By blocking the sale of two semiconductor factories to Chinese companies, Germany showcased that it “will not allow China to swallow up its companies of strategic and critical importance,” CNN reported. Berlin's decision comes despite German Chancellor Olaf Scholz's visit to China in November amid criticism by lawmakers from his country and the European Union.
The criticism of the leaders comes as European Union leaders, including Germans, have condemned Beijing for its human rights record and for offering support to Russia amid the ongoing war with Ukraine, as per the CNN report. However, Scholz chose business over ethics as he made China part of his Asian trip.
Olaf Scholz visited China to strengthen bilateral economic engagement between the two nations when China and Germany celebrated 50 years of diplomatic ties. Despite Scholz's visit, Germany blocked the sale of two semiconductor factories to Chinese companies, citing security threats.
Berlin's decision comes despite a shared statement encouraging both nations to “resist protectionism so that the fruitful bilateral cooperation can deliver benefits to the two peoples.” The blocking of the chip factories' deal came as a blow to China as it never thought that Germany would turn down the deal when the takeover of German chip factory Elmos by the Chinese firm Si Microelectronics, and Chinese investment in Bavaria-based ERS Electronic, were on the verge of completion, according to CNN report.
Berlin's decision comes at a time when Germany hinted that it would overrule the government's 2018 decision to screen and even block purchases of stakes in German firms by Chinese investors, according to the news report. A few weeks back, German authorities had permitted a Chinese shipping company to take a stake in a terminal at the country's largest seaport, the port of Hamburg.
After Germany's decision, The Global Times, in its report, said that the move would “inject stability into important China-Germany relations.” However, Germany's decision to block sales of semiconductor factories to China demonstrated that Beijing's happiness was ‘ephemeral.'
Chinese Foreign Ministry spokesperson Zhao Lijian had said, “We hope Germany and other countries will provide a fair, open, and non-discriminatory market environment for Chinese companies doing business there, and refrain from politicizing normal economic and trade cooperation, still less using national security as a pretext to practice protectionism,” as per the news report.
In 2020, Germany blocked the takeover of satellite and radar technology firm IMST by a state-backed missile maker, China Aerospace and Industry Group (CASIC) subsidiary. Similarly, Germany discouraged China's YantaiTaihai from purchasing Leifeld in August 2018. In 2016, state-backed Chinese chemical company ChemChina acquired Germany's machinery maker KraussMaffei Group for about $1 billion.
These takeovers by Chinese companies raised concern among Germans, and the government led by Angela Merkel in December 2018 released new rules to block the sale of stakes in German firms by non-Europeans. The decision was considered a move to stop unwanted takeovers by Chinese investors in strategic sectors.
Amid a downturn in the economy due to the ongoing war between Russia and Ukraine, German Chancellor Scholz tried to overturn such rules. As per the news report, it was viewed as an initial move to accept Chinese shipping giant Cosco's proposal to take a 35% stake in Germany's Hamburg port terminal. Facing pressure from German colleagues and EU leaders, Olaf Scholz permitted the Chinese shipping company to take below 25% stake in Germany's Hamburg port.
Olaf Scholz's visit to China had created an impression among Chinese investors that Germany is open to their funding. However, Germany “proved stronger than the Chinese” as they did not allow Beijing to buy semiconductor companies. Citing The Atlantic report, the CNN report said that Chinese companies are “feverishly” exploring options to secure high-quality semiconductor technology from Europe and Asia after the US restricted the flow of its chip technology to Beijing.
