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[BRUSSELS] European leaders will resist French President Emmanuel Macron's call to curb foreign takeovers in strategic industries, agreeing only to scrutinise investments but not consider a new EU law against them, four senior diplomats said on Wednesday.
While state-owned ChemChina's US$43 billion purchase of Swiss farm company Syngenta deepened concerns that Europe was ceding control of its advanced technology, many EU governments are too reliant on Chinese investment to limit Beijing's reach, the diplomats said.
"I don't think blocking Chinese investments is on the cards," one senior EU official said of the two-day summit in Brussels from Thursday, where leaders are set to discuss Mr Macron's ideas for a so-called protective Europe that limits what many French see as damaging aspects of globalisation.
Mr Macron, at his first EU summit since winning power in May, wants to make good on his election call for an EU mechanism to control foreign takeovers of important industries.
He has found support from Germany and Italy. Berlin, Paris and Rome are upset that the European Commission, the bloc's competition regulator, approved China's purchase of Syngenta, Beijing's biggest overseas sale to date, at a time when China maintains restrictions on foreign investment.
Chinese direct investment in the European Union jumped by 77 per cent last year to more than 35 billion euros (S$54.1 billion), compared to 2015, while EU acquisitions in China fell for the second consecutive year, according to the Rhodium Group.
"Europeans must understand that their mission is to regulate globalisation, being open but also very firm when competition is unfair," said a French presidency official.
But smaller European countries dependent on Chinese investment such as Hungary and Greece, where China has a majority stake in the country's main port, reject any steps against Beijing, going as far as to block EU statements criticising China's human rights record.
The French official acknowledged that some EU states were not prepared to let an EU institution take decisions for them. "About half of member states already have their own domestic legislation on foreign investment. We're not ready for a European system yet," the French official said.
Free-trade advocates such as Sweden also want to avoid any measures that might contradict the bloc's rejection of the protectionism promoted by US President Donald Trump.
In a compromise, EU leaders will agree to "examine ways to identify and screen investments from third countries in strategic sectors" according to a draft summit statement, which the French official said was already progress.
They will also stress the need for "respecting member states competences", EU code for limiting the power of the Commission.
One EU diplomat said that the summit declaration would essentially mean agreeing only to ask the Commission to provide guidelines on foreign takeovers. "We don't expect any legislative proposals," the diplomat said.
The issue highlights broader tensions with China, the EU's second-largest trade partner. Beijing is seen as an ally in the fight against climate change and Brussels welcomed President Xi Jinping's call for free trade at a speech in Davos in January.
But an EU-China summit in Brussels this month failed to agree a joint statement for the second year running, a diplomatic embarrassment as both sides disagreed over China's global trading status and whether Beijing should face harsh EU duties against low-cost exports.