China Policy Update

CEINEX, together with its partners, informs you on current policy and regulatory changes in the Chinese capital markets or related topics.

For more information on the Chinese capital markets please also refer to CEINEX Newsletter

Dentos 

Germany takes another step to tighten its controls on foreign direct investment

 

Join the Webinar

“Changes and impact of Foreign Direct Investment regulations – a cross-border view between China and Germany”

on 28 May 2020, 10.30-11.30 CEST/16.30-17.30 CST 

Panelists

Kaiming Cai, Senior Partner, Dentons, & Deputy Director Expert Committee Trade and Economics, CCPIT

Dr. Helen Liang, Executive Board Member - Head of China Desk, Hauck & Aufhäuser

Dr. Julia Pfeil, Partner Public Policy and Regulation, Dentons

Niels Tomm, Co-CEO, Ceinex (Keynote)

 

Moderators

Robert Michels, Managing Partner, Dentons

Sascha Dettmar, Corporate Communications, CEINEX

In terms of level playing field engagement in international cooperation, governments are seeking different measures. The German Foreign Trade and Payments Act—to be put in place this summer—is one of these policies. Who is affected by the decision? What does it mean in detail?

Learn more in the China Policy Update provided by Dentons and China Europe International Exchange (CEINEX).

 

What has happened?

On 09 April 2020, the German government introduced a draft bill in German Parliament, the Bundestag, to further tighten German controls on foreign direct investment. The draft bill was introduced earlier than planned, and it is expected that Parliament will pass the draft this summer. Once the draft has been adopted, the Government can then update respective regulations to make the new rules effective in practice.

 

The new German rules are designed, amongst others, to implement the new EU-wide framework for the screening of foreign direct investments in the EU. This new EU framework entered into force in April 2019 and becomes applicable as of October 2020. However, the new German rules will go beyond the EU framework and will allow the German government to restrict foreign direct investments in Germany to an even greater extent.

 

What does this mean?

 

Germany already maintains controls for investments in the German defense and IT security sector and for investments in companies active in sensitive industries. Investments in

 

companies from all these sectors must be notified to the German government. If the government intends to review (and potentially restrict) an investment in a company active in a sensitive industry, under the current system the government must show that the investment constitutes a real threat or an actual danger to German national security.

 

This threshold for investments in companies active in sensitive industries will be lowered: Once the new system becomes effective, the German government only needs to show an “expected impairment” compared to currently a “genuine and sufficiently serious threat” to

 

German national security if it wants to review and potentially restrict a transaction. In addition, the government will be able to control investments in German companies if these may impair the national security of another EU Member State or programs of European Union interest (e.g. EU-sponsored research initiatives).

 

This amendment will provide the German government with a larger margin of discretion for reviewing and interfering with foreign investments in Germany. Already under the current system there is a trend to apply the rules very broadly. While the new rules will make it easier yet for the government to pursue this policy, investments even in sensitive sectors can be successful if thoroughly prepared. All in all, we still expect to see more cooperation on the global scale and especially between China and Europe.  

 

In case of any further questions, please contact:

 

Mr. Robert Michels                             Mr. Sascha Dettmar

robert.michels@dentons.com           sascha.dettmar@ceinex.com

+49 69 450012388                             +49 69 247415966

Dentons LLP                                      China Europe International Exchange (CEINEX)

 

Frankfurt am Main, Germany

May 2020

Source: XINHUANET, December 18, 2018

 

Part Three

Cooperation in Trade, Investment, Connectivity, and Fiscal and Financial Fields

Leverage mechanisms such as the China-EU Economic and Financial Dialogue and the Working Group between the People's Bank of China and the European Central Bank to maintain close communication on major international economic and financial issues. Support greater two-way openness of the financial sector and advance cooperation on cross-border financial infrastructure connectivity. Promote cooperation between financial institutions, including cooperation with multilateral financial institutions, and between businesses, maintain steady development of the financial sector, deepen communication and dialogue between the financial regulatory bodies, enhance mutual regulatory recognition and trust, and actively address appeals from banks on both sides for cross-border operations.

 

Financial institutions from EU member states are welcome to enter the Chinese market. China hopes that the EU will support Chinese financial institutions in setting up institutions in Europe and expand access channels for Chinese policy financial institutions to do business in the EU. Support CEINEX in becoming a platform for offshore trade in RMB-denominated financial products, risk management and asset allocation. China encourages EU member states to issue RMB bonds in China and offshore RMB bonds in major global financial centers. China hopes that the EU will exercise caution when introducing the Intermediate Parent Undertaking requirement to safeguard the sound development of the financial cooperation between the two sides. Full Text

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Source: Xinhua, March 13, 2018

 

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Source: Xinhua | Updated: 2018-02-28 17:12

 

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The German government also maintained a relatively open attitude, saying that the purchase was a business matter and Germany is "an open economy that welcomes investments." More

Source: Xinhua| 2018-01-24 23:41:23|Editor: Lifang

 

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