EU to Block Predatory Practices Against Chinese Companies

Restrictions on Mergers and Acquisitions of Foreign State-Owned Enterprises Proposed
Bloomberg: "A Response to China's Economic Threat"

Ursula von der Leyen, President of the European Commission [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The European Union (EU) is reportedly considering measures to restrict mergers and acquisitions (M&A) transactions involving foreign state-owned enterprises. This is interpreted as a signal that Europe’s efforts to curb China have become more active amid the expanding economic influence of Chinese state-owned enterprises within Europe.

According to documents obtained by Bloomberg on the 27th (local time), the EU plans to implement sanctions requiring all M&A transactions conducted by foreign companies that have generated over 500 million euros (approximately 670 billion KRW) in revenue within Europe over the past three years and have received subsidies exceeding 50 million euros (approximately 6.7 billion KRW) from foreign governments to undergo prior EU review procedures.

Additionally, if it is confirmed that a foreign company has engaged in anti-competitive behavior by unfairly receiving subsidies from its home government, the EU plans to impose fines up to 10% of the company’s annual revenue and cancel any business agreements the company has made with European governments. According to Bloomberg, the unfair subsidies referred to in the plan include unlimited loans guaranteed by the state.

However, the EU is also reportedly considering easing sanctions for foreign state-owned enterprises that, despite receiving subsidies from their home governments, sell some assets within Europe, allow European competitors access to their infrastructure, or charge reasonable royalty fees for patents.

Previously, European countries had expressed concerns that Chinese companies’ low-price strategies were weakening the competitiveness of European firms. Moreover, as the asset values of European companies declined due to the impact of COVID-19, Chinese companies, backed by government subsidies, aggressively pursued M&A activities. In March, during the early stages of the COVID-19 pandemic, China’s largest private investment firm, Fuxing Group, announced plans to acquire a large number of high-quality overseas assets. In fact, shortly after announcing this plan, Fuxing Group purchased a 55.4% stake in the French jewelry brand “Joula.”

Although the EU’s draft sanctions plan on foreign state-owned enterprises does not target any specific country, the prevailing analysis is that it is intended to check China. Bloomberg reported, “European companies have long complained about suffering from anti-competitive practices by Chinese companies,” adding, “The EU’s plan is a response to this economic threat posed by China.”

This content was produced with the assistance of AI translation services.