On August 1, the German Cabinet voted to block Yantai Taihai Group’s proposed acquisition of machine tool manufacturer Leifeld Metal Spinning. Leifeld is one of the leading producers of high-strength metals for the auto, space, and nuclear industries. A July 2017 reform provides German regulators the ability to review inbound investment against a range of security-related concerns, but this is the first time those powers have actually been used to forestall a Chinese-led acquisition of a German entity.
The decision taken by Merkel’s Cabinet is the latest development in a recent toughening of the German government’s stance on China. On July 27, German state-owned bank KfW spent approximately $895 million on a 20% stake in local power distribution company 50 Hertz after Chinese power company State Grid had attempted, for the second time, to acquire a stake in that company. The government commented, “On national security grounds, the federal government has a major interest in protecting critical energy infrastructure. The citizens and business community expect a reliable energy supply.”
Concern regarding the consequences of Chinese investment in Germany began to seriously intensify in 2016, when China’s Midea Group purchased robot manufacturer Kuka AG.