Germany turning against foreign investment?
The German government is making moves to increase its power over large foreign investments into the country. Big enough deals are subject to a final ministerial veto which can be exercised to halt takeovers which are considered to be undesirable for the larger German economy. Now the threshold at which this veto kicks in is set to be lowered significantly.
Berlin can currently veto deals in which at least 25% of a German company is being purchased by foreign entities from outside the EU, and it is seeking to lower this threshold to 15% in the face of an increasingly aggressive Chinese acquisition strategy.
Peter Altmaier, the minister for economic affairs and energy, says that the policy will allow the German government to “check more acquisitions in sensitive sectors of the economy”. It is thought that the measures are being put in place specifically to protect Germany’s defence, technology and critical infrastructure sectors.
Germany’s turn towards a more protectionist economic strategy concerning money from outside the EU is perhaps coming at the right time. China’s trillion dollar Belt and Road project aims to do nothing less than reshape half the world and push China into becoming the hegemonic global power. This network of roads and ports reaches as far as Duisberg, an industrial city in the heart of Germany’s famous Ruhr Valley. It offers a real-time exhibition of what Chinese involvement in German industry may look like in the future.
Regarded as the world’s largest inland port, Duisberg sees 30 Chinese trains a week which ferry cheap consumer items from the Far East into the heart of Europe’s powerhouse economy. In return the trains are packed full of premium European goods such as Scottish whiskey and German cars for the domestic Chinese market.
The Belt and Road project is turning Duisberg into Europe’s central logistics hub, and about 80% of Chinese trains into Europe now make it their first stop. The Mayor of Duisberg, Sören Link, has called it “Germany’s China city”.
Whilst Duisberg is only one case, it is understandable that German lawmakers are beginning to worry a little. The country has achieved its status as an economic giant through a strong inward investment strategy which has strengthened its major industries into world leaders during turbulent times.
By taking steps to resist foreign investment in this manner, Germany is acting to protect its hard work in the past and its stability in the future. Kuka, a leading German robotics manufacturer, was bought for €4.5bn in 2016 by Chinese appliance maker Midea, and now China has refocussed on Made in China 2025 – its policy to transform itself from a low-cost manufacturer into a global high tech powerhouse by 2025.
With that in mind, aggressive expansion into foreign high tech industries can start to look a lot more ominous. By moving early to protect its industries, Germany hopes to maintain stability and preserve its economic power far into the future. Time will tell if this gentle new form of protectionism will be beneficial in the long term.