EU countries should be prepared to buy in as owners of companies amid the coronavirus crisis to avoid Chinese acquisitions, Competition Commissioner and Vice President of the European Commission Margrethe Vestager has warned.
Vestager said that the EU “had no objection” to member states acting as players in financial markets, if deemed necessary to prevent a hostile takeover.
“It is very important to be aware there is a real risk that vulnerable companies can be exposed to a takeover. The situation is currently such that we really have to work intensely to counter such a development”, Vestager said, as quoted by Danish Radio.
While many companies across Europe have been hit hard by the consequences of the COVID-19 pandemic and are fighting in hopes of relief packages, Vestager warned of another problem lurking beneath the surface.
According to Vestager, China in particular may step in and take over distressed European companies, a development the EU should avoid. Therefore, countries should get ready to buy in as owners of companies in their countries to keep China away.
Danish Radio business correspondent Jakob Ussing stressed that the coronavirus pandemic has rattled the markets and shattered the value of many European companies, making them cheaper for a buyout.
“There is simply fear in Germany and France, the EU's two largest economies, but also in many other European countries that both important infrastructure and technology companies can end up in Chinese hands”, Ussing mused.
Ussing also reminded that Germany and France have long pushed for new rules to better protect European companies from being acquired by Chinese companies. This is especially true if these companies are owned or controlled by the Chinese state, he said.
“China has already largely shown its interest. In the aftermath of the financial crisis, state-owned Chinese company Cosco took control of Greece's largest port in Piraeus, Athens, and state-controlled Chinese companies have also bought holdings in ports in many other places in Europe”, Ussing reminded.
“Ironically, it was actually the Eurozone countries that forced Greece to sell the port of Piraeus to help the country out of the debt crisis, but since then the fear of Chinese takeovers in Europe has moved higher up the agenda, and EU rules have already been tightened”, Ussing stressed.
In conclusion, he emphasised a strong Chinese presence and interest in Denmark, focusing on green technologies. According to him, a number of smaller Danish companies have been completely acquired by the Chinese.
China’s global outbound foreign direct investment soared to record levels in 2016, with the European Union as the favourite destination for Chinese investors and Germany as the largest recipient. While investment levels have since dropped off a bit, the Chinese acquisition of high-tech assets, particularly in manufacturing and machinery, have still fuelled a European debate about the involvement of the Chinese state in such deals and the long-term risks of losing core industrial technology to China.
Margrethe Vestager was previously instrumental in launching relief measures to help afflicted companies survive the COVID-19 pandemic and overcome heavy losses.
“The financial consequences of the COVID-19 outbreak are serious. We need to act quickly to deal with the consequences as best we can. And it needs to be coordinated”, Vestager said.
Last week, EU ministers agreed to a half trillion euro package for coronavirus relief.