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Germany tightens rules to protect critical infrastructure - document

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By Michael Nienaber and Markus Wacket

BERLIN (Reuters) – Germany is lowering its threshold to launch security probes of stake purchases by non-European entities to protect critical infrastructure, a government document showed on Tuesday, in a push to fend off unwanted takeovers by Chinese investors.

Chancellor Angela Merkel’s coalition government agreed to lower the shareholding threshold at which the government can intervene in certain sectors on grounds of public safety concerns, to 10 percent from 25 percent previously, the document seen by Reuters showed.

The cabinet is expected to pass the new rules on Wednesday.

The move coincides with mounting concerns that China’s state-backed companies are gaining too much access to key technologies in Germany and other European countries while Beijing is shielding its own companies from foreign takeovers.

Since taking office in March, Economy Minister Peter Altmaier has repeatedly stressed that Germany wants to remain a free market economy which is open to foreign direct investments.

At the same time, Altmaier has called on China to ensure a level playing field in economic relations and he warned that the government had a duty to protect critical infrastructure such as power and communication networks.

Germany introduced rules to shield critical sectors against foreign influence in 2004 and expanded them in 2017. They are meant to protect vital infrastructure such as energy, water, food supply, telecommunications, finance and transportation.


With the new rules, the government also plans to add certain media outlets to the list of companies which are regarded as critical for public safety, the document showed.

The changes follow an intense debate about Chinese investments in Europe, after a series of corporate takeovers in western Europe and infrastructure investments, notably in Greece and the Balkans.

The most prominent case in Germany so far was the purchase of German robotics maker Kuka <KU2G.DE> by Chinese company Midea <000333.SZ> in 2016. The debate has also been fueled by Chinese carmaker Geely’s <GEELY.UL> surprise move in February to acquire a stake of almost 10 percent in Germany’s Daimler <DAIGn.DE>.

So far, Germany has never blocked a stake purchase by a non-European company based on the shareholding threshold rules.

However, the government signaled in August that it would use its veto powers in the case of a Chinese bid for toolmaker Leifeld. The threat alone was enough to force China’s Yantai Taihai to drop its attempt to buy the company, a maker of metalworking tools that are crucial in the nuclear power sector.

In July, a German state bank decided to buy a stake in high-voltage grid operator 50Hertz to prevent China’s State Grid acquiring the shareholding after the government failed to find an alternative private investor in Europe.

Across Europe, authorities are looking warily at bids by Chinese firms for the kinds of advanced manufacturers that underpin the continent’s relative prosperity compared to lower-value emerging-market economies.

European Union countries agreed earlier this month to a far-reaching system to coordinate scrutiny of foreign investments into Europe, notably from China.

(Reporting by Michael Nienaber and Markus Wacket, Editing by Paul Carrel, William Maclean)

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