*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
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"How international Investment Agreements can Protect Free Media", "China,
the G20 and the International Investment Regime", "The Evolving
International Investment Law and Policy Regime: Ways Forward", "China's
Outward FDI and International Investment law", "Policy Options for
Promoting FDI in the LDCs", and “The Negotiations of the United Nations
Code of Conduct on Transnational Corporations: Experience and Lessons
Learned” *are* available at

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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 179  August 1, 2016
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Daniel Allman ([log in to unmask])
*Chinese FDI in the EU: learning from the renewable energy sector*
Francesca Spigarelli and Ping Lv* * <#m_-8827157373840132821__edn1>*

The European Union (EU) and China have very different depths of experience
in relation to clean energy, and they have developed different approaches
regarding this theme. To promote a greener energy mix, including solar,
wind, biomass, and hydropower, Europe relied on consumption incentives,
while China pushed production subsidies and massive public investments.

Recently, Chinese foreign direct investment in the EU is helping to
integrate the Chinese and EU renewable energy industries and is playing an
important role in addressing economic and technological challenges in that
sector. As the EU has become comparatively weak in attracting global
investment flows after the world economic crisis, China’s willingness to
invest in Europe is an opportunity to support key industries—that is, while
China continues to need Western markets, European expertise and advanced
technologies regarding renewable energy are still a benchmark in this area.

From 2004 to 2013, 135 Chinese firms undertook 208 renewable energy
investment initiatives in the EU.[1] <#m_-8827157373840132821__edn2>
Greenfield investment was the preferred mode of entry in terms of numbers,
and investors were mostly private companies. Market seeking was not the
only, but was by far the prevailing motivation. As a result of overcapacity
at home, Chinese firms looked for Western markets, thereby compensating for
price pressures and reduced margins in China. Less frequently, they opened
research-and-development centers in areas in which advanced technology and
know-how were available. Seldom did they build manufacturing capacity.[2]

Investments exhibited a high geographical concentration. Seventeen EU
members were target destinations, but more than 40% of investments were
located in Germany. Other popular host countries were Bulgaria, Luxembourg
and Italy. Chinese investors hailed from 19 provinces, but around 30% of
them were from Jiangsu.

Generally, EU members with a poor institutional environment attracted
investments only from Chinese provinces with poor institutions.[3]
<#m_-8827157373840132821__edn4> On the Chinese side, the extent and
direction of investments were affected by the home province’s supportive
measures for renewable energies. Naturally, the level of development of the
internal renewable energy sector was an additional determinant. On the EU
side, the quality of the renewable energy industry (as in the case of
Germany, the leader in related technology) and the availability of generous
consumption policies seemed to attract investors.[4]

These trends have tremendous policy implications, both in geopolitical
terms and for the ongoing negotiations of an EU–China bilateral investment
treaty, as well as for the formulation of EU members’ investment promotion

To secure benefits from cooperation, the EU needs to play a more assertive
role when discussing the terms of the investment framework with China,
mostly with reference to reciprocity, impact and sustainability.

Reciprocity is still missing. The recently amended Chinese *Catalog of
Industries for Guiding Foreign Investment* confirms an abundant number of
restricted or prohibited industries, well beyond the sensitive sectors.[5]
<#m_-8827157373840132821__edn6> The EU’s reaction through restrictions (as
in the solar panel antidumping case)[6] <#m_-8827157373840132821__edn7> is
extremely weak. Indeed, this is also due to the considerable internal
division within the EU.

Leveraging the interest of Chinese investors in Europe, the EU should
address the impact of Chinese investments on local industries, in terms of
relations with stakeholders, local supplier connections and labor-market
trends. Provisions aiming at ensuring appropriate and fair corporate
behavior, as well as clauses to commit to environmental protection, should
be prioritized.

Promotion policies by EU members should be based on an understanding of the
type of institutional environment and the level of industrial development
of Chinese provinces. EU investment promotion agencies might “customize”
measures and leverage similarities in the quality of institutions or
complementarity of industrial systems. They might selectively develop
services to assist investors from institutionally challenged provinces.

One last point, which cannot be ignored, is the Clean Development Mechanism
(CDM). As China has sometimes associated the regulated business of CDM with
its foreign investment projects, the new structure and mechanisms of the
international carbon market could play a critical role in shaping the
future of Chinese investments in the EU energy sector. Indeed, during
COP21, China publicly committed to strengthen cooperation with the EU to
build the new carbon market.[7] <#m_-8827157373840132821__edn8>

* <#m_-8827157373840132821__ednref1> Francesca Spigarelli (
[log in to unmask]) is Director of the China Center, University of
Macerata, Italy; Ping Lv ([log in to unmask]) is Associate Professor at the
School of Economics and Management, University of Chinese Academy of
Sciences, China. The research leading to this contribution was supported by
the People Programme (MarieCurieActions) of the 7FP European Union
FP7/2007-2013/ under REA GA 318908 and the National Natural Science
Foundation of China (n. 71002082, 71472173). The authors are grateful to
Filip de Beule, Louis Brennan and Ana Tavares for their helpful peer
reviews, as well as to Federico Boffa. *The views expressed by the authors
of this Perspective do not necessarily reflect the opinions of the European
Union, or of Columbia University or its partners and supporters. Columbia
FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.*
[1] <#m_-8827157373840132821__ednref2> Ping Lv and Francesca Spigarelli,
“The integration of Chinese and European renewable energy markets: The role
of Chinese foreign direct investments,” *Energy Policy*, vol. 81 (2015),
pp. 14-26.
[2] <#m_-8827157373840132821__ednref3> Ping Lv and Francesca Spigarelli,
“The determinants of location choice: Chinese foreign direct investments in
the European renewable energy sector,” *International Journal of Emerging
Markets*, vol. 3 (forthcoming 2016).
[3] <#m_-8827157373840132821__ednref4> Ping Lv and Francesca Spigarelli,
op. cit., 2015, p. 21.
[4] <#m_-8827157373840132821__ednref5> Usha C.V. Haley and Douglas A.
Schuler, “Government policy and firm strategy in the solar photovoltaic
industry,” *California Management Review*, vol. 54, 1 (2011), pp. 17-38.
[5] <#m_-8827157373840132821__ednref6> National Development and Reform
Commission, Ministry of Commerce, China, “Catalogue of Industries for
Guiding Foreign Investment (2015 Amendment),” Policy No. 22 (2015), Chinese
version available at
[6] <#m_-8827157373840132821__ednref7> *Case AD590 - Solar panels
(Crystalline silicon photovoltaic modules and key components)*, Initial
Investigation, Art. 5, European Commission, initiated Sept. 6, 2012.
[7] <#m_-8827157373840132821__ednref8> Xinhua, “China to accelerate
construction of carbon market: Xie Zhenhua,” *China Daily Europe* (Dec. 7,
2015), available at

*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Francesca Spigarelli and Ping Lv, ‘**Chinese FDI
in the EU: learning from the renewable energy sector**,’ **Columbia FDI
Perspectives, No. 179, August 1, 2016. Reprinted with permission from the
Columbia Center on Sustainable Investment (
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at [log in to unmask] <[log in to unmask]>. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Daniel Allman, [log in to unmask]

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*Other relevant CCSI news and announcements*

   - CCSI's Perrine Toledano, Lise Johnson and Lisa Sachs, together with
   Ana Teresa Tavares-Lehmann, have edited a volume entitled “Rethinking
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   - *On November 2-3, 2016*, CCSI will host the eleventh annual *Columbia
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   Sustainable Investment in Natural Resources: From Consensus to Action.”
   Both the Sustainable Development Goals and the Paris Agreement, reached
   last December at COP21, make clear that climate-change mitigation must be
   pursued within the broader agenda of ending poverty, promoting economic
   development, ensuring social inclusion, and protecting the physical
   environment. Our Conference, taking place one week before COP22, will offer
   a high-level opportunity to explore the complex challenges of the Paris
   Agreement in light of sustainable development, the SDGs, and the real
   challenges facing developing countries within the global economy. The
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   more information, including registration, please check our website
   - *In September*, CCSI will launch its* Fall 2016 International
   Investment Law and Policy Speaker Series*. We’re delighted to announce
   that this year’s speakers include Maria Chedid, Freddy Sourgens, Stanimir
   Alexandrov, Gabrielle Kaufmann-Kohler, Gabriel Bottini, Allan Rosas and
   Mark Wu. This fall, the series will once again be co-sponsored by Crowell &
   Moring LLP, Baker & McKenzie LLP and Investment Claims. The series will be
   moderated by Ian Laird, Grant Hanessian and Kabir Duggal. All talks will
   take place in Jerome Greene Hall. Select presentations will be webcast;
   please see our website
   the schedule and more details. No registration is required.

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