With eye on China, EU drafts rules to curb state-backed foreign buyers

© Reuters. FILE PHOTO: European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, in this file picture taken October 28, 2015. REUTERS/Francois Lenoir

By Sabine Siebold

(Reuters) -The European Commission proposed rules on Wednesday to restrain companies that benefit from foreign subsidies to buy EU businesses or take part in public tenders, with a particular eye on fending off unfair competition from China.

“The EU is the most open market in the world. But openness rhymes with fairness,” the European Union executive’s president, Ursula von der Leyen, said in a tweet, adding the aim of the proposed measures was to ensure a level playing field.

The European Commission’s plan underscores a more protectionist line prompted by a recent surge of foreign takeovers of European companies and fears of a buying spree of firms whose share prices declined during the COVID-19 pandemic.

According to the proposals, a Commission investigation would be triggered if it identifies possible distortive foreign subsidies in takeovers of EU companies with a turnover of 500 million euros ($600.4 million) or more in the bloc or in procurement contracts from 250 million euros and above.

The proposed rules still need to be agreed among EU member states and the bloc’s parliament in the months ahead, and both foreign governments and companies are expected to lobby to water them down.

The EU’s antitrust chief, Margrethe Vestager, told a news conference that the rules would apply to all sectors and were based on the idea that “Europe is open for business” but inward investments must be fair and transparent.

“When you open your home to guests then of course you … expect your guests to treat your belongings, your furniture as you would do it yourself, with the same sense of care,” she said.

“It’s the same with our single market: We want every company that operates in Europe, no matter where it comes from, to accept our house rules. And one of the oldest rules that we have is that we don’t allow subsidies which harm fair competition.”

($1 = 0.8328 euros)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.