BRUSSELS, Belgium—The European Commission on Wednesday unveiled new powers to block state-backed companies from making unfair inroads into EU markets, as the bloc seeks new ways to respond to China’s rise.
The new rules, when approved by member states and European Parliament, will give EU competition authorities fresh abilities to probe foreign companies seeking to snap up EU firms 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 Brussels to temporarily cease 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.
German Chancellor Angela Merkel, the deal’s champion, on Wednesday said that despite the “difficulties,” seeing the deal through would be “a very important undertaking.”
The EU commission’s state aid policy is part of Europe’s delicate balancing act in handling China, where Brussels now wants to show a bit more strength while also keeping dialogue open.
“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.
Under 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 subsidized 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 European employers’ organization BusinessEurope welcomed “a step in the right direction.”