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China Imposes Restrictions on Investments Abroad | ASHARQ AL-AWSAT English Archive 2005 -2017
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Chinese national flag flies in front of the China Construction
Bank (CCB) Tower at Hong Kong’s business Central district December 26,
2014.REUTERS/Tyrone Siu

London- China has imposed new restrictions on Chinese companies’ overseas investments, preventing them from working in many sectors, such as sports clubs, hotels, cinemas, real estate and entertainment.

After it long motivated its companies’ overseas acquisitions, Beijing abruptly changed its speech in late 2016, and warned from “irrational” acquisitions.

The Chinese government announced on Friday that overseas investment, which is inconsistent with China’s diplomacy for peaceful development, and the mutually beneficial cooperation and macroeconomic regulation, will be restricted, noting that it wants to “avoid risks”.

The Chinese government added that Chinese companies would not be able to make more investments in countries or regions experiencing wars or those with no diplomatic relations with the country.

The directive also prohibits investments that could harm the interests and security of the country. It referred in particular to the production of “unauthorized” military equipment and technology, pornography and gambling.

The announcement came after Chinese businessman Gao Zhisheng has partnered in the capital of the English football club Thothampton. According to the British press, the Gao family has acquired 80 percent of the shares at about 200 million pounds (220 million euros).

A large number of European clubs have attracted capital from China three years ago: in Spain (Atletico Madrid and Barcelona), in Britain (Aston Villa, West Bromwich and Manchester City), France (Sochaux and Auxerre), and Italy (Inter Milan and AC Milan).

Large Chinese groups in Europe and the United States have also bought stakes in banks, hotels, studios and cinemas.
But China has anxiously considered these acquisitions, which are causing huge indebtedness to China’s financial system, while high-risk acquisitions are being investigated.

Only investments that support the real economy or advanced technology are allowed.

As a result, Chinese investment abroad fell by 46% in the first half of 2017 to $ 48 billion, according to the government.

On Friday, the United States officially launched a commercial investigation into China’s intellectual property practices and the forced transfer of U.S. technology, to which President Donald Trump called this week.

US Trade Representative Robert Lighthizer said in a statement: “Last Monday, President Trump asked me to review the Chinese laws, policies and practices that could harm intellectual property rights, innovation and US technological development.”

“After negotiations with stakeholders and government agencies, I decided that these critical issues deserve an inclusive investigation,” he said.

Foreign companies have long complained about Beijing’s failure to protect patents. In some cases, Beijing forced institutions to share information with local Chinese partners, as a price that should be paid to invest in the huge Chinese market and set up projects.

However, because foreign companies are afraid of being banned from entering the Chinese market, they have not pressed their governments to take action.

“We will protect intellectual property, patents, trademarks, trade secrets, and any intellectual property that is vital to our security and prosperity,” Lighthizer said. He added that the United States would not again tolerate Beijing’s “theft” of US industrial secrets.

Lighthizer has launched the investigation under the article 301 of the US Trade Law on Intellectual Property. Beijing responded this week by warning that “everyone will lose” if a trade war ignites between the world’s two largest economies.

For their parts, governments of Germany, France and Italy resorted to the European Commission to prevent foreign investors from taking unwanted acquisitions over European companies.

Der Spiegel magazine reported Saturday that German Economy Minister Brigitte Zypries sent a cable to European Commission President Jean-Claude Juncker to highlight China’s growing efforts to acquire European technology companies.

In the cable, Zypries called the European countries to reject or restrict such deals.

The German Economy Minister explained that such transactions should not be allowed if there is interference from the state of incoming investments that encourage or support acquisition deals or offering unrealistic prices for contracts.

Despite that the cable assessed the flow of foreign capital as “positive development”, the minister pointed out that China’s unilateral long-term focus on technology and technology has been monitored in the light of China’s 2025 strategy.

The strategy aims to support Chinese industries. The cable pointed out that the Chinese market in return is still closed to European investment in many areas.

The Minister, therefore, called for granting the EU countries additional rights to stand out to unwanted acquisitions. Der Spiegel reported that according to officials from the German Ministry of Economy, the contributions of Chinese companies in Germany have lately increased significantly. According to data, Chinese contributions in the German market 21 transactions since the beginning of this year, more than double compared to the same period last year.