EU beefs up powers to control China investment

BRUSSELS: The EU commission on Wednesday unveiled new powers to block state-backed companies making unfair inroads into Europe, as the bloc seeks new ways to respond to China's rise.

The new rules, once approved by member states and European Parliament, will give EU competition authorities new abilities to probe foreign companies seeking to snap up EU companies or public contracts.

The rules don't specifically mention China, but they land as ties between the EU and its second biggest trading partner are at a low point after an angry exchange of tit-for-tat sanctions over human rights concerns.

The bitterness has forced the EU commission to suspend its efforts to seek ratification of a German-backed EU-China investment deal, which had been billed as a key tool to pave the way towards smoother relations.

"Unfair advantages accorded through subsidies have long been a scourge of international competition. This is why we have made it a priority to clamp down on such unfair practices," EU vice president Valdis Dombrovskis said.

"China is certainly a challenge in this context but this ... can cover pretty much any country, and any situation, if it's found that there is a distorted position in the market," he said.

In the new rules, the bloc's powerful antitrust authority would investigate state-backed foreign companies seeking to acquire EU businesses with an annual turnover of more than 500 million euros.

State aid investigations would also be launched into subsidised companies bidding for large public contracts in Europe, such as in rail or telecommunications, worth more than 250 million euros.

If necessary, Brussels will be able to implement corrective measures to remedy possible distortions of competition, and in some cases even prohibit a merger or the award of a public contract to the company concerned.

Illegal aid could include interest-free loans, preferential tax treatment or simply direct subsidies.

The regulation comes shortly after the Commission, which manages trade policy for the EU's 27 member states, reached its surprise investment deal with Beijing in late December.

Dombrovskis, who is also the EU's trade supremo, told AFP that he had suspended efforts to promote the deal to the European Parliament given the sanctions and poisonous political context, a move that was welcomed by MEPs.

The dispute between the EU and China escalated suddenly in March when the EU imposed sanctions on four party and regional representatives of the Xinjiang region because of their actions against the Uyghur Muslim minority.

Beijing swiftly hit back with punitive measures on European politicians and academics, including German MEPs Reinhard Buetikofer and Michael Gahler.

On Wednesday, Buetikofer said the suspended investment deal was "a personal embarrassment" for Chinese President Xi Jinping who had "declared Europe a top priority" last year.