The Coronavirus pandemic has broken the back of nearly all the countries and with no end in sight of the deadly respiratory virus—the countries will continue to reel under economic duress for the uncertain future. With crumbling economies and a worsening recession, companies in and around the world are slipping towards financial uncertainty and even bankruptcy in some cases.
With the pandemic slowing down the consumer market, the company’s valuations have shrunk to new lows and thus they will be selling themselves short and it gives the golden opportunity to China to invest its money with minimal capital and reap a greater return of investment (ROI) in the future.
In the face of adversity and suffering, Beijing has seen a lucrative opportunity of buying out large stakes in such companies that will ultimately erode the sovereignty of host countries.
However, the countries have been quick to gauge the ominous Chinese motives and have started addressing the chinks in the armor of their legislations.
The latest to join the bandwagon is the United States of America. Jim Banks, an influential American Congressman on Wednesday introduced a legislation in the House of Representatives that would prevent predatory investments in American companies by the Chinese government.
The Restricting Predatory Acquisition during COVID-19 Act would expand the scope of the Committee on Foreign Investment in the United States (CFIUS) to review purchases by companies with ties to the Chinese Communist Party during the coronavirus pandemic. It will prevent companies with ties to the People’s Republic of China from owning more than 51 percent of shares in the critical infrastructure.
The Chinese companies, private as well as public, are looking to pump up investments in companies all around the globe. It already has foreign exchange reserves of more than 3 trillion dollars- equal to the GDP of India for 2019—and consequently, Beijing is injecting the Chinese companies with capital so that they can buy foreign assets.
The game of China is fairly simple to decode—it involves creating a monopoly by buying stakes in as many companies as possible and then leverage it to necessarily strong-arm the nations to have its way-in in major policy decisions and the functioning of the governments.
However, many European countries including Italy, Spain, and Germany have tightened their FDI rules in the light of recent events to prevent a hostile takeover of their companies by Chinese firms.
Spain, the country with the second-highest number of Wuhan virus cases despite a low population, has capped the FDI limit in general companies at 10 percent. Italy has announced new rules for investment in strategic industries and completely shunned the takeover of such companies. Germany, too, has strengthened FDI laws to make foreign takeover harder.
All the aforementioned developments came at the heel of the European Union (EU) issuing new FDI guidelines keeping the damage incurred by the Wuhan virus and the vulnerable position of the European companies in mind.
Initially, EU was hesitant and not coming around in its attack on Beijing regarding its role in the spread of Wuhan virus—however, after sustained efforts by the countries of the Union, the top body of Europe has started waging a full-blown battle against the CCP regime—something which Xi Jinping must not have anticipated, given the huge trade imbalance with EU.
EU’s Competition chief Margrethe Vestager has asked the member-states of the regional bloc to buy stakes in the capital-starved companies to keep the Chinese away.
Even India has altered its FDI norms saying all the investments will have to go down the government route after alarm bells went ringing when news of the People’s Bank of China acquiring 1.01 percent stake in India’s lending major, the Housing Development Finance Corporation (HDFC) went bust.
America could be the next target for China and therefore the senate needs to pass the Bill at the earliest to counter any ostentatious Chinese manoeuvre.
Countries are preparing to protect themselves from the predatory Chinese firms. The water-tight laws are being implemented and China’s tactics are being given a run for their money. The pandemic has brought together the world against China like no other. The economic colonization strategy that China routinely uses to paralyze nations has run its course. And it needs to be seen what the rogue regime of China comes up with now, given the world has thwarted its predatory-hijacking of companies ploy. The game is afoot.