Through the majority shareholder right of first refusal, the German government prevented China’s State Grid Corporation from acquiring a 20% stake in the major German electricity transmission company 50Hertz, in late July. Now, Germany has gone even further, vetoing the purchase of Leifeld Metal Spinning AG by the Yantai Taihai Group. These actions parallel investment crackdowns seen in the US, UK, and Canada, and reflect Germany’s hardening view of Chinese investment (Financial Times, Bloomberg).
In 2017, Germany revised their foreign investment laws to more closely scrutinize incoming investment, setting their review threshold at 25%. However, despite not triggering an official review, the bid for a stake in 50Hertz, an integral part of Germany’s energy infrastructure, by a Chinese State-owned Enterprise stirred concern in Berlin. Consequently, the German state-owned bank KfW collaborated with Belgium’s Elia System Operator, 50Hertz’s majority shareholder, to invoke its pre-exemption right, thereby excluding China’s State Grid Corporation from the deal. KfW then bought the 20% share themselves as a temporary measure, planning to resell the shares at a later date.
Shortly thereafter, Germany’s chief executive body voted to veto the acquisition of Leifeld Metal Spinning AG by the Yantai Taihai Group following an Economic Ministerial review emphasizing national security concerns associated with the acquisition. Unlike China’s State Grid Corporation, the Yantai Taihai Group is a privately owned and operated organization. However, they remain an important player in the ‘Made in China 2025’ initiative, which Mikko Huotari, deputy director at the Mercator Institute for China Studies in Berlin, describes as a “threat” that “Germany is well aware of” (Bloomberg). This is the first time that Germany has vetoed a Chinese takeover of a German company.
Following these events, Peter Altmaier, Germany’s federal Economics Minister, has revealed that Germany plans to lower their foreign investment review threshold for the second year in a row, this time to 15%. Altimer told Die Welt newspaper that this regulatory amendment will be enacted as quickly as possible and will enable the government to “check more acquisitions in sensitive sectors of the economy” (CNBC).
Through their hardening stance towards incoming Chinese investment, Germany has highlighted the tensions partially arising from China’s bid for technological leadership through the ‘Made in China 2025’ initiative. As a country partially dependent upon the export of high-tech products, this threatens Germany’s economic security. Similarly, the US, UK, and Canada have reacted to similar fears by taking comparable measures to block incoming Chinese investment in recent months (Financial Times, Bloomberg).