The German government on Wednesday forbid the complete takeover of satellite startup KLEO Connect by a Chinese firm, two government sources told Reuters. The cabinet agreed on a decision by the economy ministry not to let Shanghai Spacecom Satellite Technology, which already has 53% of the company, acquire the 45% minority stake of German company EightyLeo, the sources said. The move comes as Berlin aims to reduce its strategic dependence on China and follows Elon Musk’s refusal to activate his Starlink satellite network in Crimea, which the Ukrainian military uses to track Russian forces.
The new law allowing Germany to block takeovers by non-Europeans applies to purchases of stakes in companies holding technologies vital to national security. The criterion for review is whether the acquisition threatens Germany’s public order or security. The Berlin administration has lowered the threshold for examining such purchases to 25 percent and is considering pushing it further down.
In the case of KLEO Connect, it was concerned that the takeover would allow the Chinese company to access a susceptible component developed by IMST, one of KLEO’s partners. The German military uses the component for 3D modeling in simulation and weapons systems. The government worried that the knowledge could end up in the hands of a military-backed Chinese aerospace firm and contributes to China’s development of armaments.
Several other recent deals have raised concern about how cutting-edge Chinese companies are taking over German tech firms. Last week, Berlin halted the planned takeover of a semiconductor maker by Fujian Grand Chip to protect its supply chain and national security.
Germany also seeks to promote its satellite and radio technologies, including 5G, to Chinese firms to boost exports and create jobs at home. Its economy ministry has a team of specialists dedicated to this task.
The German government has a budget surplus of about 6.2 billion euros ($6.60 billion) this year, and senior government sources said they were planning to propose to parliament that the windfall be used for amortizing debt. The surplus is the third consecutive year that Europe’s largest economy has not needed net new borrowing, fueled by solid growth and low-interest rates.
The government will bring a business delegation to China next month to discuss trade, technology, and the Xinjiang region’s alleged genocide of its Uyghur community. The trip was approved by Economy Minister Olaf Scholz, whose junior coalition partners are more hawkish on China than Merkel’s conservative Christian Democrats. The visit has angered human rights activists, including Dolkun Isa of the World Uyghur Congress, who accused the delegates of putting profits ahead of human rights. The delegation will also meet officials from the southwestern state of Bavaria, where a backlash against immigration helped propel the anti-immigration AfD into the lower house of parliament this year.
