Germany’s Economy Minister Peter Altmaier announced a new law that would give his government a veto over non-EU takeovers as well as the ability to step in during the nationalisation process of a strategic company.
“It can go as far as the state taking temporary stakes in companies – not to nationalise – them and run them in the long run, but to prevent key technologies being sold off and leaving the country,” Altmaier said.
Until recently, the terms “national” and “industrial policy” were considered a contradiction in terms. The new German industrial policy affirms Berlin’s commitment to manufacturing and in line with the goal to have German industry account for 25% of the country’s GDP by 2030, up from 23.4% today.
The German “2030 agenda” echoes the plan of one of its main economic rivals – China’s 2025 agenda. The Chinese Communist Party’s policy spells out Beijing’s ambition to be the leader in 10 of the biggest high-value manufacturing sectors in the near future – a policy that is a direct threat to German companies.
Altmaier spelt out the sectors that Germany is determined to defend from a Chinese takeover including steel and aluminium, chemicals, machine and plant engineering, optics, autos, medical equipment, Green technologies, defence, aerospace, and 3D-printing.
Leaving no room for misunderstanding, Altmaier cited the 2016 acquisition of German robotics maker Kuka by a Chinese company as an example of what this law would strive to avoid in the future.
Altmaier’s agenda is pushing back on Chinese competition, announcing a productivity counteroffensive that reduces business costs, with the state stepping in to assume the environmental and social policy costs. Significantly, the German national strategy favours mergers, sending a clear signal to the European Competition Commissioner in the wake of the Commission’s rejection of a massive deal to merge railway giants Siemens and Alstom that European companies should have the size and reach to counter any Chinese challengers.
The plan centres on allowing the state to take a more active role when it comes to companies with access to so-called strategic technologies. The recent decision by the German government to fund research into electric batteries – a strategic sector in which the German auto-industry lags behind its Chinese competitors – suggests Germany is spearheading Europe’s pushback against China.
The traditionally pro-business Free Democrats (FDP) described Altmaier’s industrial plan as a turn towards “a planned economy,” although he echoes calls for lowering the overall tax burden. Having said that, Germany’s BDI business lobby is calling for a far tougher approach to China’s “state-dominated economy” and underscores the needed for an adequate defence.
The German government, however, is naming champions it is willing to stand behind, such as Siemens, automakers, and Deutsche Bank, citing “national political and economic interest.”
Altmaier argues that open markets and competition should be the norm, but it is the responsibility of the state to sustain innovation and maintain competitiveness if they cannot be achieved through market forces.
Chinese acquisitions in Europe in 2018 dipped by 21%. In the second part of the year, Chinese takeovers in Germany hit their lowest level since 2013. The biggest deal was the acquisition of a share in Daimler by the Chinese auto manufacturer Geely.
Part of the slowdown in Chinese investment can be largely attributed to the broader downturn of the Chinese economy. Beijing’s cautious approach to asset buying is due to the negative climate created by the ongoing Sino-American trade war.
That said, Germany and the United Kingdom continue to be the biggest destination for Chinese investors, followed by Italy and France. in 2018 there was a qualitative diversification in Chinese acquisition strategies, moving gradually from manufacturing to retail and services, particularly when it comes to the integration of artificial intelligence in logistics.