Germany has blocked the sale of a Volkswagen subsidiary to China on grounds of national security, further straining relations with its largest trading partner.
MAN Energy Solutions, a part of the Volkswagen Group, announced plans in June 2023 to sell its gas turbines business to CSIC Longjiang GH Gas Turbine Co, a Chinese state-owned entity. However, following a review initiated in September, the German government expressed concerns that the gas turbines could potentially be used in Chinese warships, Reuters reported.
This decision follows the European Union’s recent tariff increase on electric vehicles imported from China, which sparked a trade dispute. In response, Beijing launched an investigation into EU pork prices shortly thereafter.
During a press conference, Germany’s Economy Minister Robert Habeck emphasized the country’s openness to foreign investment but stressed the need to safeguard technologies crucial for public security, particularly from countries with less amicable relations.
Interior Minister Nancy Faeser echoed these sentiments, supporting the government’s decision on security grounds.
Bilateral trade between Germany and China reached €255 billion ($275.3 billion) last year. However, Germany has been cautious in its economic ties with China, seeking to protect local industries and reduce dependency following challenges stemming from its close ties with Russia amid the Ukraine conflict.
Previously, Germany blocked the sale of a semiconductor factory to a Chinese tech firm in November 2022, also citing security concerns.
In response to Germany’s decision, China’s Ministry of Foreign Affairs opposed the politicization of normal commercial cooperation and urged Germany to provide a fair and non-discriminatory business environment.
MAN Energy Solutions respected the government’s ruling, announcing plans to gradually wind down its gas turbine division over the coming months.
The European Commission stated that consultations with China have intensified to resolve the tariff dispute on electric vehicles, which could significantly impact trade relations.
Volkswagen reiterated concerns about the timing and implications of the EU tariffs, stating they could exacerbate the current slowdown in electric vehicle demand in Germany and across Europe.
