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German-Chinese Bureau of Economic Research (GCB) | Messages in the Soaring Figures

China Economic Bulletin | No. 15 (22 February 2017)

Beyond the Headlines: The Impact on German Firms from Chinese Acquisitions – Part 2 of 5

Messages in the Soaring Figures

German–Chinese Bilateral FDI Development

*) Figure of 2016 is based on information from Rhodium Group.

Source: National Bureau of Statistics of China (2016), Rhodium Group (2017).

2016 is a landmark year of German-Chinese bilateral investment while it is the first year in which Chinese direct investment in Germany surpassed that from the other direction (Figure 1). According to data from Rhodium Group (Hanemann & Huotari, 2017), 12 billion US dollars flowed to Germany, an amount more than 10 times as large as the average of the past 5 years. However, if we take a closer look at this figure, 5 billion US dollars were contributed by the Midea-Kuka deal, 1.6 billion US dollars by the Beijing Enterprise Holding-EEW deal, and 1.0 billion US dollars by the ChemChina-KraussMaffei deal. These three megadeals alone have already accounted for more than half of the record-setting FDI figure.

Germany–China Cross-border Acquisition Development

Source: ThomsonEikon.

Zooming in to cross-border acquisitions between Germany and China from a deal number’s perspective¹ (Figure 2), Chinese acquisitions in Germany climbed up in 2016 after fluctuating at around 10 deals in the past 4 years, while German acquisitions in China stood at a relative low volume level. When leaving out the deal size information, the Chinese buying spree seems less pressing comparing to the FDI volume figure. Trying to combine both perspectives, Figure 3 includes deal size information in the deal count. In 2016, the 6 deals with value information accounted for 7.9 billion US dollars, leaving the rest 17 deals together with greenfield investment account for the rest 4.1 billion US dollars. According to Rhodium Group (Hanemann & Huotari, 2015) the size of Chinese greenfield investment in Germany stayed around 200 million US dollars per year in the past years. If we assume the volume of greenfield investment stay in this level, a rough estimation led to an average deal size of 230 million US dollars for the 17 cases without deal size information. According to available deal size information from Thomson Eikon, in the past 3 years, the average size of Japanese acquisitions in Germany is 252 million US dollars (based on information of 10 deals), and that of Swiss acquisitions is 244 million US dollars (based on information of 11 deals). Therefore, quantitatively, Chinese acquisitions in Germany have entered a stage that is comparable to other developed economies with an appetite of selected mega-targets.

Deal Size Information of Chinese Acquisitions in Germany

Source: ThomsonEikon.

Zooming in to the industry sectors of Germany-China cross-border merger and acquisitions (Figure 4), the industrial and consumer cyclical sectors have been the key targets for acquirers from both countries in the past 10 years, followed by basic material industries. In recent 2 years, Chinese acquirers’ interest in the German healthcare industry is developing quickly, driven by economic development, demographic change, as well as loosened medical industry restrictions in China.

Table 1 gives a deeper and more specified view of the acquisitions in the industrial and consumer cyclicals sector. In general, the acquirers from both countries are interested in the industrial machinery and automobile subsectors, though with the very limited deal size information it is hard to compare the size of the targets. Nevertheless, the current data indicates that Chinese companies’ interest in the German machinery and automobile sectors finds its roots in the existing economic cooperation mode of two economies.

Key Target Industries of Germany–China Cross-border Acquistions

Source: ThomsonEikon.

Longitudinal analysis leads to similar conclusions. 6 out of 19 Chinese acquisitions of German industrial machinery companies were achieved in 2016, marking this year a peak in the industry. However, considering that 3 deals were completed in 2008 and 4 in 2014, 6 deals cannot be considered as outrageous. Likewise, deals in heavy machinery & vehicles as well as electronic equipment subsector see no surge of deals in the recent year. In the consumer cyclical sector, deals are evenly spread between 2010 and 2016 in the automobile business. There has been indeed a growing interest in the cyclical consumer products sector, with completed deals growing from around 1 per year to 3 in 2016. Specifically, the Chinese acquirers are interested in leisure products such as toys and musical instruments, as well as well recognized textile and apparel brands. Such growing interest is driven by the surging market potentials of related products in China, as we can witness in the shopping streets of every major European city.

Germany–China Cross-border Completed Acquisitions in 2007–2016
  Chinese acquisitions in Germany German acquisitions in China
  Total # of deals Total value per $ Mio (# of deals) Total # of deals Total value per $ Mio (# of deals)
Industrial machinery 19 5,233 (N=6) 7 — (N=0)
Heavy machinery & vehicles 8 2,183 (N=5) 2 152 (N=1)
Electronic components & equipment 4 163 (N=2) 3 — (N=0)
Other subsectors 6 1,738 (N=3) 6 83 (N=2)
Consumer cyclicals
Automobiles & auto parts 12 768 (N=4) 9 1,178 (N=2)
Auto & parts retailers 1 — (N=0) 4 24 (N=3)
Cyclical consumer products 9 174 (N=3) 3 — (N=0)
Other subsectors 0 — (N=0) 2 1 (N=1)

Source: ThomsonEikon.

The speculation regarding hidden political agenda behind the Chinese buying spree can be endless because hidden agenda, by definition, will always be a secret to the public. Indeed, the facts that unprecedented amount of FDI from China flowed to Germany in 2016 and that the targets include such future industrial powerhouse as Kuka deserves close scrutiny. Nonetheless, putting the quantitative analysis in a nutshell, together with the Chinese M&A wave development I mentioned in the last issue, the current phenomenal Chinese acquisitions in Germany is developed in the ground of decades’ bilateral economic cooperation. Besides possible policy incentives behind the Chinese acquisitions in Germany, it is crucial to examine this trend from a business strategy perspective: why do Chinese businesses target German companies? How are they going to achieve the goals? How will such acquisitions impact the German business and the dynamics of stakeholders?

Take the automobile and auto parts industries in China for an example. This industry cluster has turned from a steep growth path to a stagnation phase with multifaceted challenges. Though the market potential in tier two and three cities are still to be realized, generally speaking, traditional powertrain vehicle market is relatively saturated. Consumers are getting more sophisticated and start to require advanced technologies and higher efficiency instead of low price. Such demand side’s shifts are more challenging for domestic players who are losing cost advantages but are not yet technologically advanced enough comparing to international brands. From a policy perspective, international automobile manufacturers face strict restrictions in the Chinese market. They have to produce vehicles via at most 2 joint ventures per category with Chinese firms and should not have a controlling stake. Considering that vehicle manufacturers are the dominating players along the value chain, such restrictions strongly restrain the competitiveness of overseas brands. Nevertheless, sophisticated international players did gain market know-how in the past decade by cooperating with Chinese companies and are becoming more aggressive competitors. Considering that the industry growth opportunities lie in less protected sectors such as alternative powertrain and new business models, and that some insiders expect the joint venture restrictions to be loosen in the future, domestic automobile companies will face much stronger competition in crucial aspects where international players have competitive advantages.

The limited time window when domestic companies are protected by industrial policies probably will not be long enough for Chinese firms to develop sufficient competitiveness internally. Additionally, factors including domestic R&D capability, intellectual property protection, financial context, etc. make it in several situations more strategically astute to acquire capabilities overseas. Especially for Chinese public companies, the reasonably priced German targets provide access to advanced technology, management knowhow, together with valuable client network which is even more demanding to achieve without international partnership than technology for Chinese players.

Nevertheless, it requires no less business knowhow to find a proper target, seal the deal, and integrate the acquisition. The situation is more challenging than cross-border acquisitions between western companies because of the limited international business experience of Chinese acquirers, distinct mindset between the acquirer and the target backed by different market features, and dissimilar management philosophies. From the German target’s perspective, the acquirer’s financial resource, know-how of emerging markets, channels and networks, as well as promises regarding management independency play important roles in the sell decision (Knoerich, 2010). However, how have the both sides performed? What are the strategic outlooks of both? Additionally, the impact of acquisitions on ecosystem cannot be overlooked. Google acquiring YouTube is a vivid example of M&A changing the business landscape. Therefore, in the next issues, the author will focus on the business strategy and ecosystem impacts of Chinese acquisitions in Germany.² 


  1. If not further specified, deals refer to completed deals in which the Chinese acquirer became majority or sole shareholder after the transaction.
  2. This research is funded by Alexander von Humboldt Foundation.

References and Literature

Author: Sheryl Tang

Sheryl Tang is a German Chancellor Fellow visiting scholar at the German-Chinese Bureau of Economic Research, an institute of the German-Chinese Business Association (DCW). Her research focuses on the sustainable development of the European businesses that are acquired by Chinese companies. Her research partner in China is Listed Company Research Center, PBC School of Finance, Tsinghua University. Ms. Tang holds a Master’s degree in Organizational Behavior and is M.A. Strategy and International Management candidate of University of St. Gallen. Please write to This email address is being protected from spambots. You need JavaScript enabled to view it. for more information about related topics.

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