China said on August 19 that a European Union investigation into e-commerce firm JD.com constituted "improper extraterritorial jurisdiction" and ordered entities not to implement or assist with the probe.
JD.com faces EU scrutiny over Ceconomy bid
JD.com risks becoming collateral damage in the deteriorating trade relationship between the EU and Beijing. Chinese officials have waded into a Brussels-led probe of the $41 billion retailer's takeover bid for Germany's Ceconomy. A deal would help JD expand overseas while channelling fresh investment into the bloc. But if geopolitics torpedo it, the fallout may be costly for both sides.
The $2.5 billion deal has been stuck in regulatory limbo for nearly a year, largely thanks to the European Commission's Foreign Subsidies Regulation (FSR) aimed at acquirers that may have received unfair state aid. Last week, JD.com offered undisclosed remedies to address those concerns, signalling a breakthrough. That now looks unlikely after China's Ministry of Justice promptly ordered domestic entities not to implement or assist with the investigation, blasting it as "improper extraterritorial jurisdiction".
EU-China tensions widen beyond the transaction
That the takeover of Ceconomy - owner of the MediaMarkt and Saturn chains which sell televisions, refrigerators and other consumer electronics - has become a diplomatic lightning rod underscores how bad EU-China relations are. Trade is a sticking point: the goods deficit with the People's Republic hit 360 billion euros last year. Brussels is responding with tariffs on Chinese electric vehicle imports and probes into alleged industrial overcapacity, while also targeting e-commerce apps such as PDD's Temu and Alibaba's AliExpress.
Yet this investigation into JD is a head-scratcher: it is neither dominant in China's fiercely competitive e-commerce market, nor is it a state-owned industrial champion. Europe's crowded consumer electronics industry is hardly critical or strategic, so the FSR inserting itself in the process is unusual, unlike, say, its past probes including the Abu Dhabi National Oil Company's acquisition of chemicals maker Covestro.
Chinese investment in Europe faces growing scrutiny
Moreover, the company founded by Richard Liu is bringing in capital and creating jobs on the ground: it is building out a regional logistics and fulfillment network as part of a big push to take on Amazon.com on the Continent. Earlier this year, it launched online marketplace Joybuy that offers same- or next-day delivery across major European cities.
The extra - and odd - scrutiny of JD's dealmaking signals Europe's growing wariness of Chinese companies expanding their presence in the region. Electric-vehicle giant BYD is building new production capacity in Hungary and Turkey, while Contemporary Amperex Technology is investing heavily in battery plants in Germany, Hungary and Spain. That has helped push foreign direct investment from the People's Republic to a seven-year high, according to the Rhodium Group, to 16.8 billion euros including the United Kingdom last year. Regardless of how the Ceconomy saga plays out, Chinese M&A and investment in Europe is getting harder.
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