The European Union is busy drafting a law which aims to stop Chinese companies from buying up European firms and technology, deputy German Finance Minister Matthias Machnig has announced.
As reported by German media, Machnig said that the draft EU law “has found support in European capitals” because the continent “urgently needed a legislative tool” to examine strategic takeovers and stake-holding by foreign states and, if necessary, powers to intervene.
The initiative has come from Germany, France and Italy, and has European Commission approval. It is now subject to consultations within the EU Council of Ministers and the European Parliament, Machnig added.
“It is urgently necessary that within this year we are handed a sharper legislative instrument to resist takeover fantasies or outflows of technology and know-how,” he was quoted as saying.
“Firm takeovers are rising, unfortunately often under market-distorting financial conditions.”
Known Chinese investments in Germany had jumped from €100 million ($124 million) seven years ago to €12.1 billion last year, the Cologne-based Institute for Economic Research (IW) told Welt am Sonntag.
“In most cases less than 50 percent of the sum of transactions of Chinese firms in Germany actually became public,” said the IW’s Christian Rusche.
Overall, foreign buyers took over a record number of 873 German companies last year.
According to Berlin-based Mercator Institute for China Studies, foreign direct investment (FDI) in Germany started soaring in 2015 and hit a record of 11 billion euros ($12.6 billion) of completed deals last year. This makes Germany the largest recipient of Chinese FDI in Europe.
Chinese appliance manufacturer Midea’s purchase of German robot manufacturer Kuka for 4.4 billion euros was by far the largest transaction last year. The proposed legislation is a direct response to the Kuka takeover.
In 2017, the German government cancelled its initial approval of a Chinese takeover of semiconductor equipment maker Aixtron, a deal that was later shut down by the US government.
In early 2016, Beijing Enterprises acquired waste incineration and power generation company EEW Energy for 1.4 billion euros.
The acquisition of Munich-based industrial machinery maker KraussMaffei Group for 925 million euros by China National Chemical Corporation was the fourth-largest Chinese investment in Germany in 2016.
In October 2016, China’ sovereign wealth fund CIC invested one billion euros in German property group BGP. The transaction was the first major Chinese investment in German homes. According to Reuters, CIC and its co-investors beat out German property groups Vonovia and Deutsche Wohnen in the auction for BGP.
Putzmeister, a 59-year-old maker of pumps for concrete, was bought by its Chinese competitor Sany for 360 million euros in 2012.
The sudden Chinese wealth is the direct result of the deindustrialisation policies pursued by Western governments ever since the Reagan-Thatcher era, when it was claimed that outsourcing European and American manufacturing would lower the cost of goods and First World nations could transition to so-called “service industries”—which mainly now consist of money shuffling in the large financial centers and take-away food industries for the “workers.”
This principle ignored the basic economic reality that wealth creation only comes about through the physical manufacture of goods, and nothing else. The decision to outsource manufacturing to China has effectively gutted the west, and now, with the wealth so transferred to the Far East, the Chinese are attempting to buy up what is left of European industry.