Fears for Volvo Expose Sour Turn in Sweden’s Ties With China

In late 2017, Geely became the second largest stakeholder in Sweden’s largest industrial company, Volvo Truck, whose subsidiary, Arquus (formerly Renault Trucks Defense), makes military vehicles.

“We know that Chinese companies are used by the Chinese government as a way to get information and serve as a base for influencing other countries,” Mr. Wastberg, the former diplomat, said.

In May, amid increasing concerns over the threat to national security, the government proposed new rules for mergers and acquisitions that would allow officials to block foreign takeovers of Swedish companies.

But the threat went beyond the economy, the intelligence service said, warning of China’s stepped up efforts “to influence basic freedoms and rights in Sweden,” by “trying to influence Swedish politicians and media.” That seemed a reference to a spat over the arrest of a Hong Kong-based publisher who holds Swedish citizenship.

After the publisher, Gui Minhai, was abducted in Thailand and convicted in China, Sweden honored him with a human rights award. That prompted China’s ambassador to Sweden, Gui Congyou, to issue a stark warning. “We treat our friends with fine wine,” he told Swedish radio in November, “but for our enemies we have shotguns.”

But no China-related issue has so galvanized Swedes as the proposed Volvo merger.

Mr. Li started Geely, the first Chinese carmaker not owned by the state, in 1997. When he and Mr. Sundemo, the Swedish engineer and union leader, met in 2009 in Shanghai, there were a lot of smiles, Mr. Sundemo recalled.

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