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Germany to cap investment guarantees for China

Germany will limit guarantees for companies doing business in China as it looks to reduce its dependence on Beijing, Economy Minister Robert Habeck said Tuesday.

The investment support programme would be overhauled to create “a strong incentive for diversification”, Habeck told a news conference in Paris.

Policymakers would implement a quota, “so that not all German guarantees are aimed at one country, that is to say China,” Habeck said, flanked by French counterpart Bruno Le Maire.

Germany has been reevaluating its economic relationship with China amid concerns over human rights and the communist regime’s ties with Russia.

“There will be an upper limit for investments in a particular country,” with a figure of three billion euros ($3.1 billion) being discussed, Habeck said.

“Above that, companies can of course invest in a country but they will no longer be further secured with taxpayer money,” he said.

The guarantees would also be subject to an “in-depth” check, taking into account environmental and social standards, the German weekly Spiegel reported last week, citing internal government documents.

In May, Germany refused guarantees to Volkswagen in China due to concerns over human rights abuses in the Xinjiang region, where the auto giant has a facility.

– Critical infrastructure –

Germany could not “decouple from China, nor can we completely do without the Chinese market,” Foreign Minister Annalena Baerbock said at an event hosted by the Sueddeutsche Zeitung daily.

Berlin however had the potential to “accompany” more investments with guarantees around the globe in countries other than China, she said.

Scepticism has also grown in Germany around Chinese investments in what is deemed to be critical infrastructure.

“We are increasingly refusing investments from Chinese firms in these areas (critical infrastructure),” Habeck said.

By blocking Chinese buyers from taking stakes in sensitive areas, Germany was “claiming the same right that China claims for itself”, he said.

Earlier this month, Berlin blocked the sale of two chipmakers to Chinese investors, citing a potential threat to security.

The key technology has increasingly become a zone of confrontation with China, as Germany and its European partners look to reduce their dependence on Asia and grow their domestic industry.

Germany did give the green light to the sale of a stake in the Hamburg port terminal to the Chinese firm Cosco, despite internal government opposition.

Chancellor Olaf Scholz defied calls from six ministries to veto the sale, permitting Cosco to acquire a reduced stake.

Scholz made a plea for “pragmatism” in relations with China ahead of a controversial trip to Beijing earlier this month.

Germany should not withdraw from the key market but would look to “reduce one-sided dependencies”, he said.