooperation of the member states.

Affect bilateral relations and diplomatic risks.
The economic and political relations between Central Europe and China may experience friction due to this policy. The Chinese side may perceive it as unfair or discriminatory.

The impact on Chinese enterprises.

If such policies are implemented, they may have the following impacts on Chinese companies, especially those planning to invest in Europe or already investing in the automotive/battery/manufacturing sectors:

It is necessary to assess technology transfer obligations at an early stage of entering the EU market and make appropriate arrangements for possible intellectual property protection and contracts.

The investment structure may need to be adjusted, such as establishing a joint venture or setting up a research and development center/production base in Europe to meet local value-added or technology sharing requirements.

Cost increase: In addition to the investment costs themselves, it is also necessary to consider transfer costs, legal, compliance, and potential compensation or intellectual property risks.

Compliance risks and transparency requirements are higher: there may be demands to disclose the sources of technology, approval processes, product value-added data, and the use of intellectual property.

Stricter review and approval processes may affect project timelines and return on investment forecasts.