Germany Tightens Foreign Investment Rules With Eye on China

(Bloomberg) -- Germany tightened its grip on investment by companies from outside the European Union, lowering the threshold for government probes of stakes in German businesses considered “critical infrastructure.”

Driven by concern about China’s efforts to gain footholds in sensitive industries, the rule backed by Chancellor Angela Merkel’s cabinet on Wednesday kicks in at stakes of 10 percent in “especially sensitive areas” such as those related to security and defense, the Economy Ministry said in a statement. Media companies are also included, while the current 25 percent threshold remains in force for all other cases.

It’s the latest step by countries from Canada and the U.S. to Germany to increase vetting and shield sectors from defense and telecommunications to power grids and water supplies. Germany has stepped up pressure for coordinated EU action since the takeover of robot maker Kuka AG by China’s Midea Group Co. in 2016. That led Merkel’s government to rethink its tools for shielding technology companies and securing German competitiveness.

“Companies like to invest in Germany and that should not change,” Economy Minister Peter Altmaier said. “But for sensitive infrastructure, we should be able to see exactly who is buying it and what implications that has.”

While Germany is trying to sidestep trade conflict between the U.S. and China, its government also is under pressure to counter Chinese inroads on other fronts. That includes U.S. warnings to German policy makers against using Huawei Technologies Co. equipment to upgrade the nation’s 5G wireless network.

German state-owned investment bank KfW agreed in July to temporarily acquire a 20 percent stake in 50Hertz Transmission GmbH, thwarting an attempt by a Chinese company. In August, Merkel’s cabinet stopped a Chinese bid for the first time by vetoing the potential purchase of machine-tool manufacturer Leifeld Metal Spinning AG.

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