10 Oct /17

Chinese Takeovers in Strategic European Sectors

Chinese Takeovers in Strategic European Sectors - EVS Translations
Chinese Takeovers in Strategic European Sectors – EVS Translations

With European Commission President Jean-Claude Juncker set to deliver the State of the European Union speech in several days, the topic on Chinese takeovers of some of Europe’s most strategic companies is among the most anticipated. In the last 30 years, China, by virtually every metric has, economically speaking exploded. For a nation of close to 1.4 billion people (20% of the world’s population), China has experienced a growth rate of at least 6% annually (and well over 10% at times) for the last 36 years. Looking at the individual, per capita GDP has risen from $317.89 in 1990 to $8,123.18 in 2016, or, if you prefer 2455%. Externally, China’s New Silk Road initiative plans to spend $900 billion with up to $8 trillion in funding for infrastructural development. Moreover, this doesn’t account for the $225 billion in overseas merger & acquisition deals that Chinese companies closed on in 2016 alone.

Clearly, China has substantially grown and is starting to flex its economic power internationally. Typically, this would be a good thing. After all, in a globalised economy where more people can afford better things, all economies prosper. However, due to the speed of China’s growth as well as the shock that it is creating in the current global system, this has become a mixed bag.

Driven by the Beijing’s Made in China 2025 program – aimed at promoting the Made in China brand and acquiring technological capabilities overseas for national development – Chinese investments in European acquisitions in 2016 alone reached $90 billion, as much as in all the previous 10 years combined, with buyouts of critical infrastructure and high-tech businesses leading to unbalanced trade relations between Europe and China.

And while smaller eastern and southern European economies, that are dependent on Chinese investment, seem not that willing to take any steps against Beijing, the big players are considering legislative proposals to screen investments from third countries in strategic sectors. With, for example, Germany adopting a directive in July, broadening the scope of an existing law on screening the takeovers of companies in critical industries by buyers outside the EU; followed by a joint proposal from Germany, France and Italy to limit the takeovers by state-owned Chinese businesses. At present, where only half of the EU nations have formal systems for screening investments to assess whether they pose a threat to national security and policy, the keynote speech of the European Commission President is anticipated to call for the implementation and harmonisation of national screening systems on foreign acquisitions in strategic sectors.

On the political side of the argument, the difficulty comes from striking the right balance between what are deemed “critical industries and strategic sectors” in the national interest while maintaining economic openness. On the economic side, the question becomes one of how to keep business open to foreign investment while still avoiding excessive government oversight and regulation.

Taking an overview, this multifaceted and contentious issue of China’s plunge into globalisation could be viewed as a product of a lack of effective communication.

In the case of government officials, prompt understanding of a situation involving Chinese investment and the ability to properly convey regulatory requirements could definitely help to diffuse what seems to be becoming a tense situation. And for Chinese companies wanting to acquire a foothold or increase their presence in a foreign market as well as for non-Chinese companies looking to attract investment, being able to quickly and correctly communicate ideas as well as understand the method of business and jurisdictions in a particular market requires capable legal, financial and compliance translation services.

Do you have specific questions regarding Chinese translation services in the areas of M&A, compliance, EU and competition law? The teams of in-house Chinese translators (located across China, USA and Europe) at EVS Translations, a leading provider of certified language services for over 25 years, look forward to hearing from you.