The European Union should impose a temporary ban on Chinese takeovers of companies that are currently undervalued or have business problems because of the COVID-19 crisis, the leader of the bloc’s largest political alliance said on May 17.
“We have to see that Chinese companies, partly with the support of state funds, are increasingly trying to buy up European companies that are cheap to acquire or that got into economic difficulties due to the coronavirus crisis,” he said.
The European Union, therefore, should react in a coordinated way and put an end to the “Chinese shopping tour” by imposing a twelve-month moratorium on sales of European companies until the coronavirus crisis is hopefully over, Weber said.
“We have to protect ourselves,” he added.
Risks Associated with Chinese Takeovers
In Northern Europe, the Chinese regime targeted high-tech businesses, which made it possible to transfer advanced technologies to China, said Rasmussen. The Chinese takeover of German robot manufacturer Kuka in 2016 was a wake-up call for Germany that made it realize the need for protecting its strategic assets.
The Chinese communist regime uses two main strategies to advance its ambitions in Europe, The Belt and Road Initiative, and 5G.
The Belt and Road Initiative (BRI)—also known as One Belt, One Road or OBOR—is a plan for the Chinese regime to invest trillions of dollars to build critical infrastructures, such as bridges, railroads, ports, and energy facilities, in dozens of countries on four continents.
In financially robust countries, Chinese companies enter into equity participation or joint ventures. With financially weaker countries, China invests large amounts of money locally and attempts to obtain the right to operate the ports, often through opaque lending practices leading to debt traps.
Another goal of the BRI is to open routes for shipping Chinese products to Europe at low cost, thus increasing China’s own export. The Chinese intention is to increase its own exports, not to help the countries along the Belt and Road to establish their own manufacturing industries.
Foreign companies often sign a technology transfer contract with Chinese firms lured by a promise of access to the market of more than one billion Chinese consumers in exchange for technology transfer. However, once the Chinese company learns and implements the technology it manufactures the product more cheaply thus squeezing the technology owner out of the international market.
Mergers and acquisitions allowed Chinese companies to acquire Western technology, brands, and other assets. Only in 2016, fifty-six German companies were acquired by mainland Chinese and Hong Kong investors, with investment reaching a high of 11 billion euros ($12 billion).
The Chinese regime, however, denies Western businesses and investors the reciprocal access to its markets, Rasmussen said. “In 2016 alone, China’s foreign direct investment in Europe increased 77 percent compared to 2015, yet European investments in China decreased by 25 percent,” he said.