A leading lawmaker has called on the UK government to tighten restrictions on overseas company takeovers in the wake of a pending recession.
Tom Tugendhat, chair of the Foreign Affairs Select Committee, warned of Chinese state-owned companies exploiting the financial crisis caused by the coronavirus outbreak, in a striking piece in the Financial Times.
"Increasingly, China’s state-owned enterprises have been able to draw on state banks to outbid rivals in Europe and America. In a downturn, the difference between state-backed credit and the buying power of normal commercial investors will become starker, further strengthening the hand of state-owned enterprises with a voracious appetite to buy rather than build," wrote the Conservative party lawmaker.
Tugendhat said that although Britain prided itself on being an open economy with few restrictions on foreign ownership the basis for that model has been changed by the "rise in state capitalism with deep pockets."
He pointed to China in particular, claiming it was trying to exploit the global crisis triggered by the pandemic by wresting control of companies such as Imagination Technologies.
Following the lead of other democratic market economies such as Australia, France and Sweden, the UK needed to defend its interests "subjecting potential sales of significant companies and assets to stricter scrutiny," said Tugendhat.
This includes lowering the £1m ($1.2m) threshold to trigger an inquiry and extending restrictions beyond areas of national security such as military, dual-use, computing hardware and quantum technology sectors already covered by a change in the law two years ago.
He welcomed the recent government announcement of changes to UK rules but said the country "cannot delay" in bringing laws on foreign ownership in line with other nations.
"An inferno of fire sales is risky: if we are not careful, much of the intellectual property the UK needs for long-term innovation and prosperity could disappear to Shanghai or Shenzhen," he warned.