Germany Halts Major Volkswagen Subsidiary Sale to China on Security Grounds.
Germany has obstructed the sale of a Volkswagen subsidiary to China, invoking national security concerns, marking another strain in the already delicate relationship with its foremost trading partner. MAN Energy Solutions, a vital segment of the Volkswagen Group, announced in June 2023 its intention to divest its gas turbine business to the Chinese state-owned CSIC Longjiang GH Gas Turbine Co (GHGT). However, according to Reuters, a German government review initiated in September identified potential risks that the turbines could be repurposed for powering Chinese warships.
This decision arrived in the wake of the European Union's recent imposition of heightened tariffs on electric vehicles imported from China, which has exacerbated trade tensions with Beijing. This move prompted China to launch an investigation into the pricing of EU pork just days later, signaling a burgeoning trade dispute.
During a press conference on Wednesday, Germany's Economy Minister Robert Habeck emphasized that while Berlin is open to foreign investments, technologies pertinent to "public security" must be shielded from nations that may not always maintain friendly relations with Germany. Interior Minister Nancy Faeser echoed this sentiment, endorsing the government's decision on security grounds.
According to German government statistics, Germany and China engaged in trade worth €255 billion ($275.3 billion) the previous year. Nonetheless, the bilateral relationship has frayed as Germany endeavors to shield its domestic manufacturers and mitigate dependency on China. This cautionary stance stems from Germany's detrimental reliance on Russian natural gas, which severely impacted the nation following Russia's invasion of Ukraine.
In a similar move in November 2022, Germany blocked the sale of a semiconductor factory to a Chinese-owned tech firm, citing security concerns.
A spokesperson for China's Ministry of Foreign Affairs expressed opposition to the "politicization" of routine commercial cooperation, urging Germany to maintain a fair and non-discriminatory business environment for all companies, including those from China.
MAN Energy Solutions has acknowledged the government's decision, stating it will now embark on a structured process to wind down its gas turbine division over the coming months.
The additional EU tariffs, potentially increasing the cost of importing an electric vehicle from China by up to 38%, are set to commence on Friday for an initial period of four months. The EU will determine by November whether to extend these tariffs for an additional five years.
The European Commission noted on Thursday that consultations with the Chinese government have intensified in recent weeks, aiming to resolve the trade dispute.
Volkswagen, Europe's leading automaker, reiterated that the timing of the EU's tariff decision is detrimental to the already weak demand for electric vehicles in Germany and across the region. The company asserted that the negative repercussions of this decision outweigh any prospective benefits for the European and particularly the German automotive industry.
As Germany navigates this intricate geopolitical and economic landscape, the implications of these decisions underscore the delicate balance between national security and economic interdependence, spotlighting the broader strategic recalibrations within the European Union and its member states.
Sources:
https://www.aljazeera.com/news/2024/7/4/eu-imposes-tariffs-of-up-to-38-on-chinese-electric-vehicles
