The German government moves to veto Chinese investment in “strategic sectors”

German Chancellor Angela Merkel (L) and Chinese Premier Li Keqiang attend an event to present a project on autonomous driving at former Tempelhof airport in Berlin, Germany, 10 July 2018. EPA-EFE/MICHELE TANTUSSI / POOL

The German government moves to veto Chinese investment in “strategic sectors”


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The German government has blocked a Chinese takeover of two strategic companies, namely Berlin’s power grid (50Hertz) and the Leifeld engineering company.

The block on Chinese investment echoed US rationale, making reference to “national security.” On the one hand, electricity is by definition a “strategic” infrastructure, while Leifeld is linked to aerospace and nuclear technology.

This is the first German government veto on Chinese investment; the government can block takeovers of more than 25% of a company by a non-EU company.

Chinese takeovers in Germany have targeted a number of strategic sectors, including robotics (Kuka), cement manufacturing (Putzmeister), mechanical engineering (Krauss-Maffei), wind energy (WindMW), and waste management (EEW). In 2017 alone, there were 54 Chinese takeovers in Germany, valued at just under €12bn.

Beyond takeovers, a number of major German corporate actors have signed strategic alliances with Chinese firms that may include technology transfers, including BASF, BMW, Volkswagen, Daimler, Siemens, and Bosch.

The fear is now that Chinese state-owned companies are positioning themselves to take the lead in sectors in which Germany holds a competitive edge. Beijing’s 2025 agenda is sector-specific and focuses on the objective of China emerging as the global leader in energy and propulsion systems, biotechnology, medical technology, robotics, aerospace, new materials, and information technology.

Chinese investment in Europe already includes stakes in member state strategic infrastructure. State-owned Chinese companies are currently negotiating a share in Austria’s IFM fund and the Belgian transmission system Elia. Plans for the takeover of US strategic firms such as Qualcomm and M&A by China’s ZTE have been abandoned.

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