Sweden’s move to block foreign investments worries businesses
- Sweden is poised to propose a law to allow the government to veto foreign investments
- The EU has also proposed placing Chinese companies under trade restrictions as it cracks down on firms supplying Russia with goods that support its war in Ukraine
Sweden’s government is set to table a proposal on Tuesday that will allow the Nordic nation to veto foreign investments, a move intended to strengthen national security that the country’s business lobby fears will also add unnecessary red tape.
The proposed law is the latest in a string of similar initiatives by European countries that are rethinking their relations with China. The European Union’s executive arm has also proposed placing Chinese companies under trade restrictions as it tries to crack down on firms supplying Russia with goods that support its war machine in Ukraine.
An investigation by public broadcaster SVT last month showed about 1,500 Swedish companies, ranging from small IT firms to national treasure Volvo Car, have Chinese owners. Still, the country remains one of only nine in the European Union that have no legal possibility of blocking foreign investments on security grounds. As that is about to change with the new law, the Confederation of Swedish Enterprise warns that a heightened emphasis on security in international trade relations could come with economic risks.
“We should not go from one extreme situation to another – from having no screening at all to the most far-reaching in Europe,” Jan Olof Jacke, president of the business group, said. While his organisation “fully” supports the mechanism as such, to protect “vital security interests,” it fears a requirement for prior notification regardless of how large the investments are and where they come from could hamper companies and Sweden as an investment destination.
The Nordic nation derives more than half of its gross domestic product from exports and Swedish authorities have long been sceptical of restrictions on global trade due to their anti-protectionist instincts. However, they have been forced to reconsider their openness amid a growing confrontation between the Western powers and China. In 2020, it became one of the first European countries to issue an outright ban on allowing Huawei Technologies and ZTE to supply equipment for 5G cellular networks.
The new bill, due to enter into force in December if approved, was drafted on the initiative of the former Social Democratic government and finalised by the current centre-right cabinet.
As Sweden is seeking to establish itself as a hub for green technologies, a number of Chinese companies have set up operations to supply vital components to the emerging sector, which includes Northvolt AB, Europe’s largest home-grown maker of battery-cells for electric vehicles. Earlier this month, Shanghai Putailai New Energy Technology announced plans to build Europe’s largest factory for anode materials to supply Northvolt, and Shenzhen Kedali Industry, the world’s largest manufacturer of casings for lithium-ion batteries, has already set up shop near the company’s first factory in Skellefteå.
Still, Zhejiang Geely Holding Group of China – which owns a large majority in Volvo Cars and is truck maker Volvo’s second-largest shareholder – sees no fallout for its business from the new law, company’s spokesman Stefan Lundin said.
“Geely always adapts to and follows local rules and regulations in the markets we are active in, and this type of investment screenings is something that is very common in many of our markets.”
