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China Germany Fight
Germany Worries About China

Late last week, Berlin announced plans to stop Chinese companies from acquiring EU firms. The FT:

The move — received coolly by German business leaders — reflects a protectionist backlash in Berlin against a wave of Chinese dealmaking, which peaked this year with the €4.5bn acquisition of robotmaker Kuka, one of Germany’s most innovative companies, by Chinese appliance maker Midea.

In an interview with the Financial Times, deputy economics minister Matthias Machnig said the government welcomed foreign investments but was wary of deals that seemed to be state-directed or were only about gaining access to German technology rather than about “Germany as an investment destination”.

“We need to have the powers to really investigate deals when it is clear that they are driven by industrial policy or to enable technology transfers,” he said, calling for a better legal basis for such investigations.

“When necessary, in exceptional cases, [we need] maybe even to say we’re not going to allow [certain deals],” he added.

It’s likely that German-Chinese tensions over trade and economic issues will grow. Beijing is making a big push — not always respecting rules of intellectual property — to make its manufacturing base competitive with the highest-end firms in the world. That is exactly where Germany sits, and its technological edge is why German manufacturing has been relatively immune to Chinese competition further down the value chain. Until recently, German firms were mostly profiting off China’s rise. But now China wants to play on Germany’s turf, and German firms are struggling to protect their intellectual property rights and competitive edge. Ultimately, German companies are likely to face global competition from Chinese firms who do much of what Germany now does — but cheaper.

As this situation develops, it will have implications for the European economy (mostly bad), European trade policy (making progress on global trade deals even more difficult), transatlantic relations (mostly good) and on German politics (probably strengthening the sense of German identity and nationalism). Making the defense of German manufacturing part of Merkel’s administration is smart politics, but addressing the problems that growing Chinese competition will cause German industry could become a major preoccupation of Berlin’s and is unlikely to reach any satisfactory resolution.

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  • Dhako

    Yet again, the Germans are getting too big for their breeches. And in fact, they seems to view the powers like the China as a supplicant state no more worthy of their consideration than the “always-hustling-for-money” little Greeks, in whose their daily tantrum one could ignore at best; or at worse one could simply administer to them yet another beating till their morale and behavior improves. Which is what Mrs Merkel been doing to them ever since these Athenians came to Berlin with cap-in-hand, so that they can be bailed out of their own profligate foolishness. Hence, time has come to level with Berlin. Or at any rate, its time Beijing stop playing the “softly-softly-two-steps-waltz” with Berlin. And instead, start getting a bit rough with them, particularly where the teeming German companies that are making money over fist in China are concern,

    In other words, if Germany want to play this game of “second-guessing” any German’s company that wants sell itself (all the way down to the company’s stationary and heading letters) to any outfit from China, then two can play this game. And they can play in the sense that I am sure that there is some Chinese regulatory outfit out there who could bestirred itself to see whether some particular German’s company which is operating in that particular sector of the Chinese economy (in which this regulatory body overseas it) may have committed some sort of minor regulatory infringement, in which under a different light, can be turn into a “mightily prosecute-able case” against that German company. And since the trade balance in at the moment in favor of the German side, then who knows what few months of sustained “regulatory scrutiny” of the German’s companies operating in China, will be able to do that hefty trade surplus that is in favor of the German’s side.

    Consequently, I really think that time has come for the mild-mannered Chinese premier Li Keqiang (who thought he had a smooth and working relationship with Chancellor Frau Merkel, particularly in matters regarding industrial policy and bilateral trade between the two nations) to get on with the “game” of showing that he too can play “Knee-to-the-groin-when-it-gets-dark” as well as cutting rough, when in fact matters between them was previously a serene sight that had profit both nations tremendously.

    Or failing that, then, President Xi (a man who knows how to cut others down to their size) may have to get in on the act of teaching these self-preening Germans that they may indulge (or even fantasize) to believe that they call the shot in EU. But when it comes to China, and the likely relationship in which Germany can have with China, they are distinctly second-rate power. And moreover, China has more “telling-cards” in any high table negotiation between these two countries. In other words, now is the time for a serious “eye-balling-to-eye-balling” (preferably back in Beijing) between these two nations, at the highest level (meaning President Xi, and Mrs Merkel). And that should happen as soon as possible.

    • Observe&Report

      +50 cents

    • JR

      Brevity is the soul of wit, my good chap. A man much smarter than you or I said it. I would pay more attention to it if I were you.’Toodles….

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