Ambitious plans by German Economy Minister Peter Altmaier to promote an industrial strategy, in part to counter global competition from China, have been heavily watered down in the final version that was released at the end of November.
Altmaier outlined his “Made in Germany- Industrial Strategy 2030” plan with great fanfare in February, envisaging a role for the state in promoting so-called “National Champions”.
In the intervening months, there has been a strong backlash, not least from the Small and Medium Sized Enterprises (Mittelstand) that are one of the traditional strengths of the German economy. Leading economists also attacked the plan as a move against the market-led German industrial approach, in the unwelcome direction of state intervention.
As the influential magazine Manager noted, there was little of the previous verve to be seen from Altmaier when he presented the final version on November 29 in Berlin- which had been reworked under the supervision of faction leader Ralph Brinkhaus and CDU economics experts.
This time, Manager said that Altmaier seemed grateful to have even been able to begin a debate about an industrial strategy, and he held back from naming prominent companies as national champions as he did in February.
Weekly magazine Der Spiegel was even more brutal, comparing Altmaier with a pupil who had not completed his work satisfactorily, and had to sit in detention and do better at a second attempt.
The new version mentions only occasionally the decisive economies of scale of large industrial groups. And in terms of targeted support, the ministry now talks about hidden champions instead of national champions, which is viewed as giving in to the concerns of the Mittelstand.
Der Spiegel noted that there is now more emphasis on defensive measures, such as the new hurdles for foreign investments, than on a positive industrial strategy.
These defensive measures are proposals to modernize instruments for the protection of technological sovereignty. As a last resort, and only if all other instruments do not work, temporary state participation in companies is to be considered on a case-by-case basis.
Sensitive sectors include high-tech sectors such as artificial intelligence, robotics, biotechnology and quantum technology. However, the paper leaves open the criteria according to which the intervention is to take place.
State-owned development bank Kreditanstalt für Wiederaufbau (KfW) has already previously stepped in as a so-called "national recourse option".
In July 2018, following the exercise of pre-emption rights between the Belgian Elia System Operator SA and asset manager IFM, KfW acquired 20% of the shares of Eurogrid International CVBA on behalf of the German Federal Government. Eurogrid International CVBA indirectly holds 100% in the German transmission system operator 50Hertz.
KfW carried out this transaction on behalf of the German Federal Government as a mandated transaction. The upside and risks arising from this transaction lie with the federal government while KfW did not assume any entrepreneurial or strategic responsibility for the transaction. The shareholder rights are exercised by the German Federal Government.
This move was made to block IFM from selling the stake to Chinese transmission network operator, State Grid Corporation of China.
At the EU level, a new five-year commission began work last week under the presidency of Ursula von der Leyen, who has identified competition from China as one of her key themes. But the agenda is currently dominated by climate change, and much of the resources of the EU will be taken up for the first hundred days by the promise to deliver a so-called Green Deal.
That seems to suggest that the EU will continue to deal with China in a piecemeal manner, often undercut by individual member states looking after their bilateral relations with Beijing.