Chinese Outward Direct Investment in Europe and the control of the global value chain

This article will adopt a long term perspective on the possible evolutions of the respective role of China and Europe in the global division of labour and in international trade. The rise of emerging economies through their insertion in the global value chain, particularly of China since its accession to the WTO and the adoption of its “Going Global” strategy, has generated strong reactions by the US and European firms that are trying to keep control on international production networks by holding their advance in innovation capacities and global management know-how. This has generated the development of specific EU policies, notably the adoption of the Lisbon and Europe 2020 strategies to transform the EU into a “knowledge-based” economy. The Chinese leadership has been pursuing an active industrial policy to enable its national champions to move up the value chain and challenge the European incumbents. In that context, Chinese authorities have been fostering strategic-assets seeking ODI by Chinese firms in the EU to capture technology and management know-how by taking over European enterprises weakened by the crisis. This new challenge affects very differently the various EU member states as some of them are well under their way to meet the Europe 2020 targets necessary to transform themselves into knowledge-based society while others are stagnating or even declining in terms of innovation capacities, sometimes falling behind China. This article will also assess the relative technological decline of some Member states and show how this situation threatens their future capacity to find a sustainable place in the international division of labour that is being reshaped by the upgrading of China’s technological knowledge