Eye on China, EU drafts rules to curb state-backed foreign buyers

Sabine Siebold
Updated ·2 min read
1
FILE PHOTO: Picture shows European Union flags fluttering outside the EU Commission headquarters in Brussels

By Sabine Siebold

(Reuters) - The European Commission proposed rules on Wednesday to prevent companies that benefit from distortive foreign subsidies from buying EU businesses or taking part in public tenders, with a particular eye on fending off unfair competition from China.

"The EU is the most open market in the world. But openness rhymes with fairness," the European Union executive's president, Ursula von der Leyen, said in a tweet, adding the aim of the proposed measures was to ensure a level playing field.

The European Commission's plan underscores a more protectionist line prompted by a recent surge of foreign takeovers of European companies and fears of a buying spree of firms whose share prices declined during the COVID-19 pandemic.

According to the proposals, a Commission investigation would be triggered if it identifies possible distortive foreign subsidies in takeovers of EU companies with a turnover of 500 million euros ($600.4 million) or more in the bloc or in procurement contracts from 250 million euros and above.

Companies violating the rules could be forced to sell part of their business or be fined up to 10% of their turnover.

The proposed measures will need to be agreed among EU member states and the bloc's parliament, and both foreign governments and companies are expected to lobby to water them down.

The EU's antitrust chief, Margrethe Vestager, told a news conference that the rules would apply to all sectors and were based on the idea that "Europe is open for business" but inward investments must be fair and transparent.

"We want every company that operates in Europe, no matter where it comes from, to accept our house rules. And one of the oldest rules that we have is that we don't allow subsidies which harm fair competition," she said.

The new measures would complement strict state aid rules the EU has applied for decades with regard to transactions inside the bloc.

An example of EU concerns over foreign investment came in 2016 when German officials described the Chinese takeover of Bavarian robotics firm Kuka as a wake-up call that underlined the need to shield strategic parts of the economy.

In December, Germany blocked the takeover of satellite and radar technology firm IMST by a subsidiary of China's state-controlled missile maker China Aerospace and Industry Group on national security grounds.

($1 = 0.8328 euros)

(Reporting by Sabine Siebold; Editing by John Chalmers)