Growing European Backlash Against Chinese Investment

In early September, a piece was posted on this blog on the need for reciprocity in investment between China and Canada.  Recently, following Chinese appliance giant Midea Group’s takeover of German robot maker Kuka AG, the German government is looking closely at increased oversight of foreign cum Chinese investment in the entire EU.

In the backdrop of growing protectionist sentiment around the world, especially in economically developed nations, China will surely face increasing scrutiny of its investments in key sectors of the economy, particularly those involving advanced manufacturing, technology and information systems.

While recent policy pronouncements by the Chinese government on opening up more sectors to foreign investors is an encouraging sign, China must do more to entice foreign investment, removing impediments in non-strategic sectors of the economy.  More must be done to whittle down the ‘negative lists’ in China’s free trade zones and spread that experience to the broader economy.  It is in China’s interest to do so given its need to feed a rapidly growing consumer market and to reduce/prevent protectionist backlash overseas.

Germany is seeking tighter control over foreign investment in European companies, in a sign of a growing protectionist reaction to China’s appetite for overseas acquisitions.

Spurred by the purchase of German robot maker Kuka AG by China’s Midea Group Co., Chancellor Angela Merkel’s deputy, Sigmar Gabriel, is calling for European Union measures to give national governments expanded powers to block or impose conditions on shareholdings of non-EU companies. He’s found an ally in EU Digital Economy Commissioner Guenther Oettinger, a German who’s a member of Merkel’s party.

“It’s absolutely right to initiate this debate at the European level,” Oettinger said in an interview last week. “Everybody has to play by the same rules. Clearly, there are many countries, including big ones such as China, that make market access or corporate takeovers difficult or effectively impossible.”

While Merkel hasn’t publicly backed her vice chancellor’s push, Gabriel’s proposal reflects growing resistance within her government to unfettered Chinese investment in Europe’s biggest economy. In the latest potential Chinese bid, lighting maker Sanan Optoelectronics Co. Ltd. said it had held talks with Osram Licht AG on a possible acquisition of the almost century-old German company.

The initiative by Gabriel, who also is Germany’s economy minister, calls for allowing EU member states to step in if a non-EU investor seeks to acquire more than 25 percent of the voting rights in a company, according to a government document obtained by Bloomberg. Restrictions would potentially kick in if the home country restricts foreign investment or its government orders or funds the acquisition.

– Bloomberg on Yahoo Finance;_ylt=AwrXgCOpew1Y.kMAepDQtDMD;_ylu=X3oDMTBzdmVvZmlwBGNvbG8DZ3ExBHBvcwMxMAR2dGlkAwRzZWMDc3I-

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