The European Union (EU) plans to introduce stricter screening of foreign takeovers of European companies in response to worries about a rapid rise in Chinese corporations buying the continent's best technology and manufacturing assets.
The scope of the move, scheduled to be announced by Mr Jean-Claude Juncker, the president of the European Commission, the EU's executive body, during his traditional "state of the union" speech next month, still needs to be decided.
But there is an emerging consensus - including among those ardently in favour of free trade such as Germany, the Netherlands and Britain - that the continent cannot allow Chinese companies to "cherry-pick" their way through the best and most promising European enterprises.
Chinese direct investment in Europe leapt from almost nothing in 2009 to €13 billion (S$21 billion) in 2014. It then doubled again in 2015 and peaked at €35 billion last year.
More importantly, the character of the investment has changed. While previous inflows were largely about Chinese companies seeking a fast return on cash surpluses, many of the current Chinese takeovers are aimed very precisely at high-tech, innovative European firms.
And, as EU officials point out, the Chinese financial thrust into Europe is different from that of other key industrial nations. It is dominated by state-owned enterprises, which account for over 70 per cent of Chinese acquisitions in Europe, according to analysis by the Mercator Institute for China Studies, a German-based think-tank.
These Chinese concerns also seem to defy the basic laws of economic gravity. Take ChemChina: The Beijing-based company has debts 9.5 times bigger than its annual earnings, but somehow had no difficulty in finding US$44 billion (S$60 billion) to make a bid for Syngenta, a European biotechnology company that is a leader in genomic research with 30,000 employees.
But the biggest worry for European governments is the lack of safeguards of their companies' intellectual property and the fact that many of Europe's high-tech firms are also developing technologies with direct military use - to which China may gain access.
In theory, there is nothing to prevent EU governments from doing what the United States and Australia already do: Vet and prevent foreign acquisitions deemed harmful to national security. Last month, Germany tightened its takeover supervision system, and British Prime Minister Theresa May promised to do the same during her country's recent electoral campaign.
But legal arrangements in each EU member state continue to vary widely - in Germany, the top target of Chinese acquisitions in Europe, there is no compulsory registration for non-EU takeovers, so the authorities frequently do not even know what is happening.
European nations are also reluctant to be publicly pushing restrictive measures which may anger the Chinese, so they prefer to hide behind the European Commission.
Back in February, France, Germany and Italy joined hands in asking the commission to intervene, but they did so gingerly.
"What is needed is additional protection based on economic criteria taking into account, and with reference to, the commission's expertise", the countries said.
Predictably, the commission was delighted by the prospect of acquiring more regulatory powers.
Still, it has to tread carefully. Commissioners are eager to avoid suggestions that any restrictions on foreign takeovers amount to a European retreat from free markets and globalisation.
The European Commission also has to take into account divergent views among member states. For, while the more technologically advanced European nations want protection from foreign hostile takeovers, poorer EU countries have little to protect from Chinese buyers but every interest in attracting Beijing's investment.
And then, there is a real risk that blocking foreign acquisitions will inspire more nationalism within the EU itself - France's recent decision to veto an Italian purchase of a French shipyard is an example of how hostility to takeovers can easily spread.
Little wonder, therefore, that the European Commission's discussion paper on the topic, released in May, merely pledged EU regulators to "make a careful analysis" and "take appropriate action" on foreign takeovers, without going into any detail.
In his policy speech next month, Mr Juncker is expected to unveil a compromise under which national European governments would have the final say on a foreign takeover if the acquisition poses a risk to national security, but grant to the EU as a whole powers to review foreign takeovers that involve important technologies, but are not directly relevant to national security.
The Chinese are likely to object to such measures. But they can't object too much for, while China's purchases of European companies are booming, EU acquisitions have fallen for the last four years, largely due to Chinese restrictions.
