Dispute between Germany and Chinese investors – DW – 10/21/2022

China’s state-owned shipping company COSCO announced earlier this week that it has delayed an attempt to buy a 35% stake in the Tollerort terminal, the smallest of the four container facilities in the Port of Hamburg.

The announcement came after Minister for Economic Affairs and Climate Action Robert Habeck suggested last week that he would likely veto a takeover over concerns that China was acquiring much of Germany’s so-called critical infrastructure. A spokesman for German Chancellor Olaf Schulz said he had not yet agreed with the relevant ministers on how to proceed with Cosco’s bid.

The German government considers ports to be a critical infrastructure, allowing officials to examine and prevent takeovers of larger stakes in shipping facilities by non-EU companies.

According to the Hans Böckler Foundation, which is linked to the German Trade Union Confederation, about 193 Chinese investors acquired 243 German companies either partially or wholly between 2011 and 2020.

The latest figures provided by EY consultancy show that from 2016 to 2018, the number of acquisitions by Chinese companies fell by 40%, but accelerated again in 2021 to 35 acquisitions, up from 28 the year before, according to the latest data. available.

Yi Sun, head of EY’s major Chinese business services, believes that the ups and downs of China’s overseas investment in major industrial nations is due to increasing attempts by Western governments to avoid future dependence on China and generally curb the influence of foreign companies in national infrastructures. and internal security.

With regard to China, such concerns are not completely unfounded, a study by the European Union this year found. The EU survey, which was conducted in the aftermath of the Russian invasion of Ukraine, found that of the 137 goods and products considered critical, almost half are supplied by China and only 3% by Russia. The commodities examined mainly relate to the healthcare sector and renewable energies.

satisfied with China

In 2016, Germany learned the hard way that FDI from China is not always a positive development. That year, the Ministry of Economy was unable to prevent the complete acquisition of Germany’s leading robotics company, KuKa, by the Chinese company Midea, a manufacturer of dishwashers and refrigerators.

As a result, foreign takeover and acquisition laws were urgently updated in Germany to avoid future unsolicited bids from abroad in key economic sectors such as medical technology, power supply and telecommunications. Later, artificial intelligence technology was included in the list of protected sectors.

The new regulation now gives the government veto power over all significant mergers and acquisitions. “Awareness of the political risks involved has grown,” Christian Roche, an economist at the German Economic Institute, told DW.

Roche cited the failed 2018 bid by China’s state-owned electricity company SGCC to buy a 20% stake in Germany’s 50Hz power grid operator as a good example of state intervention. The quota could have given China undue influence over the management of Germany’s electricity supply. Similarly in 2018, Berlin halted a Chinese purchase of Leifeld Metal Spinning – a global leader in tool machines for foil-less metal forming based in Ahlen.

Germany’s foreign intelligence service, the German Federal Intelligence Service, is warily watching “the rise of authoritarian China into a world power”. The head of Germany’s Federal Intelligence Service, Bruno Kahl, told lawmakers during a recent parliamentary hearing that German leaders were “very satisfied with China” by accepting a “painful dependence” on a power that appears to be “no longer aligned with Germany”.

China’s investment has become a political minefield

With at least 5,000 German companies operating in China and more than two million German jobs dependent on exports to the Asian power, the countries’ economies are intertwined, Horst Loeschel, a China expert at Frankfurt School of Management, told DW. He cautioned against early decisions about Chinese investors in Germany.

Lukele described China’s critical views as “hypocrisy” against the backdrop of recent government efforts to forge closer energy ties with Qatar and Saudi Arabia – two countries not well known as major human rights defenders. Washington’s attempts to pressure Germany and Europe to isolate China also entered here.

Roche said the real impact of Chinese investors on the management of the companies they acquired will only become clear in the long term. He cited a Böckler study that showed that financial pressures from Chinese owners have been increasing over the years.

“There are cases where investors have demanded cuts in staffing and wages, and companies have had to fire workers who were previously protected by labor protection clauses included in the takeover deal,” he said.

Even KuKa’s former owner and CEO Till Reuter has not escaped a power grab by the Chinese investors to whom he sold his company. He was forced to resign in 2018 – two years after he strongly supported Medea’s show. This summer he issued a stern warning, saying that Germany “must reduce its external dependencies in all sectors of the economy – first and foremost those related to China”.

This article was originally published in German.