Tables Turned

Chinese Takeovers of German Firms on the Rise

china
Employees work at a Sany assembly plant. The company just acquired a German firm.
  • Why it matters

    Why it matters

    Seeking access to new customers, new distribution channels and advanced technology, growing numbers of Chinese firms are establishing beachheads either through investments or outright purchases of German companies.

  • Facts

    Facts

    • Investments are generally focused on industries identified by the Chinese government as critical to the nation’s future success such as mechanical engineering, electronics and automobiles.
    • China is now the third-largest investor in Germany behind only the United States and Switzerland.
    • Chinese direct investment in Europe now numbers 153, up from 122 the previous year, with Germany grabbing a 44 percent share, the highest ever.
  • Audio

    Audio

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For Germany, China was once a source of labor in the Far East, but Chinese companies increasingly are buying their way into the German economy as underscored by the recent deal in which SANY Heavy Industry acquired Putzmeister Holding, a manufacturer of concrete pumps.

The Chinese aren’t just buying. They’re also investing in new factories and logistic centers, and Germany is in especially high demand. In the past year alone, Chinese firms have made 68 investments in Germany, up from 2013 when they invested in 46 projects. Germany is outperforming Great Britain, where the Chinese initiated 29 projects, and France with just 14 projects, according to a study conducted by the London-based professional services giant Ernst & Young.

Chinese firms are seeking new marketing and distribution channels and more efficient access to German high technology. The industries involved are generally those the Chinese government defines as key technologies including mechanical engineering, electronics and the automobile industry.

“Germany offers Chinese companies exactly what they are looking for.”

Yi Sun, Analyst with Ernst & Young

An example is the purchase of a large site in the Ilsenburg Industrial Park near Magdeburg in central Germany by the Minth Group, a Chinese company trading on the Hong Kong Stock Exchange that manufactures automobile parts.

“Germany offers Chinese companies exactly what they are looking for,” said Yi Sun, an analyst at Ernst & Young. “High technological know-how paired with outstanding innovative drive in a stable regulatory and legal environment.”

This is the exact opposite of how German firms are treated in China, which has been cracking down on foreign companies and has levied anti-trust fines against German car manufacturers. The European Chamber of Commerce accuses China of clearly favoring domestic companies over European firms “when it is a matter of collusion and ties between companies.”

The Chinese don’t suffer similar disadvantages in Germany. The number of direct Chinese investments across Europe rose to 153 from 122 the previous year, with Germany grabbing a 44 percent share, the highest ever.

Chinese companies have been expanding abroad for years. They either buy up a company or they establish a branch of their own, making takeovers and direct investments closely linked. Aided by the experience they’ve gained through other acquisitions, the Chinese are expanding in Germany, for example, but building centrally-located shopping centers for the parent companies.

China is now become the third largest investor in Germany, trailing only the United States, with 142 projects and  Switzerland with 98 projects. Düsseldorf has been the largest recipient of Chinese investment by attracting 32 projects, far more than the 20 projects in London. The strong Chinese presence is based on long-standing relationships between Asian countries and the city’s long tradition as an industrial base in the fields of chemistry, steel and mechanical engineering.

This article was translated by David Andersen. Jeff Borden also contributed to this story. To reach the author: sommer@handelsblatt.com 

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