The debate on the sale of critical assets to China rages in Germany. The controversy generated by the entry of Chinese capital in a container terminal in the port of Hamburg, approved last week, seems to have influenced the decision of the ministries involved to reject the new operation. The head of Economy and Climate, the green Robert Habeck, threatens to veto the sale of the semiconductor manufacturer Elmos, based in Dortmund, in the west of the country, to the Swedish firm Silex, 100% owned by the Chinese Sai Microelectronics.
Pressure on the German government over trade deals with Beijing has only increased in recent days, before and after Chancellor Olaf Scholz’s highly criticized visit to Xi Jinping last Friday. The Office for the Protection of the Constitution, the German national security agency, had sounded the alarm and recommended that the Executive reject the agreement, despite acknowledging that Elmos’ technology is not state-of-the-art. The agency recalled that China is targeting certain industries to use as political bargaining chips. Along these lines, Habeck has argued this Tuesday that his refusal is based on the fact that the transaction would endanger security and public order in Germany.
Elmos announced in December last year its intention to sell its chip production plant to its Swedish competitor Silex for 85 million euros. The company assures that the entry of foreign capital would allow it to ensure its future viability in a very competitive environment. If the operation is rejected, it is likely that the government will have to offer some kind of help to Elmos so that it can maintain chip production. In the heat of the government’s foreseeable change of course, the company’s stock fell 13% on Tuesday.
Until a few days ago, everything seemed to indicate that the operation was going to have the approval of the Government, but the controversy generated by the sale of the Hamburg port terminal to Cosco has caused a change of course. The Hamburg deal initially consisted of the acquisition by the Chinese shipping company Cosco of 35% of the shares in the terminal. The chancellor was in favour, but opposition from several of his ministers – both those of his Liberal and Green partners and some Social Democrats – forced him to accept a compromise solution. Finally, the council of ministers approved the sale of 24.9% to prevent Cosco from having the right to take part in operational decisions.
The Executive is discussing these days how to change the investment evaluation procedures, so that issues that go beyond the operation itself are analyzed by default: if Germany further increases its dependence on another State; if it is a critical infrastructure that comes under the control of a third party, or if there is a risk that crucial technological knowledge leaves the country. Almost all ties with Russia severed after the invasion of Ukraine, attention now turns to China and its undisguised attempt at economic colonization. The Government is currently working on a new strategy with respect to the Asian giant that, if it includes the keys that the Social Democrats, Greens and Liberals agreed to in the coalition agreement, will imply a much harsher discourse.
The final decision on the semiconductor company is expected to be made this Wednesday in the council of ministers. Unlike the port of Hamburg, the Scholz Executive has tried to give an image of unity. Until this Tuesday, no minister had spoken out against the operation, although members of the liberals had, such as Lukas Koehler, vice president of the parliamentary group: “It is important to avoid Chinese influence both in critical infrastructure and in key industries. ”, he assured.
So far this year, the Ministry of Economy has initiated 261 national investment evaluation procedures. Most are approved quickly because applicants come from non-suspect countries like the United States, Japan, or the European Union. Currently, there are 44 applications pending, including 17 from China, reports the Süddeutsche Zeitung. In April, the government banned the sale of the medical technology company Heyer Medical, which among other things makes ventilators, to a Chinese investor. The context was different and the news hardly had an impact. Now that Germany is in the process of reassessing its dependencies on third countries, any purchase will be scrutinized with a magnifying glass.
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