Germany wants tighter foreign investment controls amid China ‘de-risking’

German Economic and Climate Protection minister Robert Habeck visits the steel plant of ThyssenKrupp in Duisburg, Germany, July 26, 2023. REUTERS/Wolfgang Rattay

BERLIN – German Economy Minister Robert Habeck wants to tighten the process for reviewing foreign investments with a new law that would aim to enhance economic security, according to a ministry document seen by Reuters on Sunday.

The effort comes as Berlin urges companies to reduce their reliance on China and as the government examines whether its current set of regulations is sufficient to encourage this.

It also reflects a broader push in the West to reduce strategic dependence on China – which policymakers have labelled “de-risking” – amid concerns about increasing Chinese expansiveness in the Indo-Pacific region and about broader possible supply chain disruptions.

Germany has at times been seen as a weak link in the Western approach to China, given the strong business ties with its single biggest trading partner. An effort by China’s Cosco for instance to buy a stake in a goods terminal in Hamburg, the country’s largest port, was ultimately approved by Berlin.

“Investment reviews have gained enormously in importance in Germany, Europe and internationally in recent years,” the document said.

As part of the law under consideration, investments would be audited in which an investor gains access to a domestic company’s goods or technologies through contractual agreements, rather than through the acquisition of voting shares – already the subject of sufficient regulatory control.

In addition, the ministry is also considering checking the security significance of new factories built in Germany by foreign companies, as well as whether security-critical research cooperation deals need to be scrutinized.