Berlin plans tighter control of Chinese investments

The German government plans to tightly control Chinese investments and stakes in critical infrastructure, the business daily Handelsblatt reported.

It cited a confidential draft document as saying that Germany wanted a better overall European overview of Chinese investments and investments in critical infrastructure.

Furthermore, cooperation with China should be designed in such a way that risks to the freedom of research and teaching and unregulated know-how and technology transfer are minimized.

The center-left government coalition of Chancellor Olaf Scholz has launched a strategic review of its relations with China as Berlin is forced to cope with its economic reliance on an increasingly belligerent Asian superpower.

At the Scholz urging, the cabinet recently decided that a Chinese company could take a stake in a terminal in the port of Hamburg. However, planned deals by Chinese investors with two German chipmaking companies were stopped by the government.

Meanwhile, the government is also planning to conduct so-called "stress tests" for those German companies that are especially dependent on doing business with China.

"On this basis, we will assess whether affected companies should conduct regular stress tests in order to identify China-specific risks at an early stage and take corrective measures," the draft said.

"We aim to oblige companies particularly exposed to China to specify and summarize relevant China-related developments and figures, for example in the form of a separate notification obligation, on the basis of existing disclosure requirements," it added.

China has been Germany's most important trading partner since 2016, with German carmakers at the forefront of that relationship. For instance, Volkswagen relies on the Chinese market for at least half of its profits.

The German economy's stakes in China continued to increase in 2022, with a record 10 billion euros in new investments.

Scholz's coalition government has labeled China a "systemic rival," and underlined the need for Germany to diversify politically as well as economically by focusing on relationships with other Indo-Pacific countries like India, Japan and South Korea.