Sweden’s government tabled a proposal on Tuesday to 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.
(Bloomberg) — Sweden’s government tabled a proposal on Tuesday to 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.
About 1,500 Swedish companies, ranging from small IT firms to national treasure Volvo Car AB, have Chinese owners, an investigation by public broadcaster SVT showed last month. 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 organization “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 skeptical 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 Co. and ZTE Corp. to supply equipments 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 finalized by the current center-right cabinet. Justice Minister Gunnar Strommer said the proposal seeks to strike a balance between maintaining a good investment climate, and the need to protect vital interests.
“It is unavoidable that this will take more administrative effort than what is currently the case,” Strommer said in e-mailed comments. “However, for unproblematic investments it is essential to get feedback quickly, and therefore the authority in charge of investigating should respond within 25 days in those cases.”
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 homegrown maker of battery-cells for electric vehicles. Earlier this month, Shanghai Putailai New Energy Technology Co. announced plans to build Europe’s largest factory for anode materials to supply Northvolt, and Shenzhen Kedali Industry Co., 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 Co of China — which owns a large majority in Volvo Cars and is truckmaker Volvo AB’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.”
(Adds comment from Minister for Justice from sixth paragraph.)
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