German economy minister Peter Altmaier released his proposal for a new industrial policy on Tuesday, envisioning a new state fund that could be used to pre-empt foreign takeovers of German firms, reflecting growing concerns prompted by high-profile Chinese acquisitions.
But the idea of German taxpayers intervening in the market has revived painful memories of the onset of the European sovereign debt crisis, German daily Die Welt reported. In the 1990s, Germans were promised that they would not be forced to foot the bill if other eurozone countries went bankrupt. But that “no-bailout” pledge was thrown out the window in 2010 with the collapse of Greece’s economy.
Altmaier’s inclination to use state intervention in industrial policy was already seen in July of last year, when the German government saved the energy provider 50Hertz. The firm was not on the brink of bankruptcy, but rather was in danger of being acquired by a Chinese firm.
In the minister’s new industrial policy, he does not limit such methods to instances involving critical infrastructure. In the case of the new fund, dubbed a “national participation facility,” the state could step in if any German high-tech firm was considering a sale to foreign entities.
The “National Industrial Strategy 2030” cites China specifically.
“World-famous companies have emerged in China, and entire sectors of the industry could become the technological monopoly of these companies over the next few years,” states the 21-page paper. The result would be “that functioning international competition would no longer be possible”.
The document makes clear in no uncertain terms a vision that market forces should not be the sole basis for a national economic strategy.
“Industrial policy strategies are experiencing a renaissance in many parts of the world, and there is hardly a successful country that relies solely and exclusively on the forces of the market to accomplish its tasks.”
The statement is an apparent reference to Beijing’s Made in China 2025 plan, which has stoked tensions with policymakers in the US and some European countries. Critics say the strategy runs counter to principles of fair trade with calls for vigorous state support for domestic firms and an eye on overtaking foreign competition in key industries of the future.
Altmaier’s policy proposal comes amid the rising international realization that leading Chinese firms have already leapfrogged their western competition, notably in the case of telecommunications equipment maker Huawei. The Chinese national champion is poised to take the lead in 5G rollouts across the globe, except in the US and Australia, which have said they will ban the company from providing gear for the next-generation networks.
While Germany has yet to sign on to a US-led campaign against Huawei, anxiety in the country has grown in the wake of several high-profile acquisitions.
One such takeover came in 2016 when China’s Midea purchased German robotics firm Kuka. In response, Berlin has already introduced laws to increase scrutiny of foreign acquisitions.
In an interview with Handelsblatt, Germany Free Democratic Party leader Christian Lindner decried Altmaier’s lurch towards a larger government role, precisely because it resembled China’s “planned economy.”
There has been too much political influence in the economy, not too little Lindner said. “This is shown by rising energy prices, escalating bureaucracy and the world’s highest tax burden,” he stressed.
If Altmaier wanted to revise fair rules regarding foreign investment, he added, it should be done at the European Union level.