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Germany toughens stance on Chinese investment

Germany toughens stance on Chinese investment

HAMBURG, Germany -- Germany's move to block a Chinese company from buying a local producer of specialized machinery tools is the latest sign that Berlin is toughening its stance on Chinese investments into strategic and security-related sectors.

Wednesday's decision to forbid Yantai Taihai Group from buying Leifeld Metal Spinning, whose machines produce high-specification metals for aerospace, nuclear and other applications, on security grounds marks the first time Berlin has stopped a Chinese acquisition since the government's screening powers were strengthened last year. The cabinet acted even though Yantai Taihai had canceled the deal hours earlier in the face of the government's signaled opposition.

The collapse of the sale came just five days after state-owned development bank KfW stepped in to acquire a 20% stake in local power network operator 50Hertz Transmission that State Grid Corp. of China was seeking.

Berlin has in recent years grudgingly watched as Chinese investors scooped up a number of industrial crown jewels, most prominently robotics maker Kuka, which was bought by Chinese appliance maker Midea Group in 2016 for 4.5 billion euros ($5.27 billion). Alarm was raised further after carmaker Zhejiang Geely Holding Group revealed in February that it had built a 9.7% stake in Daimler, making it the top shareholder of the owner of the Mercedes brand .

"China's strategic goals in the acquisitions have become more obvious over time," said Christian Schmidkonz, who researches China as a professor of international business at Munich Business School. "Geely's unexpected entry into Daimler has ultimately fueled suspicion of the investment goals and power of Chinese companies that are involved in the national 'Made in China 2025' master plan."

Germany's toughening stance comes despite warm words between Chancellor Angela Merkel and Chinese Premier Li Keqiang during Li's visit to Berlin last month. Amid rising trade tensions between the U.S. and both nations, China has been seeking to keep Europe's doors open to high-tech acquisitions and has recently doled out special privileges to German companies.

By Courtesy of asia.nikkei.com

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