Brussels wants to prevent a possible Chinese takeover of Dutch cable manufacturer Draka, but the Dutch are for the deal. A takeover bid by Chinese company Xinmao has not just led to financial rivalry, but the question is also developing into a political row in Brussels.

Some member states think the European Union should stop Chinese multinationals and banks from pumping more money into Europe. They fear Chinese investment means they are buying Western know-how as well as industrial clout.

Chinese billions
Chinese investments in Europe have increased more than fivefold in recent years. Chinese banks helped Greece out at the beginning of 2010 when Brussels ordered the country to get its finances in order within a couple of years. The Chinese have also bought up the harbour rights for the next 35 years for the port of Pireaus. Chinese car manufacturer Geely has taken control of Swedish car company Volvo. And Chinese banks have also helped Spain, Portugal and Greece out by buying government bonds worth tens of millions of euros.
European Commissioner Antonio Tajani recently called for a new European agency to be set up to scrutinise foreign investment. He says the United States tries to protect its important industrial sectors and Europe should do the same. Mr Tajani pointed out that in recent years the Chinese have made huge investments in Africa.

Left in the cold
It is not particularly surprising that the Italian EU commissioner opposes a Chinese take-over of Draka. French and Italian politicians have been inundating Brussels with warnings against the deal, but they may be doing so out of self interest. Earlier this year, the French cable company Nexans and the Italian Prysmian both made bids for Draka.

Draka is Europe’s third biggest cable company. Nexans offered 15 euros per share and a couple of weeks later the bid was outdone by Prysmian which offered more than 17 euros per share. Draka accepted the bid, and was about to seal the deal, when the Chinese company Xinmao came along with a bid for more than 20 euros per share. As a result the French and Italians were left out in the cold.

European protectionism
The Dutch Economic Affairs and Industry Minister Maxime Verhagen objects to European interference in the possible Chinese takeover. He says the bid has not been made with the help of state support from Beijing. He also opposes European protectionism; Brussels, which has regularly raised the issue of US and Chinese protectionism practices at the World Trade Organisation in the past, can hardly start creating similar constructions now.

Last week, Minister Verhagen wrote to the Lower House, “I do not agree that a possible takeover of Draka by Xinmao will have a negative effect on Europe’s competitive position. In the end the Netherlands benefits more from having open borders than from protecting its economy from foreign takeovers. Maintaining an open and attractive business climate is vital to the dynamics of the Dutch economy.”

Draka is still held to its deal with the Italian company. It plans to put the 17.20 euro share bid to its shareholders meeting at the end of January. But meanwhile talks are being held with the Chinese. Xinmao says it will officially place its bid at the beginning of February.

In a few weeks time, it will become clear whether Draka will become part of a new European cable giant or whether the Chinese will tighten their grip of Europe.