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EU capitals seek stronger right of veto on Chinese takeovers

Enlarged font  Narrow font Release date:2017-02-16  Source:Source: Financial Times  Browse number:54
Note: EU capitals seek stronger right of veto on Chinese takeovers Date: 16 Feb 2017

EU capitals seek stronger right of veto on Chinese takeovers


 

Germany, France and Italy have called on Brussels to grant them a right of veto over Chinese high-tech takeovers, in a sign of the growing protectionist backlash against Chinese investment in Europe’s most sensitive industries.

Germany’s economics ministry said the three governments had written to Cecilia Malmström, EU trade commissioner, with the aim of opening up a debate on the issue. It said they wanted to create the legal basis for national governments to be able to “intervene in direct investments which are state-controlled”.

A copy of the letter, quoted by the news agency DPA, said Germany and other European countries “should have more scope to investigate individual takeovers and, where applicable, block them”. At issue are deals that are “unfair . . . because they rely on state funds or are aimed at buying up important technologies”.

Germany first announced last autumn that it was pushing for new EU rules to increase its powers to block takeovers by Chinese investors. But the initiative is likely to have a much greater chance of success now that France and Italy — the second and third largest economies in the eurozone — have signed up.

A flurry of deals involving Chinese companies has fuelled concern in Germany that some of its most prized technologies are ending up in Chinese hands. Such worries peaked last year with the €4.5bn acquisition of robotmaker Kuka by Chinese appliance maker Midea.

Chancellor Angela Merkel complained at the time about a lack of reciprocity, saying German companies wanting to invest in China were faced with a number of hurdles, such as a requirement to form joint ventures with Chinese partners.

A recent survey by EY found Chinese investment in Germany had risen from $530m in 2015 to $12.6bn last year. It said Germany was the most favoured European destination for Chinese investment, with 68 takeovers in 2016.

However, the environment is a lot less welcoming now than it was even a year ago — a trend exemplified by the fate of Fujian Grand Chip Investment’s attempt to buy German chip equipment maker Aixtron. Last October the German government abruptly withdrew its clearance for the deal and reopened a review, following a tip-off from US intelligence services that chips produced using Aixtron’s equipment could be used in China’s nuclear programme.

After it failed to win regulatory approval for the transaction from the US Committee on Foreign Investment, Fujian dropped its offer.

Under German law, Berlin can intervene to block foreign investments in defence industry enterprises or companies that are involved in IT security and the processing of state-classified documents.

But officials want to vastly expand such powers, so they can stop any acquisition that appears to be dictated by Chinese state industrial policy or is designed to enable technology transfers.

Matthias Machnig, Germany’s deputy economy minister, said that, as an exporting nation, Germany supported open markets and foreign investment. But foreign companies “must show that their investments in Germany are not driven by the state, and that financing for their deals is in keeping with the market”, he said.

“It is a principle that we want to establish in Europe, together with France and Italy,” he added.

 
 
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