Germany in China-bashing mode over strategic takeovers

Sectors of the government in Berlin are calling bluntly for an intervention of the European Union (EU) to protect its members against unfair investment practices from Chinese state-owned and private companies. While both EU institutions and member states are sending mixed signals over this German proposal, hawkish supporters of Brexit – Britain’s exit from the EU – are pushing for their leaders to seize on the “China-bashing” that is taking place across the Channel.

Berlin fears that the rise in China’s takeovers of German national assets, notably in the dual-use (i.e. civil and military) hi-tech industry, is driven in large part by the Chinese undisguised desire to buy up Western know-how and intellectual properties, something that will negatively affect the country’s security.

In the run-up to and during his just-concluded five-day visit to China and Hong Kong, German Economic Minister and Vice Chancellor Sigmar Gabriel warned of the current mismatch between China and Europe, with Beijing easily snatching up European technologies while making it difficult for European companies to buy Chinese assets. Not least, on November 7, the standing committee of the Chinese National People’s Congress passed through a cyber-security law requiring overseas enterprises to store data in the mainland and face security scrutiny.

Protectionism is hardly the path that Germany and other EU countries are eager to tread. Berlin does not want to cut ties with China; it actually calls on Beijing to ensure a level field to foreign players, as voiced many times by Michael Clauss, the German ambassador to Beijing.

In the absence of reciprocity, Germany has already blocked some Chinese acquisitions of high-tech national companies. In particular, Berlin recently prevented China’s Fujian Grand Chip Investment Fund from taking over chip-equipment maker Aixtron, in a purchase worth US$740 million. The German government justified the move by advancing security reservations, reportedly pushed by the United States.

The European Commission – the EU executive body – has so far steered clear of the current Sino-German spat. Only Germany’s EU Commissioner Guenther Oettinger, a Christian Democrat like Merkel, who has recently come under the spotlight after talking about Chinese officials in racist terms, did embrace Gabriel’s initiative.

The EU has no body comparable to the US Committee on Foreign Investment, but its anti-trust regulators have already questioned and stalled a number of Chinese bids for industrial takeovers in Europe, like ChemChina’s attempt to secure Swiss seed maker Syngenta.

For their part, the Chinese leaders have tried to counter German blows. The Chinese Foreign Ministry contended on November 2 that the volume of European investment in China was constantly growing and that exceeded the amount of Chinese capital in Europe. Beijing’s figures are at variance with those released by the EU Commission in late October; according to Brussels, in fact, the stock of European foreign direct investment in China has been remained below US$2 billion in the last four quarters.

Now, a dramatic rupture of the Sino-German “special relationship” and, accordingly, the dynamic economic synergy between China and Europe, is to be excluded. Down the road, however, if the two actors do not manage to strike a balance between their investment policy, a short circuit will be possible. In this sense, the protectionist sentiment that is mounting among European citizens will not certainly be of help, like the possible decision by the new American administration to further shield the country’s military-industrial complex – and its connections with the Old Continent’s strategic industries – from Chinese capital.

Full article: Germany in China-bashing mode over strategic takeovers (Asia Times)

Comments are closed.