September 12, 2018 / 9:38 AM / a year ago

Germany says not mulling state fund to fend off unwanted foreign investment

BERLIN (Reuters) - Germany denied a newspaper report on Wednesday that said the government was mulling the creation of a sovereign wealth fund to buy company stakes and beat predatory Chinese and Gulf investors so that key technology remained in German hands.

Berlin was spooked by the takeover of robotics firm Kuka by China’s Midea in 2016 and the surprise purchase earlier this year of a 9.7 percent stake in Daimler by Chinese carmaker Geely.

German daily Frankfurter Allgemeine Zeitung (FAZ) reported that a move by German state development bank KfW to buy a stake in high-voltage grid operator 50Hertz, preventing China’s State Grid from acquiring it, could serve as a model for similar interventions.

“There are no considerations or plans in the federal government to establish a ‘sovereign wealth fund’ with the aim of financing government stakes in companies,” an Economy Ministry spokeswoman said when asked to comment on the report.

“Germany is open to foreign direct investment and supports the freedom of international capital flows,” she said.

“Nevertheless, the federal government is committed to the protection of Germany’s security interests ...,” the spokeswoman said, pointing to government plans to tighten rules for foreign direct investment in certain sectors.

Economy Ministry sources said in August that Germany was considering tighter controls on foreign investments, enabling Berlin to intervene if a buyer from outside the European Union amasses a shareholding of at least 15 percent, compared with 25 percent now.

Without citing specific sources, FAZ reported that if the government rejected a foreign direct investment, a German sovereign wealth fund could step in as an alternate buyer to avert a possible decline in market value.

Germany’s Economy and Finance Ministries had already discussed with each other the idea of a sovereign wealth fund, which would need to be endowed with federal funds for purchasing stakes, it added.

Reporting by Michael Nienaber and Rene Wagner; editing by Thomas Seythal and Alison Williams

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