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Its scope is deliberately limited to foreign direct investments exceeding EUR 100 million in:

• batteries and their value chain for energy storage;
• electric vehicles and components linked to electrification and digitalisation;
• solar photovoltaic technologies;
• the extraction, processing and recycling of critical raw materials.

Yet in all four of these segments, the industrial reality is documented. China today controls more than 83% of global battery cell manufacturing capacity, and more than 80% of photovoltaic module manufacturing across the entire value chain.

These dependencies expose the Union to structural risks, which China's recent restrictions on the export of critical materials — rare earth magnets, anode materials, lithium refining technologies — have illustrated very concretely.

The text therefore does not close the European market to Chinese investors. It redraws the legal framework within which future Sino-European partnerships will have to be structured.

From a logic of risk to a logic of value

What distinguishes this text from existing foreign investment control mechanisms is its legal basis. Regulation (EU) 2019/452, currently in force on the screening of foreign investments, is based on a logic of security and public order: it allows an investment to be blocked or conditioned when it poses a risk to essential State interests.

The IAA introduces a complementary and different logic. Investment is no longer assessed solely according to the danger it represents, but according to the industrial value it brings to the Union: skilled jobs, localised research, shared technology, local sourcing.

Here, the Commission explicitly draws a lesson from the Chinese experience. The Impact Assessment accompanying the Commission's proposal recalls that China, for decades, conditioned access to its market on requirements relating to technology transfer, joint ventures under Chinese control, localisation of R&D and local sourcing — and that these conditions enabled its industries to move up the value chain while absorbing foreign know-how.

The two regimes coexist and overlap. A Sino-European partnership could therefore meet the security requirements of the 2019 Regulation and nonetheless be blocked or conditioned under the IAA for lack of sufficient industrial contribution.

The six conditions: what future Sino-European partnerships will have to demonstrate

From twelve months after the entry into force of the Regulation, the competent national authorities will only be able to approve the investments concerned if they find at least four out of the following six criteria — one of which is mandatory.

The anti-circumvention clause

The text provides for a provision aimed at preventing avoidance strategies. The competent authorities could apply all or part of the mechanism to an investment carried out in the Union by a European subsidiary of a foreign investor, where circumvention is established or where no less restrictive measure is available. The interposition of a pre-existing European structure will therefore not, under the IAA, constitute sufficient protection.

What this changes for European companies that have chosen China

For European companies that already have Chinese partners, or that are currently negotiating a JV in one of the covered sectors, the practical implications are immediate.

The governance of the JV will have to be rethought. The 49% limit imposed on the Chinese investor presupposes that the European partner will hold formal majority control. But above all, it will have to exercise real participation in management and in strategic decisions. For European companies accustomed to playing a passive role in their JVs with Chinese players — bringing market access or an operating licence, without operational involvement — this represents a substantial change of position, which also requires a rise in capabilities.

Intellectual property will become a central issue from the negotiation stage onwards. The ownership regime for IP — prior, concurrent and future — will have to be structured carefully. Provisions on licences, exclusivity conditions and the allocation of rights over collaborative developments will become structuring clauses of the JV agreement.

Local employment and R&D will become contractual and regulatory obligations. The requirement for predominantly local, continuous and verifiable employment transforms what had until now been a matter of good practice into an enforceable legal requirement. The same applies to R&D: its volume, localisation and scope will have to be documented.

The future IAA framework also constitutes a lever for companies currently in negotiation. It justifies requiring, from now on, a deeper anchoring of the Chinese partner in Europe, more balanced governance, and a more rigorous structuring of rights over technology.

A text still under discussion, but a direction already clear

The proposal must be examined by the European Parliament and the Council. Adjustments are likely regarding the definition of thresholds, the exact scope of the covered sectors, and the modalities of application of the anti-circumvention clause. Some Member States may argue for greater flexibility, particularly those that have the most to gain from attracting foreign industrial investment to their territory.

But the direction has been set, and it is clear enough for companies that are currently structuring partnerships with Chinese players in the battery, photovoltaic, electric vehicle or critical raw materials sectors to integrate it — without delay — into their strategic and contractual thinking.