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China won’t budge as Germany plans to veto takeover

2018-07-31

Source: Global Times    Published: 2018-7-30


China and the EU should pursue in-depth industrial cooperation that takes a long-term view and Chinese companies should not halt their steps in going global due to acquisition setbacks, experts told the Global Times on Monday.


Their comments followed media reports saying that the German government is ready to prevent Chinese investors from buying local companies.


For example, the German government plans to veto a proposed takeover of precision machinery manufacturer Leifeld Metal Spinning by China's Yantai Taihai Group due to possible national security threats, German media outlet WirtschaftsWoche reported Friday. The authorities will probably say no to the transaction on Wednesday while reviews are still underway, said the report.


Yantai Taihai Group did not respond to an interview request by the Global Times as of press time.


If the veto is imposed as reported, it will be the first time for Germany to use such powers granted by tough foreign investment legislation enacted in July last year. Under that measure, stakes of 25 percent or more in businesses operating in such fields as defense and information security must be screened. The legislation also lengthened the review period from two months to four months.


Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the Global Times Monday that the German government is expressing its determination to implement the new rules, while putting pressure on China to open its market wider.


Chinese Foreign Ministry spokesman Geng Shuang told a press briefing on Friday that the ministry had noted the reports about Leifeld. He expressed hopes that the German side could treat Chinese investment objectively and provide open and fair market access and a stable institutional framework for Chinese companies' investment.


The legislation also expanded the reviews to include investment in infrastructure and other key sectors. German state bank KfW agreed on Friday to take a 20 percent stake in high-voltage energy network operator 50Hertz, fending off an offer from the State Grid Corp of China, Reuters reported Friday.


A PR representative of the State Grid Corp of China said he was not clear about the deal.


"With China's industrial upgrading and technology innovation moving ahead, the competition between China and Germany - two manufacturing powerhouses - is tending to emerge while their complementarities are declining," Cui said.


Since China's Midea Group successfully purchased German robotics company Kuka in 2016, the European country has become wary of Chinese buyers.


Wang Yingtao, manager of DMG Medical Devices (Beijing) Co, a subsidiary of DMG Chemisch-Pharmazeutische Fabrik GmbH, told the Global Times Monday that he supports Chinese investors acquiring German companies as it brings hope for small and medium-sized enterprises (SMEs) in Germany.


"For example, many SMEs in the medical industry are family-owned. They have distinct advantages and strong technologies. But they're weak in terms of capital and management, so it's hard for them to develop and grow, if not close down," Wang said, adding that Chinese investment is a solution.


The EU is also showing such protectionist sentiment by seeking to establish a joint protection mechanism against the sales of key companies to foreign investors, according to Cui.


"On further cooperation and trade between China and EU, we should consider the US, but that is not the only factor. How to maintain in-depth, sustainable and irreplaceable economic relations is the key," he stressed.


Amid the escalating trade friction between China and the US and Western countries' pushback against Chinese investment, Chinese enterprises should not flinch when it comes to globalizing, said Bian Yongzu, a research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.


"Objectively speaking, the current situation is not favorable for our enterprises to nail down overseas deals. However, from the economic point of view, business opportunities still exist," Bian told the Global Times Monday.


"It's very important to stick to globalization and making the cake a bigger and bigger one," he added.


Bian Yongzu is a research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.

Key Words: China   EU   market   Bian Yongzu  

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