BRUSSELS: The EU wants tougher rules to thwart heavily-subsidised foreign companies, especially Chinese ones, from taking over European firms, officials said on Wednesday.

The European Commission said foreign subsidiaries that benefit from state-funding back home put companies from Europe, where rules against state aid are far stricter, at a disadvantage.

The economic shock caused by the coronavirus pandemic has accelerated the plans, with widespread concern that foreigners could swoop in and buy European companies weakened by the recession.

The plans would also affect firms from post-Brexit Britain, with the EU giving itself new powers to scrutinise foreign-based companies trying to do business in Europe.

"The problem is that our European companies are being penalised for complying with the rules, while companies in China and other third countries are receiving excessive public funding," Internal Market Commissioner Thierry Breton told reporters.

Breton and Competition Commissioner Margrethe Vestager released the plans in a policy paper that the commission, the EU's executive arm, will propose as a draft law next year.

"We need the right tools to make sure that subsidised foreign companies do not distort competition on the European market, just as we already do by controlling national state aid to EU companies", Vestager said.

The commission's proposal deplores "an increasing number of incidences in which foreign subsidies appear to have facilitated the acquisition of EU undertakings." The commission said the aluminium, steel, shipbuilding and auto sector appear to be most vulnerable to foreign acquisitions.

The plans include giving European regulators the power to demand compensation or other measures if a foreign company is determined to be excessively subsidised. The Commission also wants to prevent these same companies from buying up fragile European companies or acquiring a significant stake in their capital.-AFP