So far, governments have acted alone and at random, as was Italy’s recent decision to block the Chinese Sinochem’s potential takeover of Pirelli. From today, the European Union will intervene directly to thwart foreign investment deemed “hostile” or in any case dangerous to the bloc’s strategic interests. It seems to be a move aimed at protecting China and sectors such as the automotive sector, where more than half of Beijing’s investments in the EU in 2022 are concentrated.
Despite a progressive and sharp decline over the last decade, Chinese foreign investment in Europe remains high: they approached $8 billion last year, due to increasing tightening by some governments. If in the past Beijing’s targets were to target critical infrastructures such as ports or 5G networks, more recently the operations concern the nascent electric car supply chain. According to a study by the Merics think tank, $17.5 billion from China’s coffers has gone into electric battery production in Europe since 2018. France and Germany were the major EU countries that benefited the most, but Hungary has also become the sort of platform from which Beijing seeks to conquer the European electric car market.
The new rules, enacted by the so-called FSR, the EU regulation for foreign subsidies, provide a kind of anti-takeover shield or “golden rule” in Europe for companies benefiting from public subsidies from non-EU countries. conducting operations that harm the industrial interests of the bloc. The regulation obliges companies to report to the Commission the concentration and financial assistance they receive to participate in public tenders, according to the implementing rules announced by Brussels today.
In the first case, companies must report mergers (mergers or acquisitions) that have generated a total foreign financial contribution of at least 50 million Euros or an EU turnover of at least 500 million Euros in the last 3 years to the parties to the transaction. The estimated value of the contract is at least 250 million Euros and the proposal provides a total foreign financial contribution of at least 4 million Euros per third country in the last 3 years. With regard to participation in public tenders, the notification obligation is triggered if the estimated value of the contract is at least 250 million Euros and the offer has made a combined total foreign financial contribution of at least 4 million Euros per third country in the last 3 years. year.
The regulation then specifies a set of transparency obligations that companies that fall within the parameters of the reporting obligation must comply with. Based on the documents produced by these companies, the European Commission will be able to decide whether and how to act. The Commission writes that if verification identifies risks, Brussels may propose “structural and non-structural corrective measures, such as the sale of certain assets or granting access to infrastructure”. If the measures are not implemented, Brussels could also ban concentration altogether or block the award of public procurement.
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Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
