BERLIN -Germany's economy ministry has recommended to the cabinet that the government block the Chinese takeover of Elmos' chip factory, saying it would pose a threat to national security, ministry sources said on Tuesday.
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Milder measures, such as an injunction, are not suitable for addressing the identified dangers, added the sources.
Elmos said on Monday that the German government would likely block the sale to competitor Silex, a Swedish company that is a subsidiary of Chinese group Sai Microelectronics.
The sources said the economy ministry and the government are currently working on a China strategy focused on reducing one-sided dependencies and encouraging diversification, as well as protecting infrastructure and preventing technology leakage.
German Chancellor Olaf Scholz said during a trip to Beijing last week that it was clear that China and Germany were no friends of "decoupling", while also complaining about increased difficulties for German companies accessing the Chinese market.
Concerns about the extent of Chinese influence in German businesses came to the forefront last month after Scholz pushed through a decision to allow Chinese shipping giant Cosco to buy a stake in a terminal in the country's largest port, triggering unprecedented protest from within his own governing coalition.
In that case, the cabinet approved a 24.9% stake investment by Cosco, less than an initially planned 35% stake, and it does not give Cosco any say in management or strategic decisions.
The decision sparked an angry response by the foreign ministry, which warned that the investment disproportionately expands China's strategic influence and, in the event of a crisis, would open up the possibility for China to politically instrumentalise part of Germany's critical infrastructure.