China targeting German tech ‘through back door’ with licences – report

By Reinhard Becker

BERLIN (Reuters) -China is going after licences to boost its access to German technology as investment regulation makes company acquisitions in the sector increasingly difficult, the Handelsblatt newspaper reported on Wednesday, citing a study.

The study conducted by the IW economic institute, analysing Bundesbank data on behalf of the newspaper, found German licence revenues from China more than tripled in 2022 compared to 2014. Compared with 2020, the increase was about half.

“There is a clear early indication that Chinese companies are looking for a new way to get access to German technology,” said Juergen Matthes, head of IW’s global and regional markets research unit.

Tech licences are one way for China to try to get in “through the back door”, he told Reuters.

With the German economy still smarting from a breakdown in ties with Russia, Berlin launched an overhaul of its China policy, calling for a “de-risking” approach that seeks to avoid over-reliance, while acknowledging the country’s importance as a key market for many companies.

As a result, direct investments and takeover bids by Chinese companies have attracted scrutiny in Berlin in recent months. Last year, a bid by China’s Cosco to invest in a Hamburg port terminal triggered a political crisis before being approved at a lower stake than originally planned.

Through licensing agreements, Chinese companies can gain legal permission to use German technology.

According to Handelsblatt, most such agreements are considered unproblematic, but in some cases they give Chinese companies access to sensitive research, for example in the semiconductor industry, where the technological know-how can also be applied in a military context.

Asked whether Berlin would regulate such licence models more closely, a spokesperson for the German economy ministry told Reuters various options were being examined as part of a planned reform of investment audit law.

(Writing by Rachel More, Editing by Kirsti Knolle and Sharon Singleton)