The German government is currently considering a rigorous review plan to mitigate Chinese investment, a move that reflects Berlin’s subtle balance between attracting foreign investment and stimulating economic recovery.According to the Wall Street Journal’s April 28 report, although the European Commission is seeking to take stronger measures against China, Germany seems to be willing to adopt a more moderate policy towards China.

Since German Prime Minister Olaf Schultz took office in 2021, the German government has stepped up its strategic vigilance towards China, especially in the fields of technology and security. The German government has tightened its controls on exports of sensitive technologies and has repeatedly blocked certain Chinese investment activities on national security grounds. Last July, in the first “China Strategy” document launched by the Schultz government, China was clearly defined as a “systemic competitor” and urged its companies to reduce their reliance on the Chinese market.

However, according to the latest sources, the German government may now be re-evaluating this policy direction. Faced with ongoing economic stagnation, government officials now seem to think that too strict foreign investment censorship could hinder Germany’s economic vitality. At the moment of seeking capital and innovative technologies globally, excessive protectionism may be detrimental to the long-term benefits of the German economy.

The German government originally planned to pass a new investment review law, giving more powers to review the security risks of foreign investments and extending its powers to more types of investments.The plan mainly targets Chinese investments, but also includes new clauses for reviewing German research institutions that work with foreign partners in key fields.

Nevertheless, Germany now seems to be reviewing its strategy in two directions. On the one hand, the German government may not push for new laws, but rather amend existing regulations to define the government’s power to review investments. The amended regulations may still bring some new powers to the government, such as reviewing internal restructuring of enterprises or transferring patents to foreign investors.

The adjustment of this strategy may be related to the German government’s concerns that strict censorship measures affect foreign capital flows. Informed sources revealed that the Schultz government was concerned that these measures could hinder efforts to revive the national economy. A spokesman for the German Ministry of Economy also said that while existing investment censorship rules are still in place, “recent experience suggests that the rules should be reformed to adapt to the changing security situation...

A potential adjustment of this policy could also trigger issues that differ from the policies of other EU member states, Brussels. The European Commission is taking a series of harsher measures against China, including a counter-subsidy investigation into goods such as Chinese electric vehicles.