Chinese state-owned firms investing in the EU to face challenges unseen at home: scholar

Alexandr Svetlicinii

Chinese enterprises, many of which are state-owned, may face challenges when attempting to break into the European market, where participation by Chinese-owned businesses is restricted, an international law academic has said on the sidelines of a seminar.
The seminar, which was titled “Chinese State Owned Enterprises and EU Merger Control” and given by Alexandr Svetlicinii, associate professor and program coordinator of the Master of Law in International Business Law (English Language) at the University of Macau, analyzed the specifics of corporate governance of China’s state-owned enterprises (SOEs) and their assessment under EU merger control, which is reflected in the EU Commission’s screening of the notified economic concentrations.
“Merger controls apply to any kind of companies or investment in Europe,” the academic pointed out. He was then asked to identify the main challenges facing Chinese and Macau companies when they are in the course of investing in Europe, particularly within the European Union.
“It doesn’t matter where the business owners come from – be they from China, from Macau or from any other territory – they will need to follow this set of rules,” Svetlicinii said.
The academic pointed out that there are three levels on which investors and investments are analyzed before they enter the market.
“Depending on the size of the transaction, they may need to get approval from the European Commission or from competition authorities in certain member states for smaller-sized transactions,” Svetlicinii explained.
These authorities will assess the effect of these investments or transactions on competitions in different markets, he said. If such authorities believe there will be a negative effect on competition, they may levy conditions.
“Another important framework the EU implemented last year is the approval of foreign investment based on the grounds of security and national security,” he said. “In special sectors that are very important or strategic to EU member states, any kind of foreign investment must receive an approval from a different authority governing national security.”
According to the academic, this is another set of rules with which foreign investors need to abide. Meanwhile, non-EU investors may face other constraints.
“This year, the EU will possibly adopt a new set of rules about foreign subsidies. It means that if a foreign investor gets subsidized by a [non-EU] government, they will need to go through a special procedure, because this kind of subsidy may create distortions in the European market,” the academic remarked.
On the other hand, the Comprehensive Agreement on Investment concluded, in principle, last December. It involves China opening its door to EU enterprises.
The legal academic revealed that global scholars and lawyers are anticipating the implementation of the agreement to potentially effect Chinese companies doing business in Europe and vice versa.
The academic also spoke about his latest publication, a book on Chinese state-owned enterprises going global through the Belt and Road Initiative.
The main objective of the book is to demonstrate the conceptual and regulatory challenges of applying traditional merger assessment tools in cases involving Chinese state-owned enterprises due to the specifics in their corporate governance and the regulatory framework under which they operate in China.