China’s increasingly aggressive approach to business that is often backed by the state has been a cause of concern for many countries, and now Germany has decided to create a state-backed fund that will allow them to thwart Chinese attempts to take over local companies. Although it is broadly directed at Chinese takeover attempts, it also applies to foreign firms at large who wish to take control of German companies. Sources from within the German government say that the government is now working on laws pertaining to the fund and it is expected to be fully functional by 2020. It is also important to note that the idea of such a fund was mooted by Peter Altmaier, the German economy minister in February.
This is a major shift for Germany, a country that had always sworn by free-market principles when it came to businesses but the state-backed aggression of Chinese businesses has forced the country’s policymakers to take a far more defensive approach. A source in the German government told Reuters,
In the past, Germany was too reluctant to define its national interests. This is changing now. We see that we cannot lean back anymore and let everything be decided by the free play of market forces. And this means more protection from the state.
The move comes after China had made long strides into German businesses and according to many officials, the Chinese acquisition of the robotics firm Kuka in 2016 proved to be the wake-up call for the authorities. However, even while the authorities were waking up to the threat of Chinese corporate aggression, State Grid from China tried to acquire a large stake in 50Hertz, the German power grid outfit. Eventually, a state-owned bank had to get involved and save the company from China’s takeover attempts. However, the officials who are privy to the developments stated that the German government has not suddenly become a controlling influence on businesses and in fact, one official stated that the fund would work in partnership with private players. He said, “Ideally, there will be stake acquisitions together with private investors. It’s not about the state becoming entrepreneurial.” Considering the fact that Germany’s industrial exports have shown a marked decline over the past few months, the country’s economy is currently in a delicate position and perhaps remains ripe for takeover attempts from Chinese or other foreign entities.