Germany vetoes sale of sensitive turbine unit to Chinese group

Germany has invoked national security concerns to block the sale of a gas turbine business to a Chinese company, in the latest western move to protect sensitive technologies from potential misuse in China.

The veto on the sale of MAN Energy Solutions’ unit comes as Berlin tries to chart a more security-conscious path in its relations with China, its largest trading partner, despite mounting concerns about the competitiveness of the German economy and its flagging exports.

“We confirm that the federal government has decided not to approve the sale of our gas turbine business to CSIC Longjiang GH Gas Turbine Co,” said a spokesperson for Augsburg-based MAN, which is part of automaker Volkswagen. “We respect the government’s decision.”

CSIC Longjiang is a subsidiary of the China State Shipbuilding Corporation, which makes engines for Chinese warships.

Vice-chancellor and economy minister Robert Habeck welcomed the cabinet’s decision to block the sale of MAN’s turbine business. It was important to protect “technologies relevant to public security”, he told reporters on Wednesday.

The trade-off between open markets and security has become a frequent point of division in Chancellor Olaf Scholz’s fractious government, a coalition between his Social Democratic party, the Greens and the pro-market Free Democrats.

In 2022 the chancellor ignored ministerial objections to waive through the Chinese acquisition of a stake in one of Hamburg’s biggest container facilities, citing the benefits to the local economy and future Chinese investment potential in the port.

The decision triggered a fierce debate over Germany’s security, as China has embraced a more authoritarian path and solidified its close relations with Russia even after the latter’s invasion of Ukraine in February 2022.

Habeck and his fellow Green ministers have consistently argued for a more hawkish line on China, calling for tougher laws to regulate foreign investment in critical sectors.

The German government published a new “China Strategy” last August, but tensions over relations with Beijing have continued.

German exports to China in May dropped 14 per cent, one of their biggest ever year-on-year declines. Both Habeck and Scholz have travelled to Beijing this year in a bid to assuage Chinese concerns that Germany is hostile to trade with them.

MAN Energy Solutions said it would now pursue a “structured process” to redevelop its turbine business, which employs about 100 people at sites in Oberhausen, near Essen, and in Zürich, Switzerland.

The company had lobbied the government hard to waive through the sale, arguing that its turbine technology has no military applications.

The opinions of a series of independent academics were presented by the company to show the turbines — which are designed for use in pipelines and other industrial systems — would have very few, if any, applications in warships.

The government disagreed, however, with officials at both the foreign and defence ministries raising security objections.