With eye on China, Germany tightens foreign investment rules

German Chancellor Angela Merkel attends the weekly cabinet meeting in Berlin on December 19, 2018. (Reuters)
Updated 19 December 2018
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With eye on China, Germany tightens foreign investment rules

  • Germany agreed new rules on Wednesday to lower the threshold for screening and even blocking purchases of stakes in German firms by non-Europeans
  • The decision by Angela Merkel’s cabinet is a response to mounting concern that China’s state-backed companies are gaining too much access

BERLIN: Germany agreed new rules on Wednesday to lower the threshold for screening and even blocking purchases of stakes in German firms by non-Europeans, in a move to fend off unwanted takeovers by Chinese investors in strategic areas.
The decision by Angela Merkel’s cabinet is a response to mounting concern that China’s state-backed companies are gaining too much access to key technologies in Europe’s biggest economy while Beijing shields its own companies.
Under the new rules, which come into effect immediately, Berlin can intervene on grounds of public interest if a non-European investor buys a 10 percent stake in a company, sharply reducing the threshold from 25 percent.
“Companies like investing in Germany and it should stay that way. But we must be able to look carefully at who is buying sensitive infrastructure and what consequences that has,” said Economy Minister Peter Altmaier.
Germany introduced the 25 percent threshold in 2004 and expanded its veto powers in 2017. The measures are meant to protect vital infrastructure such as energy, water, food supply, telecommunications, defense, finance and transportation. The rules passed on Wednesday added media companies.
Highlighting fears that Germany is also a target for cyberattacks, the Office for Information Security has warned several German firms of increased Chinese activity, a newspaper reported earlier.
Some business organizations criticized the move.
“Germany must remain open to foreign investors,” said the BDI industry association while the DIHK Chambers of Commerce said the new threshold sent a negative signal to foreign partners.
“It is important to keep a balance ... and to use the instruments only after careful consideration,” said Joachim Pfeiffer, spokesman for economic affairs in Merkel’s conservative bloc, adding: “Sealing ourselves off is not the answer, it leads to a spiral of protectionism.”
So far, Germany has never blocked a stake purchase by a non-European company based on the shareholding threshold rules.
However, China’s Yantai Taihai dropped an attempted purchase of Germany’s Leifeld, a maker of tools for the nuclear power sector, after Berlin signalled in August that it would veto it.
In July, a German state bank took a stake in high-voltage grid operator 50Hertz to stop China’s State Grid buying it after it found no alternative private investor in Europe.
A Chinese Foreign Ministry spokeswoman said the new rules mentioned no specific country and that while ties were good, Germany and China shared responsibility to protect free trade.
“We hope Germany can create a fair, open market access environment and stable institutional framework for foreign companies, including Chinese ones, investing in Germany,” she said.
Among prominent investments in Germany are the 2016 purchase of German robotics maker Kuka by China’s Midea and Geely’s surprise purchase of almost 10 percent in Daimler in February.
European Union states agreed earlier this month to a far-reaching system to coordinate scrutiny of foreign investments in Europe, notably from China.BERLIN


In nod to debt concerns, China Belt and Road summit to urge sustainable financing

Updated 21 April 2019
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In nod to debt concerns, China Belt and Road summit to urge sustainable financing

  • The Belt and Road Initiative envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond
  • But the initiative has proved controversial in many Western capitals, particularly Washington

SHANGHAI: World leaders meeting in Beijing this week for a summit on China’s Belt and Road initiative will agree to project financing that respects global debt goals and promotes green growth, according to a draft communique seen by Reuters.
The Belt and Road Initiative is a key policy of President Xi Jinping and envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond with massive infrastructure spending.
But it has proved controversial in many Western capitals, particularly Washington, which views it as merely a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.
The United States has been particularly critical of Italy’s decision to sign up to the plan last month, the first for a G7 nation.
In an apparent nod to these concerns, the communique reiterates promises reached at the last summit in 2017 for sustainable financing — but adds a line on debt, which was not included the last time.
“We support collaboration among national and international financial institutions to provide diversified and sustainable financial supports for projects,” the draft communique reads.
“We encourage local currency financing, mutual establishment of financial institutions, and a greater role of development finance in line with respective national priorities, laws, regulations and international commitments, and the agreed principles by the UNGA on debt sustainability,” it added, referring to the United Nations General Assembly.
The word “green” appears in the draft seven times. It was not mentioned once in the summit communique from two years ago.
“We underline the importance of promoting green development,” the draft reads. “We encourage the development of green finance including the issuance of green bonds as well as development of green technology.”
The Chinese government’s top diplomat, Wang Yi, said on Friday that the Belt and Road project is not a “geopolitical tool” or a debt crisis for participating nations, but Beijing welcomes constructive suggestions on how to address concerns over the initiative.
A total of 37 foreign leaders are due to attend the April 25-27 summit, though the United States is only sending lower-level representatives, reflecting its unease over the scheme.
The number of foreign leaders at the April 25-27 summit is up from 29 last time, mainly from China’s closest allies like Pakistan and Russia but also Italy, Switzerland and Austria.
China has repeatedly said Belt and Road is for the benefit of the whole world, and that it is committed to upholding globally accepted norms in ensuring projects are transparent and win-win for all parties.
“We emphasize the importance of the rule of law and equal opportunities for all,” the draft reads.