CNN — London/Berlin (CNN) — Germany has blocked the sale of a Volkswagen subsidiary to China on national security grounds, dealing a fresh blow to already strained relations with its biggest trading partner.
Volkswagen Group subsidiary MAN Energy Solutions announced plans in June 2023 to sell its gas turbine business to Chinese state-owned CSIC Longjiang GH Gas Turbine Co (GHGT). But a German government study launched in September has raised concerns that China could use the gas turbines to power warships, according to Reuters.
The decision to block the deal comes just weeks after the European Union raised tariffs on electric vehicles from China, sparking a trade dispute with Beijing, which days later launched an investigation into EU pork prices.
At a news conference on Wednesday, German Economy Minister Robert Habeck said Berlin welcomed investment from foreign companies, but that technologies related to “public security” needed to be protected from countries “that may not always have friendly relations with us.”
At the same press conference, Interior Minister Nancy Faeser said she welcomed the government’s decision “for security reasons.”
According to German government figures, trade between Germany and China was worth 255 billion euros ($275.3 billion) last year. But relations between Berlin and Beijing have become strained in recent years as Germany tries to protect its local producers and reduce its dependence on China.
The country was badly hit by its close economic ties with Russia after the invasion of Ukraine – particularly its heavy reliance on Russian natural gas – and wants to reduce the risks of a similar situation occurring in the future.
In November 2022, Germany blocked the sale of one of its semiconductor factories to a Chinese technology company, also citing security concerns.
A Chinese Foreign Ministry spokesperson said Thursday that China opposes the “politicization” of “normal trade cooperation.”
“We hope that Germany will provide a fair, equitable and non-discriminatory business environment for companies around the world, including Chinese companies.”
MAN Energy Solutions said it respects the government’s decision. “We will now initiate a structured process to close the gas turbine division, which will take place over the coming months,” the company added in a statement shared with CNN.
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