Germany stops planned sale of VW's gas turbine business to China

BERLIN (Reuters) -Germany's cabinet blocked the planned sale of Volkswagen unit MAN Energy Solutions' gas turbine business to a Chinese company on Wednesday, with ministers citing security reasons.

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".

China's foreign ministry said during a regular news briefing on Thursday that it opposes the politicisation of normal business cooperation and establishing "artificial obstacles".

"We should strengthen economic and trade cooperation based on common interests and market rules in the spirit of mutual benefit and win-win results," spokesperson Mao Ning said.

She added that China hopes Germany will provide a fair, just and non-discriminatory business environment for all, including Chinese firms.

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 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.

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.

(Reporting by Christian Kraemer, Andreas Rinke and Alexander Huebner in Munich; Additional reporting by Mei Mei Chu in Beijing; Writing by Madeline Chambers; Additional writing by Liz Lee; Editing by Jason Neely, David Holmes and Jan Harvey)