Coronavirus: countries move to shield companies from foreign acquisition, especially by China
- Pandemic has led to a global economic collapse not seen since Great Depression, with share prices plunging and companies needing financing
- From the European Union to Australia to India, governments are tightening restrictions and reviews of proposed foreign acquisitions
Countries around the world are erecting barriers to fend off expected efforts by foreign corporate acquirers, particularly China, to scoop up strategically important assets that have lost value during the coronavirus pandemic.
From the United States to India to Australia, governments, warning about the need to keep key industries from falling into the hands of adversaries, have taken action against potential fire sales of prized companies whose share prices have been hard hit.
The pandemic has unleashed an international economic collapse not seen since the Great Depression. The International Monetary Fund is predicting a global recession, and the United Nations estimates income losses of US$2 trillion worldwide.
Trillions of dollars of company valuations have already been wiped out. In the US alone, the benchmark Dow Jones Industrial Average, despite a recent recovery, is down 18 per cent since late February.
Boeing and Airbus, the US and European aircraft giants, have each lost nearly 60 per cent in market value since mid-February; shares in the Italian oil titan ENI and Australia’s largest mining company, BHP Group, are down 40 per cent or more since January.
As asset value drops in aerospace and energy companies, governments worry that buying opportunities are being created for adversaries like China. In just the past weeks countries have put new protective measures in place – with governments strengthening foreign-investment reviews and even weighing whether to take stakes in some companies considered strategic.