China’s appetite for German firms continues to grow.
Only four weeks into the new year, and Chinese investors are already setting new records. The acquisition of industrial machinery maker Krauss-Maffei for a price of €925 million, or $1.01 billion, is the biggest in Germany yet by a Chinese company.
Chinese investors are also pursuing German waste disposal company EEW, Handelsblatt has learned. If they are successful, nearly twice as much money could be involved as in the Krauss-Maffei deal.
At first glance, investments and acquisitions of Chinese firms in Germany seem somewhat haphazard.
But a closer look shows two big trends. Firstly, Chinese buyers are homing in on firms with expertise in digitizing and networking industrial production.
German companies could become a mosaic piece in the overall concept of the Chinese giant which plans to calibrate production with intelligent production processes.
Secondly, they're clearly focused on green growth – including recycling, water treatment and forms of renewable energy. No surprises there, because the government has identified these industries as future areas of growth.
Ever since the late 1990s, when the Chinese leadership called on the country’s enterprises to venture out into the world, companies have been refining their strategies.
Some of their first steps in Germany were ill-fated. In the year 2002 the Chinese electronic giant TCL invested in the struggling television manufacturer Schneider, but two years later the company filed for bankruptcy in Germany.
Things have changed, and Chinese companies are now proceeding more cautiously.
Their German managers are given more freedom. The acquisition of the German concrete pump manufacturer Putzmeister by China’s biggest machine constructor Sany is seen as a template that worked. The purchase of a stake in forklift truck manufacturer Kion by the Chinese diesel engine manufacturer Weichai Power also went smoothly.
But it isn't just Chinese companies who have changed. The country's authorities have also adapted their strategy.
In the past, state-owned companies first had to have takeovers approved. The trade ministry used to produce strategy papers to try and steer how companies invested. But the ministry just naming promising industries didn’t really help many Chinese companies.
Nowadays, the trade ministry compiles comprehensive studies about nearly all strategically important countries worldwide. The current ministry plan for Germany fills 139 pages and, along with details about the legal framework, also gives specific details about industries and promising companies.
The ministry’s shopping list features those industries which are important for China’s process of renewal, like machine construction and automotive supplies. But firms with expertise in environmental technology, recycling and renewable energies are also included on the list.
That's all eminently sensible from a Chinese point of view, and with a strategy plan called "Made in China 2025," Beijing has put a timetable in place.
The strategy will be flanked by the new five-year plan which has declared automation and the networking of production processes along with green growth as key features of Chinese economic policy up to the year 2020. That means that the government could make these industries state-supported areas of growth.
Investments by Chinese companies are a corollary of this strategy.
Following its takeover by a consortium headed up by China’s biggest chemical firm Chem-China, Krauss-Maffei is to be expanded to become a premium producer of plastic machines. So the German companies could become a mosaic piece in China's overall plan to calibrate production with intelligent production processes.
Similar strategies could be employed at the waste disposal company EEW. Dealing with China’s mountains of waste is an enormous challenge which the government now wants to address. One of the companies interested in the Germans is China’s leader in waste incineration, Everbright International.
Krauss-Maffei, Putzmeister and Kion are just the beginning. We're likely to see considerably more and bigger Chinese takeovers in Germany in the future. Any company here with expertise in digitized production and green technology should be particularly alert.
To contact the author: [email protected]