A survey of acquisitions adds to concerns over China in Sweden

Jerker Hellström, Head of the Asia and Middle East Program, Swedish Defence Research Agency

The Swedish Defence Research Agency (Totalförsvarets forskningsinstitut, FOI) recently published the first comprehensive audit of Chinese corporate acquisitions in Sweden. The list of identified acquisitions is dominated by industrial, electronics, biotech and automotive companies. In many cases, their operations match the key technology areas highlighted in China’s plans for industrial development. By and large, policymakers and pundits have been unaware of the deals identified in FOI’s report, which now features prominently in an intensifying debate about the Chinese party-state’s activities in Sweden.   

Before 2018 it was all about Volvo. In 2010, China’s Geely Holding had snapped up the Swedish carmaker from its U.S. owner, Ford Motor Co., in a deal valued at US$1.8 billion. As a result of this acquisition, Sweden appeared on the top four list of recipients for Chinese investments in Europe. At the time of the deal, some feared that it would lead to job cuts by Geely moving some of Volvo’s production to China. Geely’s ownership of Volvo, however, proved to be quite a success story, not least due to Geely’s favourable position in its Chinese home market, and there was no evidence of any negative effects on employment. 

In 2010, perceptions of China in Sweden were generally influenced by the potential opportunities for Swedish businesses in the large Chinese market. Of course, there were also concerns with China, not least due to its human rights abuses, but Swedish interests did not seem to be directly challenged. The 2018 Global Attitudes Survey compiled by the Pew Research Center showed that the Swedes held a more favourable view of China than the public opinion in Italy, Germany or France. 

Then, in the summer of 2018, all of this took a new turn.

Tantrum diplomacy

From June 2018, the Chinese embassy in Stockholm began issuing written statements in which it expressed its indignation over how Swedish media covered China, including the 2015 abduction and subsequent detention of the Swedish bookseller Gui Minhai. The critical statements have since been issued on average almost once a week. 

In September 2018, the Chinese embassy made headlines when it demanded an apology from Sweden’s police for the eviction of a Chinese family from the lobby of a hostel in Stockholm. Only days later, the embassy requested yet another apology — from Sweden’s national public television broadcaster, SVT. A satire show on SVT had included a skit which mocked the incident at the hostel while poking fun at Swedish casual racial stereotyping of ethnic Chinese. The Chinese Foreign Ministry’s spokesperson Geng Shuang described it as a “gross insult to and vicious attack on China and the Chinese people.”

While the embassy’s intent may have been to inspire a more positive coverage of China, the effect has been the opposite. Critical reporting of China — including Hong Kong protests, Huawei and the repression of Uighurs — has increased rather than decreased. Public perceptions of China have deteriorated sharply. According to Pew’s most recent poll of global attitudes released this September, 70 per cent of Swedes now hold unfavourable views of China. Out of 34 countries in the survey, only Japan holds a more negative opinion of China. Two of the eight parties in Parliament have called for the Chinese ambassador to be declared persona non grata and expelled from Sweden.

It is in this context that we should understand the reactions to FOI’s effort to identify Chinese corporate acquisitions in Sweden.

The survey

In spring 2019, the Swedish Ministry for Foreign Affairs commissioned FOI to identify and compile a list of companies that had been acquired by Chinese investors. My team set up a database which covered the ownership of over 600,000 companies in Sweden, based on data from the Swedish Company Registration Office (Bolagsverket) on beneficial owners. We found that more than 1,000 of the companies had reported to Bolagsverket that they were owned by Chinese citizens. 

The vast majority of these businesses appeared to have been incorporated in Sweden by entrepreneurs from China, rather than having been acquired by Chinese investors. Having excluded those, as well as the many subsidiaries of Volvo and other companies, we were able to ascertain that the Chinese ownership of roughly 30 firms was the result of acquisitions. By using other open sources, we eventually were able to identify a total of 51 majority acquisitions of Swedish parent companies and another 14 minority stakes.

The study, published on 27 November 2019, provides a snapshot of deals that FOI has been able to identify. It shows that the acquired companies mainly operate in four sectors: industrial machinery, biotech, electronics and automotive, and that some develop high-tech products such as microprocessors and satellite navigation systems. In 30 of the cases, we were able to note a correlation between the acquired technologies and those highlighted in Made in China 2025 industrial development strategy, launched by China’s State Council in 2015.   

A new debate on Chinese ownership

The report’s conclusions should not come as a surprise: China has been quite transparent about its intentions to acquire foreign technology. However, neither officials nor journalists had previously paid attention to the activities of Chinese investors in Sweden. Consequently, the release of FOI’s study triggered a debate on potential issues with Chinese ownership in Sweden, which included comments in the parliament by the Minister for Home Affairs, the Swedish Security Service, and the leader of Sweden’s main opposition party, as well as editorials in several leading newspapers. In response to the study, Sweden’s main business daily Dagens Industri concluded that “something has to be done in order to protect democracies’ control over their own economies.”

If Geely’s acquisition of Volvo Cars had been proposed today, it is likely that other concerns would have been raised, in addition to those regarding employment. For example, some might ask how Geely was able to raise the capital to fund the acquisition, and the actual ownership of Geely would also likely be thoroughly scrutinised.