Watch Out for Chinese M&A in Wake of Pandemic, Vestager Warns EU

(Bloomberg) --

The European Union needs to be “vigilant” about Chinese takeovers if the bloc’s economic recovery from the Covid-19 pandemic lags behind, antitrust chief Margrethe Vestager warned.

“It is very important to be vigilant, especially in a situation where they may be sort of a staggered recovery, where some parts of the world recover faster than others are,” Vestager said in an interview with Bloomberg TV on Tuesday when asked about the potential threat from China.

The Dane is weighing her options to tackle how some companies may use funding from foreign states to undercut European rivals or outbid them in M&A. Vestager said it was also important to strengthen EU tools to screen foreign direct investments.

“Europe is indeed open for business, obviously, but people who come here should come here for the right reasons to do business, not to come in with subsidies from third countries or to to just take technology out of the company that they acquire,” she added.

An EU initiative on foreign subsidies due to be published on June 17 seeks to assuage European businesses’ fears about Chinese state-owned firms that may pay less for financing to fund business operations within Europe.

Government support for companies has become a controversial topic in Europe as Vestager loosened rules that usually curb subsidies to businesses.

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While Germany has opened the taps by spending nearly a trillion euros ($1.1 trillion) to help its companies, many other European governments “do not have the same opportunities,” she said in the interview.

A European recovery plan that could help fund other companies is essential “because otherwise we will not have the fast recovery that will save jobs.” A potential 500 billion-euro fund suggested by France and Germany is “a very important step,” she said.

“Of the essence here is, of course, speed, because now we see that from a problem of liquidity also comes problems of solvency,” she said. Recapitalizing companies needs to be fast “because we should save valuable wealth within viable companies.”

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