The European Union's push to tighten investment conditions for foreign companies, particularly those from China, has drawn a strong endorsement from a leading economist. Alicia García-Herrero, a senior fellow at the Brussels-based think tank Bruegel, described the new rules as "fair," arguing that they address a long-standing imbalance in how subsidies are treated across global markets.
Speaking in a video interview, García-Herrero said the legislation, which restricts the subsidies that non-EU firms can receive when investing in the bloc, is a pragmatic response to practices that have distorted competition. "For years, European companies have faced rivals backed by massive state support, especially from China," she noted. "The EU is simply saying that if you want to invest here, you have to play by the same rules."
Leveling the playing field
The new framework, part of the EU's broader economic security strategy, targets foreign subsidies that could undermine fair competition in the single market. It requires companies to notify the European Commission of any financial contributions from non-EU governments that exceed certain thresholds. The Commission can then investigate and, if necessary, impose remedies or block the investment altogether.
García-Herrero stressed that the measures are not protectionist in intent. "This is not about closing Europe's doors," she said. "It's about ensuring that the benefits of foreign investment are not undermined by unfair state backing. The EU remains open to investment, but it must be on terms that respect the integrity of the internal market."
The economist's comments come as the EU and China navigate a complex relationship, balancing trade opportunities with concerns over market access and technology transfers. The bloc has been seeking a balanced strategy toward Beijing, aiming to cooperate where possible while protecting strategic interests.
Brussels has also proposed new procurement rules that would favor European bidders in public tenders, another move aimed at reducing dependence on foreign suppliers. These measures reflect a broader shift in EU policy toward economic resilience and strategic autonomy.
García-Herrero acknowledged that some critics worry the rules could deter investment and harm Europe's attractiveness. But she argued that the long-term benefits outweigh the short-term costs. "Investors value predictability and fairness," she said. "If the EU can demonstrate that its market is well-regulated and equitable, that will actually attract more quality investment, not less."
The timing of the legislation is significant, as global supply chains are being reshaped by geopolitical tensions and the aftermath of the pandemic. The EU is also stepping up its scrutiny of foreign takeovers in critical sectors, from semiconductors to infrastructure. Meanwhile, NATO has been monitoring Russian submarine activity near undersea cables, highlighting the security dimensions of economic interdependence.
For China, the new EU rules add another layer of complexity to its investment ambitions in Europe. Chinese firms have been active in sectors such as renewable energy, electric vehicles, and port infrastructure. Under the new regime, they will need to demonstrate that their financing is market-based and not reliant on state aid that could distort competition.
García-Herrero believes the EU's approach is a model for other economies grappling with similar challenges. "The United States has its own tools, but the EU is setting a precedent with a transparent, rules-based mechanism," she said. "This is the kind of framework that can foster trust in the global trading system."
As the legislation takes effect, businesses and legal experts will be watching closely to see how the Commission applies the rules in practice. The first cases are likely to set important precedents, shaping the investment landscape for years to come.
For now, García-Herrero's message is clear: the EU is not turning inward, but it is drawing a line. "Fairness is not a dirty word," she said. "It's the foundation of a sustainable and prosperous economic relationship."
