EU to present proposal to limit Chinese acquisition of property

European Competition Commissioner Margrethe Vestager will today present a white paper outlining new tools intended to combat uncompetitive behaviour in the bloc by companies receiving foreign government aid.

Vestager has warned that foreign subsidies threaten the integrity of the single market and that the current economic environment could see struggling companies in critical industries fall under foreign ownership. The Commission seeks the legal authority to investigate all cases of foreign direct investment involving state-backed companies in order to bolster the bloc’s current foreign investment screening process. A leaked draft of the paper showed that foreign companies looking to buy at least 35% of EU companies would be compelled to disclose any state aid totalling over $11 million.

This proposal is widely viewed as a warning to East Asian firms, particularly those in China. Concerns of over-reliance on China have burst to the political forefront in North America and Europe as weaknesses in China-based supply chains have been exposed by the COVID-19 pandemic. Sensitive industries, including semiconductors and steel, have been cited as the most vulnerable to Chinese manipulation.

The proposal is unlikely to face much criticism within the EU, but it will further strain the bloc’s relationship with Beijing. Earlier this month, China’s ambassador to the UK threatened to withdraw Chinese investment from British infrastructure projects if telecom major Huawei was banned from doing business in the country. In the short-term, expect similar threats from Beijing but little concrete action until official legislation is put forth.

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