Long seen as a gateway to the European Union, Ireland is tightening the screws on Chinese investment in the country, in line with the bloc’s new strategy to de-risk ties with the Asian giant.

However, the country has stressed that it will not shut the door on economic ties with Beijing.

The Screening of Third Country Transactions Act that was signed into law on Oct 31 will see Ireland introduce a screening regime for foreign direct investment (FDI) in key infrastructure, technology or sensitive information in the country.

The law will allow the minister for enterprise, trade and employment to assess any transaction valued at €2 million (S$2.9 million) or more involving an acquirer from a country other than Ireland and the EU, and to impose conditions on or even block “potentially hostile” investments.

While it will become operational in the second quarter of 2024, the new law will allow for a retrospective review of any transactions within a 15-month window, implying that investments in 2023 would also be subject to scrutiny. 

A spokesperson for the Department of Enterprise, Trade and Employment said: “The introduction of a screening mechanism for inward investment is a recognition that, notwithstanding the overwhelming positive effect of FDI, some third country investments may pose a risk to Ireland’s security and public order.”

Deputy Prime Minister Micheal Martin, who was on an official visit to China from Monday to Thursday, in May warned that the Irish government and private sector need to be “clear-eyed” about China’s strategic objectives and their implications for Ireland.

After a two-hour meeting with Chinese Foreign Minister Wang Yi at the Diaoyutai State Guest House on Tuesday, Mr Martin told reporters: “What I was very anxious to put across today was that Europe is not decoupling, Ireland is not decoupling.”

He added: “Europe and Ireland are very much up for a strong economic relationship with China, and de-risking is very much more in the context of lessons learnt from the pandemic, from Brexit in our situation, and the war in Ukraine – that over-dependencies can create resilience issues for every economy and every society.

“Foreign Minister Wang put the point across very strongly also that the interdependencies of the global supply chain are such that we need to be very careful that de-risking doesn’t become decoupling. We’re very clear that it will not,” said Mr Martin.

He said he anticipates that the upcoming EU-China summit, expected to be held in China in early December, will focus on strengthening economic ties between Europe and China.

Ireland has already taken steps to curtail Chinese investments in the country’s sensitive infrastructure, as seen in 2022 legislation that excludes Chinese telecoms giant Huawei from Ireland’s 5G network roll-out, which mirrors a decision taken by the EU. 

Finance Minister Michael McGrath stressed that Ireland is aligned with the EU in terms of de-risking rather than decoupling from China.

“We have a very good relationship with China. We continue to invest in it and improve in it, and develop further trade links and opportunities there for both countries,” he told the foreign press on Oct 25. 

Foreign direct investment agency IDA Ireland also said the screening process will not shut the door on Beijing-backed firms wanting to invest in the island nation. 

“We have had good business with China over the last 15 years, and over the last five years it has really accelerated,” said Mr Andrew Vogelaar, IDA Ireland’s head of growth markets, citing the example of companies such as TikTok and WuXi Biologics that have made multimillion-dollar investments. 

Direct investment from China into Ireland touched €9.2 billion in 2021, according to Chinese Ambassador to Ireland He Xiangdong, up from €8.3 billion in 2020 as per official Central Statistics Office data. 

“We don’t see (the investment screening) as having a huge impact on the business that we do,” Mr Vogelaar said.

“The investment screening tends to apply to things such as when somebody is acquiring a port or an airport or a piece of infrastructure. To my knowledge, there’s nobody interested in buying one of the Irish ports or airports or things like that.”

He stressed that the screening process for investments was country-agnostic, implying that all countries would be treated equally. 

Companies are “perfectly entitled to establish in Ireland if they’re doing everything legally”, he added, but said some may be rejected by IDA Ireland if “there’s something in a company that we feel is a reputational risk”.

“We do spend more time de-risking than we did five or six years back because of that geopolitical risk. But it’s for all companies and not just for those from certain jurisdictions.”