Germany’s
Chinese investment problem
European
firms are being snapped up by China companies, and that’s causing
headaches in Berlin.
By JANOSCH
DELCKER 11/25/16, 5:38 AM CET Updated 11/25/16, 5:56 AM CET
HAMBURG, Germany —
In the conflict between Beijing, Berlin and Brussels over
skyrocketing investment by Chinese firms in European high-tech
industries, China has a major advantage: It has a plan.
Germany doesn’t.
Neither does the European Union.
While trade experts
warn that a recent spending spree by Chinese companies — many of
them supported by the Chinese government — will harm the
competitiveness of European business in the long-term, Berlin and
Brussels are struggling to come up with a political response.
“As we don’t
have EU-owned companies we cannot [behave] the same [as China],”
European Commission Vice President Jyrki Katainen told POLITICO.
It doesn’t make
things easier that European businesses have little incentive to put a
stop to the billions flowing out of China, which provide them with
capital in the short term and help them secure access to the growing
Chinese market.
“To have a major
Chinese shareholder is a huge benefit in opening doors,” Gordon
Riske, CEO of Germany-based Kion, parts of which were acquired by
Chinese state-owned Weichai Power in 2012, said during this week’s
Hamburg Summit, a conference on EU-China economic relations.
As European
officials, business leaders and lobbyists met with their Chinese
counterparts inside the grandiose Hamburg Chamber of Commerce for two
days of talks, they reaffirmed that Chinese investment was still
welcome in Europe. That’s despite warnings last month from German
Economy Minister Sigmar Gabriel that Germany was sacrificing “its
companies on the altar of free markets.”
“We are well aware
that investment and openness are the elements that drive our economy
forward,” former Chancellor Gerhard Schröder said in a speech at
the event. “Germany should therefore not take a defensive approach
to Chinese investment in our economy.”
He echoed calls by
business officials like Nathalie Errand, senior vice president of
Airbus Group in Belgium, who assured Chinese business delegates that
“We as Airbus … don’t like protectionism.”
Made in China
China’s mission to
buy up companies in Europe is part of a plan called “Made in China
2025,” designed to turn the country into a manufacturing
superpower.
“We don’t want
to fight a trade war because this will benefit nobody,” Chinese
Premier Li Keqiang told German Chancellor Angela Merkel in a press
conference last June, when she was in Beijing.
Behind the scenes,
however, conflict is growing. And while Chinese investors target
countries across Europe, Germany has become the primary battleground.
“Germany is the
center of Europe,” Nan Cunhui, chairman of Chinese electrical
company Chint Group, told the audience in Hamburg. “Brands,
manufacturing technologies, in every aspect Germany is the leader.
Other countries, they need to learn from Germany. Germany is the big
brother of Europe, and it needs to play a leading role.”
During the first six
months of 2016, Chinese businesses made more investments in Germany
than in the past five years combined, according to accountancy
company EY.
Overall, Chinese
investment in Europe could top €27 billion this year, the European
Commission estimates. Katainen, who is the commissioner for jobs,
growth, investment and competitiveness, stressed that, in general,
foreign investment is positive for the European economy.
“Where Chinese
capital is creating new industrial companies or things like that, it
is a completely positive thing,” he said.
However, critics say
that with some of its recent investments, China is distorting
competition.
“China uses an
outbound industrial policy, using government capital and highly
opaque investor networks to facilitate high-tech acquisition abroad,”
a report by the Mercator Institute for China Studies, to be published
in December, states.
Gabriel strikes back
When Gabriel’s
office announced in the fall that it would withdraw its previous
approval of the acquisition of German firm Aixtron SE by China’s
Grand Chip Investment, it was widely seen as a way of telling Beijing
that Berlin is monitoring what’s happening closely.
But Gabriel’s
hands are tied, with limited ability to block a merger or
acquisition. Under its Foreign Trade Act, Germany can only intervene
if an investment poses a threat to national security.
Gabriel’s plan is
to expand the definition of threat. However, such a change would most
likely have to implemented at European level.
That means that
Gabriel will need the support of other EU countries for his mission
to take on the Chinese. It won’t be easy. In many Central and
Eastern European countries, Chinese investment is considered a
“silver bullet” for their faltering economies.
What is certain is
that Gabriel can’t count on the support of the European Commission.
“We cannot
interfere with these sensitive issues, so we just try to create the
general rule base,” said Katainen.
Eastern promise
“Made in China
2025” will, at least in its early stages, create massive business
opportunities in China for foreign investors who deliver cutting-edge
industrial equipment and core technologies.
European companies
want their slice of the cake, but there is increasing criticism of
the Chinese government for granting only limited access to foreign
investors, while planning to eventually push them out of the market.
“Yes we are
welcome there — up to a point,” said Mauro Petriccione, deputy
director general in the European Commission’s trade department.
“But how much guarantee do we have that this welcome will stay, in
spite of inevitable change in Chinese policy?”
Experts like Björn
Conrad, vice president of research at the Mercator Institute for
China Studies, who was part of a team that analyzed “Made in China
2025,” agree. He said that once Chinese firms reach a comparable
technology level to foreign investors, a whole spectrum of industrial
policies in their favor will kick in.
When it comes to
investment, both abroad and at home, the Chinese have a plan, and
they seem determined to stick to it.
“One aim of ‘Made
in China 2025’ is to replace foreign technology with Chinese
technology,” said Jost Wübbecke of Mercator Institute for China
Studies, “And that’s okay if it’s based on market rules, but
if it’s based on political interference, then it becomes
problematic.”
Authors:
Janosch Delcker
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