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Germany plans tighter scrutiny of foreign investments in defence

[BERLIN] The German government wants to tighten oversight of investments from outside the European Union in local companies that specialise in defence and security technologies, an economy ministry spokeswoman said on Wednesday.

New rules under consideration would give the government powers to scrutinise non-EU investors seeking to buy at least 15 per cent in firms that create sensitive technologies, she said.

Chinese takeovers of technology firms in Germany and other EU countries have raised concerns that the Asian economic powerhouse was taking advantage of Europe's liberal market rules to close a competitive gap.

"We have suggested (a threshold of) 15 per cent in preparatory talks with other ministries," the ministry spokeswoman said.

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Germany tightened controls on foreign investments last year after a series of high-profile takeovers by Chinese companies, making it possible for the government to intervene if a buyer amassed a shareholding of 25 per cent.

Berlin last week signalled it was prepared to use a new power to veto foreign takeovers of German companies in the case of a Chinese bid for toolmaker Leifeld.

This came after Leifeld's majority owner Georg Koffler said China's Yantai Taihai had dropped its attempt to buy the company ahead of an expected block by the German government.

The economy ministry spokeswoman said the new rules were designed to improve government oversight of foreign investments and not to make it easier to prevent takeovers.

German business groups have welcomed the government's drive to scrutinise hostile foreign investments. But they fear that foreign governments could reply in kind by erecting their own investment barriers.

"It is understandable and important that the government checks if security and public order are threatened by takeovers," Martin Wansleben of the DIHK Chambers of Commerce and Industry told the Rheinische Post newspaper.

"But a tightening of the rules could deter foreign investors and at the same time create barriers for us abroad."

Germany and its EU partners have urged China to grant foreign companies more access to local firms by removing investment obstacles.

REUTERS