CNN London/Berlin (CNN) Germany has blocked the sale of a Volkswagen subsidiary to China on national security grounds, dealing a new blow to already strained relations with its largest trading partner.
Volkswagen Group subsidiary MAN Energy Solutions has announced plans to sell its gas turbine business to China’s state-owned CSIC Longjiang GH Gas Turbine Co., Ltd. (GHGT) in June 2023. However, a German government investigation launched in September raised concerns that China could use the gas turbines to power warships, according to Reuters.
The decision to block the deal comes just weeks after the European Union increased tariffs on electric cars from China, sparking a trade dispute with Beijing and days after China launched an investigation into EU pork prices.
German Economy Minister Robert Herbeck said at a press conference on Wednesday that Berlin welcomes investment from foreign companies, but that technology related to “public safety” must be kept away from countries “that are not necessarily friendly to us.”
At the same press conference, Interior Minister Nancy Fazer said she welcomed the government’s decision, made for “security reasons.”
Germany and China traded goods worth 255 billion euros ($275.3 billion) last year, according to German government figures, but ties between Berlin and Beijing have been strained in recent years as Germany seeks to protect its domestic manufacturers and reduce its reliance on China.
Its close economic ties with Russia, and in particular its over-reliance on Russian natural gas, suffered hard damage after the invasion of Ukraine, so it 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-owned tech company, citing security concerns.
A Chinese foreign ministry spokesman said on Thursday that China opposed 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, adding in a statement shared with CNN that it would “start a systematic process to close down our gas turbine division over the coming months.”
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