Data drain

Drinking Our Milkshake

Sigmar Gabriel, Germany's economy and energy minister, pauses during a news conference following a two-day cabinet retreat in Meseburg, Germany, on Wednesday, May 25, 2016. In the latest response to the refugee crisis that's dogged German Chancellor Angela Merkel since last summer, her cabinet on Wednesday backed legislation that includes stricter requirements for asylum seekers to integrate into German society. Photographer: Krisztian Bocsi/Bloomberg *** Sigmar Gabriel
Let's not leave business to the markets.
  • Why it matters

    Why it matters

    Germany’s Mittelstand has grown strong by providing highly specialized, technical goods but competition from China means they may have to rethink the entire way they operate.

  • Facts

    Facts

    • Midea, a Chinese appliance maker, said it wanted to raise its stake in Kuka, a robotics maker based in Augsburg, Germany, to at least 30 percent from 13.5 percent.
    • The bid values Kuka at €4.6 billion, or $5.2 billion.
    • The German government favors a bid by industrial group Siemens, ABB or a carmaker to prevent technology transfers overseas.
  • Audio

    Audio

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Is there more state socialism in China or in Germany?

Anyone who has observed the German government’s desperate attempts to prevent the planned investment of Chinese electrical appliance manufacturer Midea in Augsburg robot producer Kuka could view Berlin as a larger stronghold of government interventionism than Beijing.

Attempts to stop Chinese, Arabs or Russians from investing in or taking over ailing German companies should be clearly rejected. Mergers and acquisitions are part of the DNA of the market economy.

Takeovers of German Mittelstand companies, which would be unable to continue growing due to insufficient capital, or have failed to resolve questions of succession, have been almost always positive when a Chinese investor is involved.

For many, the resulting access to the enormous Chinese market is like a turbo charger for growth. Besides, Chinese investors have developed a generally reliable sense of which pearl of a Mittelstand company is worth buying. They have also proven that they are better investors than the hedge fund branded as corporate raiders: more reliable, more interested in preserving than breaking apart companies, more committed to reaching settlements with employees and, as a result, more compatible with the German social market economy than with the predatory capitalism of Wall Street.

Still, there is the obligatory note of caution.  Germany cannot be naïve in its faith in saviors from the Far East. In the case of Kuka, the Chinese managers could siphon off the company’s technological edge for its domestic competitors.

An increase in Midea’s share to at least 30 percent suggests that this fear is wrong. It is data protection and its industrial grimace – industrial espionage – that could enter Kuka through the back door. In the era of networked Industrie 4.0, robots, 3D printers and software are ideal vehicles to transfer production secrets into the hands of uninvited rivals.

It is the “key security interests” worth protecting that make an intervention by the German government, under the Foreign Trade and Payments Act, possible in the first place.

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