European countries should buy stakes in companies to stave off the threat of Chinese takeovers, the EU competition chief has said, as Brussels steps up plans to protect businesses fighting for survival during the Covid-19 pandemic.
Regulators are already working on proposals to grant EU countries sweeping powers to derail unfair competition from state-backed enterprises.
Margrethe Vestager, also executive vice-president of the European Commission, told the Financial Times: “We don’t have any issues of states acting as market participants if need be — if they provide shares in a company, if they want to prevent a takeover of this kind.”
European companies have long been in the sights of Chinese rivals, but the sharp economic downturn caused by the coronavirus outbreak and subsequent steep falls in share prices across the continent have increased the potential for overseas bids.
“It’s very important that one is aware that there is a real risk that businesses that are vulnerable can be the object of a takeover,” Ms Vestager said. “The situation now really underlines the need so we work really intensively. This is one of our main priorities.”
She cautioned against rushing out measures, saying the best solution would be to draw up regulations that acted as a deterrent.
“People are more than welcome to come do business in Europe but not to do that with unfair competitive means. It has to have this double function.”
Following pressure from Germany and France for regulators to ensure a level playing field between European and Chinese competitors, Ms Vestager said last month that proposals to that effect would be released in June.
The overhaul would target corporations owned or backed by non-EU governments, to address worries that their financial power grants them an unfair headstart over European competitors.
Asked if the timing had accelerated in light of the current crisis, Ms Vestager said Brussels was working “as quickly as possible” to publish details.
Any proposal would have to go out to consultation and eventually be ratified by the European Parliament.
In December, Ms Vestager praised Dutch proposals calling for a revamp of European law to allow regulators to intervene in deals where state-backed companies were distorting competition.
The Dutch proposals envision Brussels stopping such companies buying EU competitors at inflated prices or undercutting them with artificially low selling prices.
The European Commission would also have the authority to demand greater transparency in foreign companies’ accounts.