Over the last few years, Western governments and parliaments have ramped up efforts to try to limit the opportunities for companies from certain countries (read: China) to buy up their most innovative firms. The United Kingdom is strengthening its laws curtailing foreign acquisitions, as is Sweden. France, Germany, and Italy have already done so. In October this year, the European Union’s foreign direct investment screening mechanism became fully operational. But such laws against foreign purchases of Western firms may come too late. China taps into start-ups long before they’re mature enough to be acquired.
To be sure, the new laws are important. In Sweden, for example, between 2014 and 2019, Chinese buyers acquired 51 Swedish firms and bought minority stakes in 14 additional ones. The acquisitions also included some 100 subsidiaries. Most worrisome, in 2018, Chinese outfits—two of them linked to the military—bought three cutting-edge Swedish semiconductor start-ups. In 2017, Imagination—a top British chipmaker—was acquired by a firm owned by a state-controlled Chinese investment outfit. Before that, a Chinese firm bought the leading German industrial robot-maker, Kuka.
