Citing possible military use, Germany vetoes sale of Volkswagen gas turbine unit to China

Germany will block the planned sale of Volkswagen subsidiary MAN Energy Solutions’ gas turbine division to a Chinese company, two government sources familiar with the matter told Reuters on Tuesday.

The decision comes amid rising trade tensions between the EU and China. Germany’s economy ministry can review and stop transactions deemed to have national security implications, and Berlin and the EU are trying to reduce risks from economic ties with Beijing.

The planned sale of the German business to Chinese state-owned CSIC Longjiang GH Gas Turbine Co (GHGT) was announced in June 2023 at an undisclosed price, but MAN Energy Solutions said in September the government would take a close look.

GHGT belongs to the China State Shipbuilding Corporation (CSSC), which dominates the Chinese shipbuilding industry.

Some German politicians are concerned that China might use the gas turbines not for civilian purposes but to power warships.Asked about the decision at a news conference, Interior Minister Nancy Faeser welcomed it “for security reasons”.

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Economy Minister Robert Habeck said Germany generally welcomed investment but that technologies important for “public order” must be protected and that was why the deal was stopped.

MAN Energy Solutions said it respected the government’s decision and would start a structured process to wind down the new development of gas turbines.“We will carry out this phase with the utmost care, taking into account the interests of our employees, customers and partners,” a spokesperson said in an emailed statement. The business has some 14,000 employees.

One source had told Reuters on Tuesday that the group would retain its profitable turbine service business. The German government has called on firms to reduce their dependence on China – the country’s most important trade partner - and is pressing for a level playing field for companies.

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The EU is also taking action against what it believes are unfair Chinese subsidies in the electric vehicle sector, though Germany’s VDA auto association has urged the European Commission to drop its planned tariffs.