China’s communist regime has moderate to heavy influence over 40 percent of European businesses acquired by Chinese companies in the past decade, research has found.
Datenna, a Dutch consulting firm specializing in screening Chinese investments, looked at data for hundreds of European companies that have sold most or all of their shares to Chinese firms to find out how much influence the Chinese state has over the companies as a shareholder.
The data is presented as the China–EU FDI (foreign direct investment) radar—an interactive map that illustrates levels of state influence.
Currently, the map illustrates more than 650 acquisitions since 2010.
Almost one in four (161) of the acquisitions were found to have high levels of influence by the Chinese state, meaning the ultimate controlling shareholder is part of the communist bureaucracy.
Approximately 15 percent of acquisitions have medium state control, where state apparatus has a “substantial” stake but aren’t necessarily seen as controlling the company.
The other 60 percent of the companies have no substantial state influence behind their investors.
Layers of OwnershipDatenna said it is “extremely challenging” to determine UBO in China, because state influence is often buried under layers of ownership.
“The government’s influence in a legal entity is commonly found in several layers of ownership and can consist of a combination of central and local government investment vehicles, amongst others,” Datenna stated in a white paper published in September.
Datenna used Dutch semiconductor company Ampleon, which was acquired by Chinese company JAC Capital, as an example.
Through five layers of investment vehicles, JAC Capital is controlled by the Chinese State Council—the highest administrative body in China’s government. Ampleon is therefore under the majority control of the Chinese regime according to Datenna’s research.
Beltman told the Microwave Journal that GaN technology is used in “commercial aviation and radar applications, aerospace and defense systems, and broadband solutions.”
Evades ScreeningAnother example is the 2017 acquisition of Imagination Technologies, widely regarded as one of Britain’s most important technology companies.
Through seven layers of investment vehicles, Canyon Bridge is controlled by the Chinese State Council.
The UK government, under then-Prime Minister Theresa May, approved the deal on the basis that Canyon Bridge was regulated by U.S. law due to it being incorporated in the United States.
U.S. Treasury Secretary and chairman of the Committee on Foreign Investment in the United States (CFIUS) Steven Mnuchin said that “the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.”
Imagination Technologies CEO Ron Black resigned from his post, along with chief product officer Steve Evans and chief technical officer John Rayfield.
“Our limited partners are Chinese financial institutions led by China Reform,“ Bingham said. ”As limited partners, they have no say in the governance of the company; they have no say in the selection of management or board members.”
He added that “China Reform’s view [was] that they could be even more helpful” in expanding business in China “if they could be closer to the action, ... closer to the board activities.”
“I have no evidence to suggest that the interests of our limited partners are anything other than business interests.”
The European Union currently doesn’t have a screening body equivalent to the CFIUS.