Germany has blocked the sale of a Volkswagen subsidiary to China on national security grounds, in a new blow to already tense relations with its largest trading partner.
MAN Energy Solutions, part of the Volkswagen Group, said in June 2023 that it planned to sell its gas turbine business to Chinese state-owned CSIC Longjiang GH Gas Turbine Co (GHGT). But a German government review launched in September raised concerns that China could use the gas turbines to power warships, Reuters reported.
The decision to block the deal comes just weeks after the European Union raised tariffs on electric vehicles from China, sparking a trade dispute with Beijing. Days later, Beijing launched an investigation into EU pork prices.
At a press conference on Wednesday, German Economics Minister Robert Habeck said Berlin welcomes investments from foreign companies but that technologies relevant to “public security” must be protected from countries “that may not always have a friendly relationship with us.”
At the same press conference, Interior Minister Nancy Faeser said she welcomed the government’s decision “for security reasons.”
Germany and China traded goods worth €255 billion ($275.3 billion) last year, according to German government figures. But Berlin’s relationship with Beijing has become strained in recent years as Germany tries to protect local manufacturers and reduce its reliance on China.
The country has suffered greatly from its close economic ties with Russia following the invasion of Ukraine, particularly due to its heavy dependence on Russian natural gas, and wants to reduce the risk of something similar happening in the future.
In November 2022, Germany blocked the sale of one of its semiconductor factories to a Chinese technology company, also over safety concerns.
A Chinese Foreign Ministry spokesman said on Thursday that China opposes the “politicization” of “normal commercial cooperation.”
“We hope that Germany will provide a fair, just and non-discriminatory business environment for companies from all over the world, including Chinese companies.”
MAN Energy Solutions said it respected the government’s decision. “(We) will now start a structured process to close the gas turbine division, which will take place over the coming months,” the company added in a statement shared with CNN.
The additional EU tariffs, which could add up to 38% to the cost of importing an electric car from China, will come into effect from Friday for an initial period of four months. The EU must decide by November whether to keep the tariffs in place for five years.
The European Commission said in a statement on Thursday that “consultations with the Chinese government have intensified in recent weeks” with a view to resolving the dispute.
Volkswagen, Europe’s largest carmaker, reiterated earlier comments that the timing of the EU decision is “harmful to the current weak demand” for electric vehicles in Germany and the region.
“The negative effects of this decision outweigh the potential benefits for the European and especially the German automotive industry,” the company added in a statement.
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