Last week Germany blocked the sale of a satellite and radar firm to a Chinese state-backed buyer, the latest in a cooling of corporate relations between the two countries.
China Aerospace and Industry Group (CASIC) had tried to buy IMST, a Duisberg-based firm founded in 1992 and known for a series of radar module innovations helping enable 5G and 6G telecommunications rollouts.
The company is also a key partner to the German Aerospace Center (DLR) – a key reason Berlin vetoed the move on national security grounds, according to a document seen by Reuters.
The block marks a high point in tension between Berlin and Beijing, as the former takes steps to prevent Chinese takeovers of German firms with sensitive technology or information.
Under new rules the German government may intervene if a foreign investor attempts to buy a 10% stake in a German company, rather than the previous threshold of 25%.
Last week’s news follows the 2018 block of a sale of toolmaker Leifeld by Yantai Taihai, and China’s State Grid’s attempt to buy grid operator 50Hertz the same year.
States across the EU have grown fearful that China may use the COVID-19 pandemic to snap up weakened European firms at bargain prices. This contradicts the fact that Chinese investment in Europe has actually dropped significantly: the $13 billion China spent last year is a third that of 2016.
Nonetheless, Germany’s toughening stance is a striking moment given Berlin’s cosy ties with Beijing. Human-rights issues have brought its leading corporations’ operations in the Middle Kingdom into question: Volkswagen, Daimler, BMW and BASF all have large manufacturing plants in the Xinjiang region, where China is forcibly detaining hundreds of thousands of Muslim Uighurs.
The EU hopes incoming US President Joe Biden will dampen some of Donald Trump’s most fiery trade standoffs with China, and work with allies on economic progress with Beijing. Brussels’ Comprehensive Agreeement on Investment (CAI) with China is seen as a legacy issue for German Chancellor Angela Merkel, who leaves office next year after 16 in the role.
But negotiations have passed six years and 34 rounds. Some believe its chief goal—opening a level playing field for access to the Chinese market—is far too optimistic.