Yahoo Finance LIVE – May 07


Bloomberg

EU pushes back China with power to thwart state-backed companies

(Bloomberg) – The European Union seeks to strengthen its hand against the growing economic threat posed by China, with new powers targeted at foreign state-owned enterprises. The European Commission, the bloc’s executive arm, has proposed new rules for impose fines and block deals, according to a draft obtained by Bloomberg. While China is not specifically mentioned in the proposal, the move follows complaints from European businesses that businesses in the Asian nation are getting support they cannot match. Chinese business groups have previously complained of the latest initiative, which will need the support of EU governments before they become final. The document is a draft and could still change before being proposed next week.It is the next step in the EU’s efforts to move China away, building on a push from member states to protect the strategic companies against takeovers by non-European buyers. In the midst of the deepest recession in almost a century, Europe has shown signs of growing protectionism. EU governments have debated the ‘repatriation’ of supply chains after the pandemic exposed the region’s vulnerability to disruption, while France and Germany say the bloc should allow the creation of ‘champions Europeans ”large enough to compete with the United States and China. expressed growing concern over the prospect of European companies being bought by companies with unlimited credit lines or forced to close because competitors can afford to sell at prices below their costs. The rules would work alongside the oversight of foreign direct investment, which European governments have increased in recent years to give them more power to end agreements on industries or sectors they see as crucial. The increased scrutiny can be imposed even for minority holdings of more than 10%. Germany blocked a Chinese bid for the first time in 2018 by vetoing the potential purchase of machine tool maker Leifeld Metal Spinning AG . Last year Chancellor Angela Merkel’s government agreed to buy a 23% stake in CureVac AG, at the time a key player in the race for a coronavirus vaccine that had been the subject of speculation. on the takeover of the United States, alongside similar measures in other Member States, Germany. The cabinet approved more changes to foreign investment rules on Tuesday to give the government increased powers to control transactions that could impact national security. The new regulations, which must be approved by Parliament, target high-tech sectors such as artificial intelligence, autonomous driving and quantum computing. France recently suspended the purchase of the Carrefour SA grocery chain by Canada Alimentation Couche-Tard Inc., citing food sovereignty and the need to secure supply chains amid the pandemic. The country has also vetoed the purchase of Photonis by Teledyne Technologies Inc., a company that makes night vision equipment for the military, citing strategic interests. coordinated with France to protect truck manufacturer Iveco SpA from a takeover by China FAW. Group Co. Premier Mario Draghi also sent a message blocking an offer by Chinese company Shenzhen Invenland Holdings Co. for small semiconductor company LPE SpA. According to the draft EU rules, companies that generate at least 500 million euros ($ 600 million) in revenue in Europe and have received more than 50 million euros in support from a foreign state during the last three years will need the bloc’s approval.The EU also wants to be able to impose a fine of up to 10% of its annual turnover on companies if it finds that a company has unfairly benefited from a foreign subsidy – including a guarantee or line of credit that undermines European competitors. He warns in the draft that he could void government contracts awarded to companies that take unfair advantage of the grants. EU officials are seeking power to inspect company offices outside Europe, with permission from the company and the knowledge of the foreigner. Regulators are suggesting ways for companies to allay concerns about subsidies, including granting competitors access to infrastructure, licensing on equitable terms, or publishing research. Companies can also reduce their capacity or presence in the market, divest assets or refrain from investing, according to the document. The European Commission declined to comment and the Chinese mission to the EU did not respond. to a request for comment. The EU continues to actively engage in trade relations with China, including an investment agreement. The bloc has promoted the deal, which could come into effect early next year, as a way to rebalance economic relations with its second-largest trading partner. The deal expands access to the Chinese market for European investors in sectors ranging from automotive to telecommunications. It also seeks to tackle underlying Chinese policies believed to distort the market, such as industrial subsidies, state control of companies and forced technology transfers. source of economic information. © 2021 Bloomberg LP

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