Leaders from Washington to Brussels are increasingly troubled by the flood of Chinese money seeking acquisitions abroad, and asking themselves how best to respond. The answer is: more carefully.
The US has a federal panel, created more than four decades ago, that scrutinizes foreign investments for national-security implications, but it isn’t adequate to the task. The European Union’s current arrangements are even less satisfactory.
It openly aspires to build up both its military and national champions in industries of the future—partly by acquiring advanced Western technology. It has more money than any other country to apply to this goal: Its companies vastly increased their investments in the US and EU last year, to $46 billion and $42 billion, respectively, and its government maintains close ties even to ostensibly private firms.
As a matter of policy, this push is notably one-sided: Tight restrictions apply to inbound investment, including requirements to share intellectual property. Above all, unlike previous rising economic powers, China is neither an ally nor a democracy.
The range of security concerns is growing. Many advanced civilian technologies now lend themselves to military application. Even companies with no apparent connection to security issues may control a wealth of customer information that could be of great interest to Chinese spy agencies.
To be sure, Western governments shouldn’t overreact—as happened when Japan launched its own buyout spree in the 1980s.
But regulators do need to broaden their scrutiny so that it more fully embraces sensitive technologies, cybersecurity and big data.
The EU needs a similar mechanism, with a similarly broad purview. And as far as possible, Europe, the US and their Nato allies should coordinate their efforts.
This broader approach won’t please Beijing—but it needn’t be a cause for alarm, and it shouldn’t be seen as a provocation. China should do the same. Two-way flows of investment that facilitate competition and commerce are win-win. Efforts to attend more carefully to security concerns are needed—but that vital truth should never be obscured.