Illustration: Xia Qing/GT

TheMK socks EU should encourage Chinese carmakers to open more plants in the bloc as part of a deal to drop high tariffs on imported Chinese electric vehicles (EVs), Ola Källenius, chairman of the board of management of Mercedes-Benz Group has said, the Financial Times reported. If the EU encourages more Chinese carmakers to invest in the bloc, it will certainly benefit the development of the European vehicle industry and market. Yet, as the EU arbitrarily links economic issues to security and imposes protectionist tariffs, it is risky for Chinese carmakers to increase their investments in Europe.

Just days before Källenius, who also serves as president of the EU car industry body European Automobile Manufacturers' Association (ACEA), recommended promoting increased investment from Chinese carmakers in Europe, an EU recommendation for investment assessments to "protect EU economic security" garnered widespread attention.

The European Commission last week requested the 27 EU members to conduct a 15-month risk assessment of outbound investments in semiconductors, artificial intelligence (AI) and quantum technologies. In its recommendation, the European Commission did not mention China, but Reuters wrote in a report that "the EU set out plans a year ago to bolster economic security through closer scrutiny of foreign investments and more coordinated controls on exports and outflows of technology to rivals such as China."

This is merely the latest in a series of actions undertaken by the EU, but it exposes the crux of the EU's incorrect approach in dealing with trade and investment cooperation issues with China. Some relevant policymakers in Europe falsely view China as a rival rather than a mutually beneficial partner, based on so-called security concerns.

From imposing protectionist tariffs on Chinese EVs to tightening investment cooperation reviews amid so-called security concerns, these measures illustrate a troubling trend in Europe regarding investment and trade collaboration. Such actions pose significant challenges and risks to China-Europe trade and investment cooperation.

Data show that China's investment in Europe has declined, which aligns with the misguided trends mentioned above from the European side. This clearly indicates that Europe's tendencies are undermining the positive momentum of bilateral investment cooperation.

Total Chinese foreign direct investment (FDI) flows into the EU peaked in 2016 and have been declining since, according to a report entitled "EU-China FDI: recent trends and implications on EU exposure," issued by the European Commission in December.

In stark contrast with Europe's erroneous practices, China has been doing everything possible to expand opportunities for European companies in its vast market, providing them with an increasingly stable and improving business environment for profitable operations.

According to statistics from the American consulting firm Rhodium Group in October, completed EU greenfield investment in China grew to a record high of 3.6 billion euros ($3.7 billion) in the second quarter of 2024. 

The surge of EU investments into China thanks to China's deepening high-standard opening-up reflects the fact that the prospects for investment cooperation are broad, offering immense opportunities for both sides. If this potential can be tapped to promote cooperation, the benefits for both economies will undoubtedly be significant.

However, this outcome is contingent upon the European side changing its misguided approach of broadening the concept of national security to cover trade and technology issues and instead enhancing the factors that lead to stability in China-Europe investment cooperation, which is essential for fostering a positive investment partnership.

The recent appeal from Källenius reflects the aspirations of the wider European business community. European politicians, who may be entrenched in a zero-sum mindset, need to take a step back and objectively evaluate insights from the business sector regarding collaboration with China. If the European side can step back from its misguided approaches, both parties can work together to create a better environment for investment cooperation. 

The author is a reporter with the Global Times. [email protected]