An industrial mechanic works on a gear at MAN Energy Solutions in Augsburg, Germany

Germany Blocks Another Big Business Deal with China

Germany has blocked the sale of a Volkswagen subsidiary to China on national security grounds, further straining the already tense relationship with its largest trading partner.

In June 2023, MAN Energy Solutions, a part of the Volkswagen Group, announced its intention to sell its gas turbine business to the Chinese state-owned company CSIC Longjiang GH Gas Turbine Co (GHGT). However, a German government review initiated in September raised concerns about the potential use of the turbines to power Chinese warships, according to Reuters.

The decision to block the deal follows the European Union’s recent move to increase tariffs on electric vehicles from China, which led to a trade dispute and a subsequent Chinese investigation into EU pork prices.

Germany’s economy minister, Robert Habeck, stated during a press conference on Wednesday that while Berlin welcomes foreign investments, it must protect technologies relevant to “public security” from countries that may not always have friendly relations with Germany.

Interior Minister Nancy Faeser also supported the decision, citing security reasons.

In 2022, Germany and China traded goods worth €255 billion ($275.3 billion), but Berlin has been working to safeguard its local manufacturers and reduce dependency on China. This shift in policy is partly due to Germany’s adverse experience with its economic ties to Russia, especially its reliance on Russian natural gas, which became problematic after Russia’s invasion of Ukraine.

This is not the first instance of Germany blocking a sale to a Chinese company due to security concerns. In November 2022, Germany stopped the sale of a semiconductor factory to a Chinese-owned tech firm.

A spokesperson for China’s Ministry of Foreign Affairs expressed opposition to the “politicization” of normal commercial cooperation, urging Germany to provide a fair business environment for all companies, including those from China.

In response to the blocked sale, MAN Energy Solutions stated that it respected the government’s decision and would begin a structured process to shut down its gas turbine division over the coming months.

The new EU tariffs, which could increase the cost of importing an electric car from China by up to 38%, are set to take effect on Friday for an initial period of four months. The EU will decide in November whether to extend these tariffs for five years.

Volkswagen, Europe’s largest carmaker, reiterated its concerns about the timing of the EU decision, stating that it could negatively impact the already weak demand for electric vehicles in Germany and Europe.

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