Chinese companies spent far less on German firms in the second half of this year as Chancellor Angela Merkel’s government moved to tighten its grip on foreign investment, according to data compiled by business services provider Ernst & Young LLP.
Chinese investment in German takeovers or in stakes in German companies plunged to $311 million during the period from almost $10 billion in the first half of 2018. The number of transactions for the full year dropped to 34, compared with 54 in 2017 and 68 the previous year.
“We expect the number to stabilize next year,” Yi Sun, an EY China business specialist, “It will take some time before we see another slight increase.”
Merkel’s cabinet this month agreed to lower the threshold for government probes of foreign stakes in German businesses to 10 percent, driven by concern about China’s efforts to gain footholds in sensitive industries, such as those related to security and defense. Media companies are also included, while the previous 25 percent threshold remains in force for all other cases.
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 the government to rethink its tools for shielding technology companies and securing German competitiveness.
German state-owned investment bank KfW agreed in July to temporarily acquire a 20 percent stake in 50Hertz Transmission GmbH, thwarting an attempted acquisition 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.
EY is advising Chinese clients to avoid investing in German companies like aerospace suppliers, Yi Sun told the FAZ. Europe’s biggest economy nonetheless remains “relatively open” compared to the U.S. and Canada, and there are investment opportunities in machinery, auto parts, health care, pharma and chemicals, she added.