Little by little, Beijing has bought into the German economy: China holds stakes in corporations like Daimler and is buying up more and more medium-sized companies. An overview shows that politicians have to react, but are caught in a quandary.
Rarely has a country changed so quickly: a rural, frayed country quickly caught up, true to the motto “audacity wins”. First, the local companies copied uncontrollably and then used the low labor costs to quickly compete with the world powers. At some point, the country’s companies were better than their former competitors and even bought companies there. We are talking about the German Empire in the 19th and early 20th centuries.
But the parallels to today’s China cannot be overlooked. When Chancellor Olaf Scholz visits the Middle Kingdom this week, he and the economic officials in his entourage know exactly who they are talking to: with a country that claims to be number one in the economic world and is as independent as possible from foreign ones to be technology.
As is so often the case, China is acting according to a long-term plan. In 2015, the party leadership developed the “Made in China” strategy: By 2025, the country wants to be a technological and economic leader in the world. All ten key industries must be fully digitized by then.
These goals are also pursued through acquisitions and investments in Europe – and especially in Germany. A well-known example is Mercedes-Benz, where the BAIC Group is the largest single shareholder with almost ten percent. The second largest is Li Shufu, another Chinese. The founder of the Geely Group holds 9.7 percent of the shares.
In general, the state leadership in Beijing has eaten a fool of the German auto industry – whether for manufacturers or suppliers. Even the Borgward brand, which has almost been forgotten in this country, was bought by the Beijing commercial vehicle manufacturer Beiqi Foton Motor in 2014 and didn’t do things by halves: The buyer, who belongs to the state-owned BAIC Group, invested 1.2 billion dollars in Borgward between 2015 and 2018. But the deal didn’t work out, in 2019 the carmaker was sold on for 570 million dollars – the future is uncertain.
In addition to the automotive industry, China is very interested in infrastructure – as recently hotly debated in Germany’s ports. The state shipping company Cosco is just leaving the port of Duisburg after investing billions in the Ruhr area. In return, Beijing gets a minority stake in the Port of Hamburg (Link). Due to the sensitivity of these institutions, the debate has flared up again as to how far Chinese companies are allowed to invest in Germany.
A look at the history of such holdings shows that the federal government has long since begun to show China the limits: in 2009, China bought Germany for only a few million dollars. A handful of mergers and acquisitions were hardly worth mentioning.
But in the ten years that followed, Beijing ignited one rocket stage after the other: in 2016 there were already 68 “mergers and acquisitions” in the context of 12.6 billion dollars, a year later even 13.7 billion dollars. German politicians reacted and took the first defensive measures. For example, the then Federal Minister of Economics Peter Altmeier (CDU) banned the purchase of Leifeld because the company was important for the nuclear industry and such companies would not be given to foreign hands.
Similar purchases by the Chinese had been waved through in previous years. In 2020, the corona pandemic also caused the Chinese spending spree to drop sharply to just 380 million euros.
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But China still appreciates a lot about Germany. Every tenth foreign student at our universities comes from the People’s Republic – around 37,000 before the corona pandemic. The Middle Kingdom needs highly competent academics. And also likes to invest in companies where this is available.
The Mainz-based company Biontech, which became world-famous in the course of the corona pandemic, also has a Chinese background: Shortly before the outbreak of the corona pandemic, Fosun began a cooperation with Biontech. China’s most powerful private conglomerate only holds a roughly one percent stake in Biontech, but there are joint projects worth millions.
The healthcare industry is one of Beijing’s ten key industries, another is industrial production: Along with the takeover of the car supplier Grammer and the robot forge Kuka by Midea, Putzmeister is one of the best-known cases.
When the Württemberg concrete pump manufacturer was bought by Sany in 2012, a murmur went through the region – precisely because it was a hidden champion with a high level of technological knowledge. Today, Sany is considered the best in the industry and is itself the world market leader. And the region has certainly benefited from this: IG Metall was satisfied with the collective bargaining agreements, there is an employment guarantee until 2028 and the 10,000-inhabitant village of Aichtal is the world headquarters of Sany. A financial investor would probably not have gone along with it, they say at Putzmeister.
Waste management is also very important to the Chinese government. And German environmental and disposal technology was one of their main goals for a while: In 2016, Beijing Enterpreise Holdings Limited (BEHL) took over the former Eon subsidiary EEW Energy from Waste GmbH, Germany’s largest thermal waste recycler, for 1.6 billion euros.
In the same year, the Chinese scrap recycler Chiho-Tiande bought the metal recycler Scholz when the Swabian company was in a precarious situation. The best-known case in this area is the Alba Group. When the Berliners came under severe financial pressure in 2016, Chengdu Techcent Environment only bought their China business from them on one condition: the Chinese wanted to take over the majority in the Alba subsidiary Interseroh. Alba sold 60 percent of her daughter’s shares out of necessity.
Regardless of the industry, China has a soft spot for traditional companies. The Steigenberger hotel chain is a big name: in 2019, the Shanghai hotel operator Huazhu Grozp acquired all shares in Deutsche Hospitality AG, to which Steigenberger belongs, for $780 million. By the way, if you order a whiskey from the well-known Loch Lomond brand at the bar there, you are drinking to the health of the Chinese financial investor Hillhouse Capital.
Many parents know the child seat manufacturer Cybex from Bayreuth – a Chinese company since 2015. Well-known brands such as the watch manufacturer Junghans went to China much earlier or the North German pencil factory. The Chinese often buy companies that are in need, such as the consumer electronics manufacturer Schneider in 2002 or the sewing machine manufacturer Pfaff from Kaiserslautern in 2013. The Essen-based computer manufacturer Medion has stabilized after being taken over by Lenovo.
With practically every takeover by Chinese companies, the federal government finds itself in a difficult position. On the one hand, one does not want to snub the trading partner, on the other hand, no transfer of know-how and independence from the Middle Kingdom should remain as high as possible.
Ironically, the solution for Germany lies in Chinese culture – the principle of the golden mean. The opinions of independent experts can be summed up as follows: It is neither advisable to encapsulate yourself and ban every Chinese takeover. Europe can still watch the hustle and bustle uninvolved. China needs to know that Europe is not simple-minded and knows its worth.
Despite all emotionality and caution, one must currently take stock: Measured against the importance of the two countries for each other, the current takeover investments in German companies are within limits.
*The article “There is more China in these German mega-companies than you thought” is published by WirtschaftsKurier. Contact the person responsible here.