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*Karl P. Sauvant, PhD* *Resident Senior Fellow* *Columbia Center on Sustainable Investment* Columbia Law School - The Earth Institute, Columbia University 435 West 116th St., Rm. JGH 825, New York, NY 10027 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> "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 http://www.works.bepress.com/karl_sauvant/. View this email in your browser <http://us6.campaign-archive1.com/?u=ab15cc1d53&id=c4368c9ccb&e=dd153d6a25> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看： http://ccsi.columbia.edu/publications/columbia-fdi-perspectives. <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=203ab3b122&e=dd153d6a25> *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* <http://columbia.us6.list-manage1.com/track/click?u=ab15cc1d53&id=4d144a6498&e=dd153d6a25> by 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] <#m_-8827157373840132821__edn3> 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] <#m_-8827157373840132821__edn5> 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 policies. 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 http://www.ndrc.gov.cn/zcfb/zcfbl/201503/W020150402620481787669.pdf <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ba0b9a797b&e=dd153d6a25> . [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 http://europe.chinadaily.com.cn/business/2015-12/07/content_22648422.htm <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=fa9f7a60ab&e=dd153d6a25> . *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 (www.ccsi.columbia.edu <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b143b03dc9&e=dd153d6a25>).” 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] *Most recent Columbia FDI Perspectives* <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=0b847cafa0&e=dd153d6a25> - No. 178, Mark Feldman, Rodrigo Monardes Vignolo and Cristián Rodríguez Chiffelle, “The Pacific Rim as a platform for international investment law harmonization,” July 18, 2016. - No. 177, Stephan W. Schill, “Changing geography: prospects for Asian actors as global rule-makers in international investment law,” July 4, 2016. - No. 176, Anthea Roberts and Richard Braddock, “Protecting public welfare regulation through joint treaty party control: a ChAFTA innovation,” June 20, 2016. *All previous FDI Perspectives are available at * *http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/* <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=9292438e95&e=dd153d6a25> *. * *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 Investment Incentives: Trends and Policy Options <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=9b53fefbfd&e=dd153d6a25>” (Columbia University Press, July 2016), which explores the use of incentives by governments worldwide. It discusses efforts at the sub-national, national, and international levels to address the policy and governance challenges that are both driving, and driven by, the use of incentives. As an overall conclusion, this volume suggests that careful investment policies are particularly crucial to guide the strategic and efficient mobilization of public and private resources for improved economic, social and environmental outcomes. Investment incentives may play a useful role, if they are strategically and thoughtfully designed and are based on a robust cost-benefit analysis. - *On November 2-3, 2016*, CCSI will host the eleventh annual *Columbia International Investment Conference*, entitled “Climate Change and 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 Conference’s sessions will address issues including: the rapidly changing (and declining) role of hydrocarbons in the global energy system; how low-carbon strategies can and should be adapted to the development needs of low-income countries; how to manage land use to mitigate climate and environmental impacts and to maximize benefits for development; and the development of new international legal frameworks and global governance to support national-level actions. *Registration is free, but required; for more information, including registration, please check our website <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=d50cb7bf4a&e=dd153d6a25>.* - *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 <http://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=4278cf7f89&e=dd153d6a25> for the schedule and more details. No registration is required. 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