EU vs China: Brussels unveils new secret weapon in battle against Beijing

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The European Commission’s proposals will crack down on firms funded by foreign governments when operating inside the bloc’s single market. Eurocrats will be handed new powers that could see business takeovers blocked, if it is considered the move could be deemed unfair competition. Commission vice-president Margrethe Vestager said: “We need the right tools to ensure that foreign subsidies do not distort our market, just as we do with national subsidies.”

Single market commissioner Thierry Breton added: “If you want to benefit from the single market and do business here, you have to play by the rules.”

He said the new rules would focus on “non-European businesses” looking to compete inside the EU.

Under the bloc’s current state aid rules, national governments have to secure approval when buying a stake in private businesses.

But the framework doesn’t cover firms that receive support from governments outside the EU.

While making no reference to combatting Chinese investment, it is understood that the new rules are largely aimed at Beijing.

Mr Breton suggested foreign-funded infrastructure projects, such as roads and bridges, would fall under the new crackdown.

“Sometimes the development of infrastructure, motorways, bridges or telecommunications are projects… and what is important here is that everyone is welcome but the rules of the game have to be the same for everyone,” he added.

“We’ve been informed of a certain number of cases where that’s not the case. Not everybody is playing by the same rules.

“A certain number of non-European businesses wanted to take advantage of this opportunity in public procurement are also on the receiving end of huge public funds.

“They were receiving state aid and that distorted the competition.”

In 2013, China launched it’s flagship foreign policy, the so-called Belt and Road initiative, that aimed to work on infrastructure projects across the globe.

Italy signed up to the state-backed trade route, which sparked fury from the likes of France’s Emmanuel Macron who called for stronger protections for European firms being outbid by their Chinese rivals.

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Other Chinese-backed firms have targeted the European technology market in recent years.

In 2016, Chinese tech firm Tencent bought a majority stake in Finnish mobile games developer Supercell. Midea, an electrical appliances manufacturer, bought German robotics business Kuka.

The Commission said that in 2016, three percent of European companies were aimed or controlled by non-EU investors.

“More recently, there has been an increase in investment also from third countries other than from traditional investors such as the United States and Canada,” it said.

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“Investment by state-owned enterprises has grown rapidly over the last few years.”

Eurocrats will now begin work on the new legislation based on the proposals put forward by the Commission.

Draft laws are expected to be put to member states in 2021.

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