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Brussels sends strong message with FDI vetting plan

European Commission outlined plans to implement more stringent vetting of overseas investment, specifically aimed at empowering EU governments to block takeovers from Chinese and other investors.

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In a show of resolve, European Commission president Jean-Claude Juncker on September 13 outlined plans to implement more stringent vetting of overseas investment, specifically aimed at empowering EU governments to block takeovers from Chinese and other investors.

Set out in Mr Juncker’s State of the Union speech to the European Parliament, the draft EU screening framework is described as an effort to protect companies in industry sectors deemed sensitive, such as energy and advanced technology.

In an unprecedented move, the legislation includes an ‘anti-circumvention’ clause, which would allow individual governments to block acquisitions attempted by European shell companies, or those established by foreigners in the bloc – a power normally disallowed due to EU free movement of capital laws.

The added scrutiny comes in response to security concerns and criticism of unequal market access between the EU and China in particular: in 2016, China’s investment into the EU was quadruple that of EU countries into China.

A joint report by think tanks Rhodium and the Mercator Institute for China Studies found that in 2016, China made €35.1bn-worth of acquisitions in the EU, while EU acquisitions in China for the same year totalled a mere €7.7bn. This is because many more sectors of Chinese industry are closed to foreign investors compared to their counterparts in Europe.

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Economics

China’s new three-child policy highlights risks of aging across emerging Asia

Thailand’s (Baa1 stable) total dependency ratio is set to jump nine percentage points to 51% by 2030 – a faster increase than China’s – which will pressure public and private savings through higher taxes and social spending, reducing innovation and productivity gains.

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Street vendor in Bangkok

Population aging in China (A1 stable) and other emerging markets in Asia will hurt economic growth, competitiveness and fiscal revenue, unless productivity gains accelerate, according to a new report by Moody’s Investors Service.

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China

Clear skies over Asia’s new foreign investment landscape?

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Compounding the fallout of the US–China trade war, the global pandemic and recession have caused considerable speculation on the future of foreign investment and global value chains (GVCs). But though there is likely to be some permanent change, it will probably not be as great as politicians expect.

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