Germany blocks 2 foreign investment deals, takes tougher line on China

The decision to bar a Chinese firm from acquiring a domestic semiconductor maker comes as Germany reassesses its ties with its trading partner giant.

Chancellor Olaf Scholz's government on Wednesday blocked the sale of a semiconductor company to a Chinese firm, as Germany seeks to strengthen the protecting its national technology and reducing its dependence on China.

Robert Habeck, Germany's economy minister, said the government has also blocked a separate investment in a German company producing critical infrastructure, which he said could not be identified due to confidentiality agreements.< /p>

Last week, Mr. Scholz traveled to Beijing, where he met President Xi Jinping for talks on Russia's war in Ukraine, as well as economic ties between the two countries. China is Germany's largest trading partner, exchanging goods worth more than 245 billion euros (about $246 billion) last year.

But the German authorities are wary of being too dependent on China. More than a million German jobs depend directly on trade with China, and many more indirectly, while almost half of German manufacturing companies depend on China for part of their supply chain.

There is also growing frustration in Berlin over Beijing's refusal to give foreign companies the equal treatment in China that Chinese companies enjoy in Germany and elsewhere in Europe. Especially when it comes to critical infrastructure and technology, there are growing concerns about allowing too much access to Beijing's state-owned companies.

"Especially in the semiconductor sector, it is important for us to protect the technological and economic sovereignty of Germany and Europe," Habeck told reporters on Wednesday. "Of course, Germany is and will remain an open investment location, but we are not naive either."

Mr. Habeck named Dortmund-based Elmos Semiconductor as one of the companies that had been denied foreign investment permission.

Elmos announced there It's been nearly a year since it planned to spin off its wafer fab, which produces chips primarily used in the automotive industry, into a separate entity that was to be acquired by Silex Microsystems, a Swedish-owned company in 100% by a Chinese company.

From the outset, the €85 million deal was subject to government approval as it involved the purchase of a German company by a foreign company.

On Wednesday, Elmos released a statement saying it regretted the government's decision and that the deal would have bolstered production of chips in Germany. He said he would "analyze the decision" and "decide whether to take legal action".

Mr. Habeck declined to name the second company whose sale was blocked, noting that the company's internal secrecy agreements prevented it from doing so. But German business daily Handelsblatt reported that it was ERS Electronic, a cooling technology company based in Bavaria.

A spokeswoman from ERS said the company had discussed “an investment by a Chinese private equity firm,” but added that it had not yet received any information from the government about a decision.

Last week, before leaving for Beijing, Mr. Scholz rejected the recommendation of six of his ministries and heads of domestic and foreign intelligence services to authorize Cosco, a public shipping company China, to buy up to a 25% stake in a container handling terminal in Hamburg, Germany's largest port. .

Cosco initially sought to acquire a 35% stake, but that was reduced...