Once welcoming, why Germany is wary of Chinese investment amid Trump’s trade war

A China-led wave of company acquisitions has seen Berlin grow leery of granting market access to foreign investors. But fears of an exodus of tech know-how are balanced by a desire to do business on the mainland

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Li Keqiang with Angela Merkel. Photo: EPA

Published: 8:00am, 26 Aug 2018Updated: 4:17pm, 1 Nov 2018

A wave of Chinese acquisitions of hi-tech companies in Germany has Berlin – traditionally a free trade proponent on the international stage – wary of granting market access to foreign investors.

Late last month, Chancellor Angela Merkel’s cabinet for the first time moved to veto the Chinese takeover of a German firm. Yantai Taihai Group withdrew its offer for toolmaker Leifeld Metal Spinning at the last minute, after the German government signalled it would block the acquisition because of “security reasons”.

Leifeld produces equipment used in the nuclear energy and aerospace industries. Days before that deal collapsed, Germany’s state-owned bank, KfW, announced it would acquire a 20 per cent stake in power grid manager 50Hertz, fending off an offer from the State Grid Corporation of China.

The German government also this month announced plans to lower the minimum threshold to screen foreign investment in industries linked to defence or national security.

Last year the government tightened controls on foreign investments by giving itself the power to intervene if a foreign investor obtained a 25 per cent stake in a German company. Berlin now wants to screen acquisition deals more closely, by reducing that threshold to 15 per cent.

Chinese firms have acquired stakes in German firms such as Daimler, which owns Mercedes-Benz. Photo: Handout