[The United States appears to be taking the hardest line toward China. President Trump’s decision this week to block a hostile bid by Singapore-based Broadcom for the rival American chip company Qualcomm fell apart over concerns that a takeover could hand Chinese rivals an advantage. And the panel that reviewed the Qualcomm deal, known as Cfius, is likely to get tougher still on China.]
By Liz Alderman
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Li
Shufu, left, chairman of Zhejiang Geely Holding Group and one of China’s
wealthiest
men, caused alarm after he quietly amassed a $9 billion stake
in
Daimler, a crown jewel of the German auto industry.
Credit
Qilai Shen/Bloomberg
|
PARIS
— Europe is pushing for more
stringent vetting of foreign investments, with an eye on Beijing. Australia has
been blocking bids by Chinese buyers for strategic assets. And in Canada, a
Chinese takeover of a major contractor faces a national security test.
As China looks to spread its wealth and
influence, the United States is not the only country seeking to shield its
industries under the guise of national security. Governments around the world,
and especially in Europe, are increasingly inclined to use such concerns as a
litmus test for Chinese investments to protect their competitive edge.
It’s a mixture of political posturing,
national pride and outright paranoia. But China presents a difficult policy
puzzle. Countries must balance safeguarding their strategic industries and
preventing the loss of sensitive technologies, while still courting Chinese
investors and improving trade with Beijing.
“There’s a general impression that China is
rising on all fronts, and the question is how to deal with that,” said Philippe
Le Corre, a China specialist and senior fellow at the Harvard Kennedy School.
“Most countries don’t know how to react.”
The United States appears to be taking the
hardest line toward China. President Trump’s decision this week to block a
hostile bid by Singapore-based Broadcom for the rival American chip company
Qualcomm fell apart over concerns that a takeover could hand Chinese rivals an
advantage. And the panel that reviewed the Qualcomm deal, known as Cfius, is
likely to get tougher still on China.
The committee, which can essentially block
foreign acquisitions of American firms on national security grounds, has
already quashed a number of deals by Chinese-linked buyers. Lawmakers are now
calling to broaden the types of transactions the panel can vet.
Europe got off to a later start. A
protectionist debate ramped up last year when Germany, France and Italy called
for a Europe-wide mechanism for more rigorous vetting of foreign takeovers. The
move came amid rising worries about the loss of the region’s edge in
technology, and the transfer of so-called dual-use technologies to China.
Concerns mounted after the 2016 purchase of
Kuka, Germany’s biggest and most advanced maker of robotics, by a Chinese
company. And they have intensified as China has invested in railways, ports and
other strategic infrastructure across southern and Central Europe.
Some of the reaction reflects domestic
political concerns. Bruno Le Maire, France’s finance minister, said on a visit
to Beijing in January, for example, that Paris would welcome investment from
China, but only after screening deals to ensure French assets were not
“looted.”
Still, numerous governments are pressing to
harden reviews of foreign investment as China embarks on a major push to
transform its economy to a cutting-edge superpower, an ambitious policy known
as Made in China 2025.
The president of the European Commission,
Jean-Claude Juncker, proposed in September creating a Europe-wide framework to
screen investment deals by foreign companies. And last year, the German
Parliament passed a law allowing deals to be scrutinized on national security
grounds if an investor’s stake reaches 25 percent.
But the political push to tighten up on
Beijing faces considerable hurdles.
For one thing, the risks of angering China
are real. Despite the optics, European companies remain eager for Chinese
investments. And European governments are also wary of offending Beijing at a
time when they are pressing to get better access to Chinese customers.
Even within Germany there is no unity among
political leaders. Angela Merkel, recently sworn in for a fourth term as
chancellor, has cultivated ties with Beijing, and China has become a crucial
market for companies like Volkswagen, a German behemoth and Europe’s biggest
automaker.
Europe is also divided over how to cope with
China’s rise. Greece, Hungary and other poorer southern and Central European
countries that benefited from China’s largess during the financial crisis have
generally opposed tightening scrutiny for fear of discouraging further Chinese
investment.
As a result, Mr. Juncker has sought to walk a
fine line in his proposal to screen investment deals, which is seen as the
first step toward an E.U.-wide mechanism similar to Cfius.
It’s a reason critics say the plan lacks real
teeth. It would mainly require European Union member states to inform Brussels
of foreign investment deals, especially ones that might affect the security of
another country. Currently, only 12 of the European Union’s 28 member states
have any screening mechanism in place.
“It will be difficult for the E.U. to have a
strong institutionalized mechanism for foreign direct investment any time
soon,” said Jue Wang, an associate fellow in the Asia Pacific Program at
Chatham House, a research organization in London. “European companies will
still want to welcome Chinese money.”
The proposal also appears to be weaker than
what other major economic powers have in place. Japan recently strengthened
restrictions on foreign investments related to security. And Britain this week
strengthened government powers to scrutinize foreign investment in specific
areas of the economy through the lens of national security, with China in mind.
Nor would the European Union’s plan
necessarily catch innovative new strategies by Chinese investors to take stakes
in strategic assets.
Germany was caught off guard after one of
China’s wealthiest men last month amassed a $9 billion stake in Daimler, a
crown jewel of Germany’s auto industry. Li Shufu, the chairman of the Chinese
car giant Geely, made the grab through a financial maneuver before anyone even
realized what was happening. Last year, the German company rejected a proposal
by the Chinese businessman to take stakes in the company.
The stealth purchase over months made Mr. Li
the largest shareholder in Daimler. The German authorities are examining
whether the purchase adhered to German investment laws. But it is unlikely that
either Daimler or the German government can do anything about the acquisition.
The experience of other countries shows the
complexity of the situation.
In Australia, where Chinese foreign
investment reached more than $30 billion in 2014 alone, the government has
sought to toughen screening.
Wariness of Beijing’s growing economic
influence has increased as Chinese investors buy up vast swaths of the Australian
economy and over concerns about Chinese businessmen giving millions of dollars
to Australian politicians. Chinese takeovers of Australian businesses have
jumped in recent years, along with an acceleration in purchases of agricultural
land.
In 2015, the government strengthened foreign
acquisitions and takeover rules to require the approval of a national oversight
board if, for instance, a foreign purchaser’s portfolio of farmland was worth
$15 million or more. It has also blocked bids by a Chinese firms for Australian
electricity companies, citing such deals as contrary to the national interest.
More changes could be afoot. The government
recently said it would consider updating its foreign investment guidelines so
Australians could be sure that proposed investments were “good for the
country.”
Elsewhere, while the government of Prime
Minster Justin Trudeau has been courting Chinese investors, public sentiment in
Canada has not always aligned with that effort. Some attempted takeovers of
Canadian companies by Chinese investors were abandoned because of concerns over
national security and Chinese business practices. Lenovo, the Chinese computer
maker, dropped ambitions to acquire BlackBerry, a smartphone used widely in
government agencies, after Ottawa signaled a deal could compromise national
security.
Those concerns prompted Canada’s previous Conservative
government to strengthen foreign investment laws to require stakes taken by
non-Canadian entities to pass a national security test.
The government is now reviewing a proposed
takeover of Aecon, a major Canadian contractor, by Chinese state-backed CCCC
International Holding. Officials are assessing whether national security would
be undermined by the takeover of Aecon, which handles major infrastructure
projects and has done work for Canada’s military and nuclear industry.
“We welcome international investments that
will benefit the Canadian economy,” said Karl W. Sasseville, a spokesman for
Navdeep Bains, the minister for economic development, whose department handles
investment reviews, “but not at the expense of national security.”
Follow Liz Alderman on Twitter:
@LizAldermanNYT.
Jack Ewing contributed reporting from
Frankfurt, Jacqueline Williams from Sydney and Ian Austen from Ottawa.