Rogue Nation

China tech plan threat to foreign firms
By JOE MCDONALD

China is violating its free-trade pledges by pressing foreign makers of electric cars and other goods to share technology under an industry development plan that is likely to shrink access to its markets, a business group said Tuesday.
The report by the European Union Chamber of Commerce adds to mounting complaints Beijing improperly shields its fledgling developers of robotics, software and other technology from competition.
Technology is a growing flashpoint in trade tensions with Washington and Europe, which worry their competitive edge is eroding as Beijing buys or develops skills in semiconductors, renewable energy and other fields.
European companies express frustration Chinese enterprises have been permitted to acquire technology leaders such as German robot maker Kuka while most of China's assets are off-limits to foreign buyers. 

In December, Germany blocked the Chinese purchase of a chipmaker, Aixtron, after Washington objected on security grounds.
The European chamber warned tactics Beijing is using to carry out its "China Manufacturing 2025" initiative might inflame sentiments in Europe and the United States in favor of trade controls.
The plan calls for China to be able to supply its own high-tech components by 2020 and materials by 2025 in 10 industries from information technology and aerospace to pharmaceuticals. 

A broad outline was issued in 2015 and officials have been gradually releasing details.
Suppliers of electric cars and other goods are under pressure to hand over technology in violation of Beijing's World Trade Organization commitments, the European chamber said. 

It said that also contradicts the ruling Communist Party's repeated promises of equal treatment and to give market forces a bigger role in the state-dominated economy.
That strategy "is in fact a large-scale import substitution plan aimed at nationalizing key industries, or at least severely curtailing the position of foreign business in them," the chamber said.
In a possible response to such criticism, China's top economic official, Li Keqiang, promised in a speech Sunday foreign companies would receive "equal treatment" under the manufacturing plan. 

He gave no details.
Foreign suppliers of technology from X-ray scanners to wind turbines to bank security software complain they face growing official obstacles to making sales in China. 

Those range from controls based on national security concerns foreign suppliers say might be exaggerated to procurement rules that encourage hospitals and other customers to favor Chinese suppliers.
Beijing has clashed repeatedly with Washington and Europe since the 1990s over its efforts to induce foreign companies to hand over encryption and other technology.
In November, Chinese legislators approved a cybersecurity law business groups warned would hamper access to technology markets. 

They said a provision requiring security technology to be "secure and controllable" might require providers to disclose how products work, raising the risk trade secrets might be leaked.
In electric cars, where Beijing sees major opportunities, the manufacturing plan says two of the top 10 global brands by 2025 should be Chinese, the European chamber said. 

It said that rules out joint ventures created by foreign companies with Chinese partners.
The chamber appealed to Chinese leaders to discard quotas and other controls and focus instead on encouraging basic research and improving their manufacturing base.
"Perfecting the market would do far more to ensure that China reaches its full potential for economic development and innovation than more old-school, expensive industrial planning ever could," the chamber said.

Enough is enough: Germany gets tough on Chinese takeovers

By Michelle FITZPATRICK

Economy Minister Sigmar Gabriel
Germany's economy ministry says it has withdrawn its approval for Chinese Grand Chip Investment's 670-million-euro purchase of Aixtron, citing security concerns
Alarmed by a raft of Chinese takeovers, Germany is putting the brakes on the Asian giant's shopping spree as it sends out the message that not everything is for sale.
The more assertive noises coming out of Berlin are likely to dominate Economy Minister Sigmar Gabriel's trip to China in the coming days, putting to the test the oft-vaunted "special relationship" between the top export powers.
Germans have watched with unease as Chinese enterprises have swallowed up a record number of homegrown tech companies this year, sparking fears of German knowhow and intellectual property being sold off to the highest bidder.
The wave of acquisitions has also stoked grumbles over China's easy access to the country's open markets, often through state-backed companies, while foreign investors there face tight restrictions.
"Germans seem to be growing more and more sceptical about China, and consequently more willing to pursue a tougher approach to Beijing," said analyst Hans Kundnani from the German Marshall Fund.
In the clearest sign yet that Berlin could be squaring up for a battle, the German economy ministry this week said it was taking a closer look at two planned Chinese takeovers -- effectively stalling both deals.
The moves have not gone unnoticed in Beijing and Gabriel will likely face some prickly questions when he leads a 60-strong business delegation on a five-day trip to China and Hong Kong from Tuesday.
Germany's first punch came last Monday when the ministry said it had withdrawn its approval for Grand Chip Investment's 670-million-euro ($730-million) purchase of chip equipment maker Aixtron, citing security concerns.
German daily Handelsblatt said the surprise reversal came after US intelligence services warned that Aixtron products could be used for military purposes.
The deal is now back under review, a process that could last three months.
Days later, the economy ministry said it was also reviewing the mooted sale of German firm Osram's general lighting unit to a Chinese buyer.
So far there has been little official reaction from Beijing.
But a bylined commentary carried by the official Xinhua news agency was scathing, accusing Germany of "protectionist moves" that called into question "Berlin's sincerity in securing an open and transparent investment climate".
"It is time for Berlin to let go of its delusional "China threat" paranoia," it added.

- Call for EU action -
Chinese firms spent over 11 billion euros on German companies between January and October, a new record, according to accountancy firm EY.
Included in that is the 4.6-billion-euro purchase of leading robot maker Kuka by Chinese appliance giant Midea, a deal that sparked particular alarm and which Gabriel had sought to thwart.
Gabriel, also Germany's vice-chancellor, has since drawn up a list of proposals to give European Union governments greater powers to block takeovers by non-EU firms in strategic industries.
Crucially there has been no word yet on whether Chancellor Angela Merkel -- who has championed close economic ties with Beijing -- approves of the idea.
But Gabriel is likely to get a sympathetic hearing from at least some European peers.
The new British government recently delayed the controversial Hinkley Point nuclear project over concerns about China's involvement, before eventually giving it the go-ahead.
In Brussels, an in-depth EU antitrust probe is holding up state-owned ChemChina's proposed mammoth takeover of Swiss seed maker Syngenta.

- Level playing field -
Observers, however, say Germany is not about to close the door on China, one of its most important trade partners.
Rather, the latest manoeuvres should be seen as part of a growing debate about how "to get a level playing field" with China, Kundnani told AFP.
Gabriel himself told reporters this week foreign investment with China could not be "a one-way street".
"We would like reciprocity," he said.
Foreign investors have long complained of the obstacles to doing business in China, such as the requirement to team up with local partners, while some sectors are completely off-limits.