Germany is bolstering its defenses against what some of its politicians see as a Chinese invasion in terms of mergers and acquisitions. That much is clear from their recent proclamations.
The issue boiled over after Günther Oettinger, a powerful European commissioner from Germany, called Chinese people derogatory names, including "sly dogs," in a speech to executives in Hamburg. He apologized for the remarks on Thursday.
He had previously refused to budge on his stance. He told the German newspaper Die Welt that he meant, by his "sly dogs" reference, that Chinese people are "very clever" and realize that Europe has an advantage in technology. If they can't match that, they catch up by buying the companies that own that technology.
Oettinger remains in his post.
Two can play at politics, though. Germany's deputy chancellor, Sigmar Gabriel, is currently in China but has found a series of high-level meetings cancelled at very short notice, leaving his dance card looking decidedly empty.
Germany is of course the largest economy in the European Union. It is pushing for new rules to allow member states to protect companies in certain sectors from Chinese approaches, especially by state-owned enterprises that are ultimately controlled by Beijing.
The anti-Chinese sentiment is already manifesting itself in the blocking of several major transactions. Investors must beware that the shares of merger targets may shoot higher on the announcement or state approval of a deal -- only to plunge later when the deal is reversed.
Germany's economics ministry in late October withdrew its OK of a €670 million takeover ($744 million) of the German chipmaker Aixtron (AIXG) by the Fujian Grand Chip Investment Fund. Aixtron shares immediately fell 7%.
The ministry said new information had come to the government's attention that Aixtron, which makes machines that produce semiconductors, "owns technologies that are relevant to national security." Apparently U.S. intelligence told Germany some of its chips could be used in China's nuclear program. Aixtron countered that it just makes the machines, not the chips, which its customers use for many different purposes.
The German economics ministry is also scrutinizing the €400 million ($444 million) purchase of the LED specialist Osram by a Chinese consortium led by its industry peer MLS. Aixtron's machines, among other things, make LEDs as well. China responded a day after the Osram news. "We want to be treated fairly," a spokesperson for the foreign ministry said.
It's not just Germany that's at it, although they're the most vociferous. The EU, as I explained on Thursday, is investigating the proposed $43 billion purchase of the Swiss pesticide and seed group Syngenta (SYT) by the state-owned enterprise ChinaChem (SNP)
Prior to that, blockbuster deals such as the €4.5 billion ($5.0 billion) buyout of robot maker Kuka (KUKAY) by the Guangdong-based appliance manufacturer Midea had been allowed to go ahead, with Berlin approving that sale in August. The Chinese company has also bought Toshiba's home-appliances business.
I can understand that computer chips and chemicals could arguably be a "matter of national importance." However, in terms of the Osram sale, why bright, economical lighting is a matter of grave economic concern is a bit of a mystery to me. Semiconductors again, I guess.
When the Kuka deal was cleared, an economics-ministry spokesperson said it can launch a formal inquiry only "if crucial German interests such as telecommunications or water or power safety are affected."
I'm sure it helped that Midea, listed in Shenzhen under the ticker SZ:000333, and now China's largest appliance maker, has no ties to the Chinese government. But 70% of the 20 biggest Chinese purchases in Germany in recent years have been by state-owned enterprises.
Sales to Beijing-backed companies are problematic. But unfortunately, to my mind, protectionism is massively on the rise, as witnessed by the successful Brexit vote, Donald Trump's anti-trade popularity and the election of nationalist governments in places such as Switzerland, Belgium, Finland, Norway and Poland.
The bulk of the most-globalized countries, as ranked by Statista, are in the EU. The Netherlands, Ireland, Belgium and Austria lead the way before you get to non-E.U. Switzerland and the first country outside Europe, Singapore.
However, Germany is not among them. It ranks No. 27 in the world, behind even protectionist Malaysia, which has economic policies favoring Malays over the Chinese and Indian populations that also account for a sizeable portion of its population.
The United Kingdom, France and Italy also outdo Germany, despite strong anti-E.U. sentiment in all three nations. Some observers predict that Italy may also strive to leave the union, which might then fall apart. It is the second-largest manufacturing economy in the EU, but has experienced scant gains since joining.
Of course, China is far behind when it comes to opening its doors to the world -- particularly to inward investment. It lies well in the bottom half of the Statista ranking, at No. 73, behind nations such as Egypt, Saudi Arabia and Russia that are hardly welcoming of foreign participation in their domestic economies.
What riles many politicians and executives is that China hopes to invest its billions overseas, while maintaining a tight grip on what it allows companies from outside China to buy in many industries within its borders.
Now it seems countries like Germany want to close their own ranks, or at least monitor them strictly when it comes to Chinese capital. Buyer beware, indeed.