The European Union (EU) is planning to strengthen its defenses against state-subsidized foreign companies, marking a sharp increase in the bloc’s efforts to both reduce the effects of
Shipments of masks supported by the Chinese government are unloaded from an Air China plane at Athens airport, Greece, in March.
The European Commission (EC) on June 17 presented options to correct what it called market distortions stemming from state-subsidized foreign companies.
Observers say the move is mainly aimed at Chinese state-owned companies, but it could also affect competitors from the US.
The proposed restrictions come after several European countries, including France, Germany and Italy, tightened foreign investment controls to protect domestic companies from falling into the hands of American and Chinese investors.
`We need the right tools to ensure that state-subsidized foreign companies do not distort our markets,` said EC Vice President Margrethe Vestager in charge of competition and digital policy.
Covid-19 has exposed the fact that Europe is dependent on imports from China in the medical field.
That reality causes European officials to rethink investment policy.
On June 15, the EC took the unprecedented step of imposing punitive taxes on Chinese exporters headquartered outside the mainland.
EU officials insist the new tools do not target any country or company.
The Chinese government expressed hope that the new EU measures would `not create new trade barriers related to subsidies`, a spokesman for the Chinese Mission in Europe said.
According to the new proposals, the EC plans to cooperate with competition authorities of countries in the bloc to evaluate and analyze foreign companies that are likely to receive state subsidies to beat their competitors.
The role of state subsidies in corporate mergers and acquisitions is also subject to closer scrutiny.
The new proposals highlight that any company receiving subsidies from a government outside the EU in the three years before an acquisition procedure will have to notify the EC.
The requirement for increased inspection will also apply to public procurement activities.
An EU official said the alarm bell rang in 2018 when state corporation China Road and Bridge won an EU-funded contract to build a $500 million bridge in Croatia.
`We are trying to prevent this from happening again,` the EU official said.
New proposals still need approval from the governments of EU member states, but some countries such as France, Germany, Poland and Italy have raised similar ideas in recent weeks.
Many countries welcomed the proposal but called for more drastic measures.
