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With Eye on China, EU Drafts Rules to Curb State-Backed Foreign Buyers

European Commission Vice President Margrethe Vestager speaks during a media conference on the proposal for a Regulation to address distortions caused by foreign subsidies in the Single Market, May 5, 2021.

The European Commission proposed rules on Wednesday to restrain companies that benefit from foreign subsidies to buy EU businesses or take part in public tenders, with a particular eye on fending off unfair competition from China.

"The EU is the most open market in the world. But openness rhymes with fairness," the European Union executive's president, Ursula von der Leyen, said in a tweet, adding the aim of the proposed measures was to ensure a level playing field.

The European Commission's plan underscores a more protectionist line prompted by a recent surge of foreign takeovers of European companies and fears of a buying spree of firms whose share prices declined during the COVID-19 pandemic.

According to the proposals, a Commission investigation would be triggered if it identifies possible distortive foreign subsidies in takeovers of EU companies with a turnover of 500 million euros ($600.4 million) or more in the bloc or in procurement contracts from 250 million euros and above.

The proposed rules still need to be agreed among EU member states and the bloc's parliament in the months ahead, and both foreign governments and companies are expected to lobby to water them down.

The EU's antitrust chief, Margrethe Vestager, told a news conference that the rules would apply to all sectors and were based on the idea that "Europe is open for business" but inward investments must be fair and transparent.

"When you open your home to guests then of course you ... expect your guests to treat your belongings, your furniture as you would do it yourself, with the same sense of care," she said.

"It's the same with our single market: We want every company that operates in Europe, no matter where it comes from, to accept our house rules. And one of the oldest rules that we have is that we don't allow subsidies which harm fair competition."