Is the China-effect real? Ideational change and the political contestation of Chinese state-led investment in Europe

Abstract

Chinese outwards investment is increasing in its relevance for the global economy; and its effects on host states are increasingly being scrutinized within International Political Economy discussions. While policy-making was ambiguous about the question of hosting Chinese state-led investment in the early 2010s, we can observe a recent surge of protectionist legal measures across Europe. What explains this trend among different European countries? Through the lens of incremental ideational change, we hypothesize that the rise of China as a global investor shifts the perceptions of policy-makers away from being a source of investment towards questions of national security. We argue that this postulated China-effect affects advanced European economies similarly. We provide evidence by studying the shift inperceptions among policy-makers in a coordinated and a liberal market economy, Germany and the UK. By drawing on document analysis and expert interviews, we unpack the policy processes in both countries in the last decade. Despite being two dissimilar cases, both show a similar outcome in increasingly rejecting Chinese state-led investment on the grounds of national security reasons. Our results add important insights to recent discussions on the ‘geopoliticization’ of European trade and investment rules in the face of a rising China.