Germany continues China ‘de-risking’ with investment leashes

German Economy Minister Robert Habeck is pushing for the implementation of a new law aimed at bolstering economic security by tightening the review process for foreign investments. A document from the ministry outlines this initiative.

This move is taking place in the context of Berlin’s efforts to encourage companies to diversify their supply chains and reduce their dependence on China. The German government is currently evaluating the effectiveness of its existing regulations in achieving this objective.

The broader context reflects a Western-wide strategy to minimise strategic reliance on China, often referred to as “de-risking.” This strategy is driven by concerns surrounding China’s increasing influence in the Indo-Pacific region and the potential disruptions to global supply chains.

Germany’s strong business ties with China, its largest trading partner, have sometimes posed a challenge to Western unity on the China issue. Past instances, such as China’s Cosco attempting to acquire a stake in a goods terminal in Hamburg, Germany’s largest port, have resulted in approvals from the German government.

The document highlights the growing significance of investment reviews both domestically and internationally, stating, “Investment reviews have gained enormously in importance in Germany, Europe, and internationally in recent years.”

The proposed law includes provisions for auditing investments where an investor gains access to a domestic company’s assets or technologies through contractual arrangements rather than through the acquisition of voting shares. The latter is already subject to regulatory control.

Furthermore, the ministry is exploring the possibility of assessing the security implications of new factories established by foreign companies in Germany. Additionally, the scrutiny of research cooperation agreements with security implications is also under consideration.