The European Union may beef up a plan to screen foreign investments as China’s pursuit of acquisitions abroad fosters political unease in the bloc, according to a key EU lawmaker.

Franck Proust, a French member of the European Parliament, said the assembly and EU governments may reach an agreement by year-end on the first bloc-wide rules meant to prevent foreign direct investments from threatening national security.

Proust is leading the EU Parliament’s deliberations over an investment-screening law proposed in September by the European Commission, the 28-nation bloc’s regulatory arm. The draft legislation needs more teeth to ensure Europe keeps strategic industries in its own hands, he said.

“It is timid,” Proust, who belongs to the Christian Democrats, the EU Parliament’s largest group, said in a March 1 interview in his 13th-floor office in Brussels. “We want to be more ambitious and go very fast in the approval process.”

Concerns are mounting across the western world over national-security risks tied to foreign investment, particularly by China. Last year, U.S. President Donald Trump blocked a Chinese-backed investor from buying Lattice Semiconductor Corp. as a result of national-security worries and Germany moved to shield cutting-edge technologies after a bid by China’s Midea Group Co. for robot maker Kuka AG prompted an outcry.

This trans-Atlantic view contrasts with EU displeasure over Trump’s protectionist stance on trade, including a controversial plan to impose tariffs on foreign steel and aluminum, a position that has aligned Europe with China and highlighted global geopolitical cross currents.

Question Marks

In Europe, the question marks over Beijing’s policy intentions are compounded by its controversial Belt and Road Initiative to upgrade infrastructure worldwide, its Made in China 2025 plan to promote manufacturing prowess and a deadlock in talks on an investment accord to scale back Chinese market barriers for EU-based businesses.

Amid that stalemate, Chinese acquisitions in Europe have remained strong—with the latest high-profile transaction being the purchase by billionaire Li Shufu of almost 10 percent of Daimler AG—while European investment in China has fallen.

“The Chinese aren’t advancing anymore in hidden fashion, they are advancing openly,” Proust said. “There are strategic sectors where they want to be masters of the world by 2025. We know that.”

The draft European legislation would stop short of handing the EU the kind of decision-making clout over foreign investments enjoyed by the White House, reflecting the political sensitivity in Europe of encroaching on national sovereignty. Instead, the commission proposal foresees a combination of data collection, information exchange and peer pressure to create a European “cooperation mechanism” in this area.

Alert Mechanism

The proposal would create a centralized database of past foreign investments in Europe and an alert mechanism for future ones without taking the ultimate power of approving deals away from individual EU governments. The goal is to limit foreign threats to “critical infrastructure,” including in the energy, transport, communications, data, space and financial industries, and to “critical technologies” such as semiconductors, robotics and artificial intelligence.

Proust said he wants to bolster the draft law in three key ways:

  • Require an EU government to come up with an alternative arrangement when a planned foreign direct investment in that country is opposed by the Brussels-based commission and by at least nine member nations (the commission’s proposal would do no more than force EU capitals to take “due consideration” or “utmost account” of reservations elsewhere in the bloc)
  • Widen the list of strategic industries to include aeronautics and media
  • Give the EU Parliament the right to order commission screening of particular cases

Proust said he might also introduce language in the draft law to ensure that EU governments heed their obligation to share information on foreign-investment projects that end up being subject to the cooperation system.

EU national governments, once too divided over the merits of European legislation on scrutinizing foreign investments for the commission even to make a proposal, increasingly support the initiative, he said.

And it’s not just China helping to unite the EU, according to Proust, who said former communist eastern members wary of Russian investments in Europe are signaling support for the draft law.

“People are aware of the need to put in place a European system,” he said a day after holding-closed door consultations with representatives of eight EU countries including Germany, Poland, Italy and Spain. “The situation is evolving rather favorably.”

Proust plans to present his amendments on March 21-22. The EU Parliament’s international-trade committee intends to vote on them in mid-May, after which the spotlight will shift to the deliberations among EU governments. Any differences between the EU Parliament on the one hand and national governments on the other would have to be ironed out in negotiations.

For Proust, the draft European law is—along with a recently agreed revamp of tariff rules—a sign that the EU is catching up with the world’s other great powers when it comes to equipping itself with tools to ensure fair conditions globally for domestic companies.

“It’s the end of European naivete,” he said. “We have to have the courage to change things.”