China fears shake Berlin’s economic principles

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BERLIN: Fear of China appears set to divert Germany from decades of hands-off economic policy, as Berlin plans a public investment fund to block hostile takeovers of high-tech firms from abroad and calls for new mega-mergers.

Aware he was making a rare break with conventional wisdom, Economy Minister Peter Altmaier took pains to set limits to his public investment scheme, one element of the “national industrial strategy 2030” he presented at a press conference Tuesday.

“The state should only be able to buy shares in a company in very important cases and for a limited time,” Altmaier said, adding that there would be clear rules rather than “capricious” decisions on when to intervene.
Meanwhile, he declared there was a “national interest” in major firms like Siemens, Thyssenkrupp or Deutsche Bank surviving — all three giants that have suffered turbulent times in recent years.

And Altmaier suggested reviewing competition law to allow German and European firms to merge into larger champions more resilient in global competition.

‘Weak Goliaths’

Altmaier’s intervention came as the European Commission was expected to announce Wednesday it will block the merger of industrial giant Siemens’ rail arm with France’s Alstom.

Ministers in both countries have backed the tie-up as necessary to face Chinese challenger CRRC.

“Aren’t there fields like aviation, railways or banks where one should take the global market as our frame of reference, rather than the European one?” Altmaier asked.

Such plans are a marked break with conventional German “ordoliberal” economic thinking dating back to the post-World War II era, which prescribes minimal state involvement in markets.

Economist Tomaso Duso of Berlin-based think-tank DIW predicted easing merger rules would favour existing heavyweights rather than making the economy as a whole stronger through competition.

“Instead of following China’s example by building up weak Goliaths, Germany should train up agile Davids,” he said.

Even before Altmaier took the stage Tuesday, pro-business Free Democratic Party (FDP) chief Christian Lindner had charged he was apeing China’s “planned economy” out of fear of Beijing in an interview with financial daily Handelsblatt.

Offence or defence?

Since 2016, when China’s Midea took over Bavarian industrial robot maker Kuka, politicians have been sounding the alarm about vital building blocks of German prosperity being sold off — especially when Beijing is in the background.

Last December, Berlin tightened takeover rules for “critical infrastructure” sectors like energy, defence and telecoms, lowering the threshold for the government to review and possibly block foreign firms taking stakes in German ones.

But the new shield will extend even further, for example covering companies in “platform” businesses like artificial intelligence — vital for developing the self-driving technology expected to upend the country’s mighty car industry — or digital manufacturing.

Federation of German Industry (BDI) director Joachim Lang praised “proposals worth discussing” in Altmaier’s latest plans but rejected the defensive approach of halting buyouts.

Rather, “new instruments for the federal government to take shares in companies should not be used to block takeovers, but only to support new technology projects,” he urged.