Germany is planning a state-owned fund to block unwanted takeovers by Chinese and other foreign firms.

It's the latest move against free trade after propping up its banks and banning short selling that targeted one of its companies.

"Germany was too reluctant to define its national interests. This is changing now," a government source told Reuters.

Germany is looking more and more protectionist and anti-free market by the day. In the latest step to shore up the corporate engine of its economy, the government is planning to create a state-owned fund so it can block unwanted takeovers by Chinese and other foreign companies.

That's according to a Reuters report on Wednesday, which, citing unnamed government sources, said Germany's move is a response to more aggressive competition from China and US President Donald Trump's trade war.

"In the past, Germany was too reluctant to define its national interests. This is changing now," an unnamed government official told the news organization.

Reuters wrote:

"For decades, German politicians followed the 'ordoliberal' principles of post-war economy minister Ludwig Erhard who said free markets should decide winners and losers, with the state only providing a framework for fair competition."

Germany looks to be tossing out those ideas. And just when the economy has been teetering on the brink of recession.

German banks aren't allowed to fail

Take the government's blessing in the combination of Germany's two largest, but struggling, banks. Just this week, Deutsche Bank and Commerzbank confirmed they were holding talks about a merger.

The announcement was met with criticism including the wisdom of a tie-up that does little to address their underlying problems. It also won't help that a key figure at Europe's central bank, speaking to the Financial Times, said he's not too keen on the idea of "national champions."

It's not clear how Germany intends to get around the European Union's rules prohibiting "state aid," which discourage countries from nationalising or subsidising their industries in order to foil competition from other EU countries' companies.

Germany banned short selling

Then there's the extraordinary story of Wirecard, a German tech company that has caught the attention of short sellers and Financial Times journalists for what they claim are irregular accounting practices. The Financial Times has done great reporting about the discovery of forged documents and suspect transactions at Wirecard, and the company has denied any wrongdoing.

The reaction in Germany? Intervention and protection. Regulators banned short selling of Wirecard's stock, while German bank analysts attacked the stories as "fake news."

To justify the unprecedented ban on short selling, the European Securities and Markets Authority said that Wirecard's circumstances "constitute a serious threat to market confidence in Germany."

The FT's financial editor Patrick Jenkins summed it up nicely in an op-ed this week about the "German tendency to close ranks."

"The fledgling Wirecard scandal has revealed something profound about the German establishment," he wrote. "It reminds me of my time as a correspondent for the FT in Frankfurt more than a decade ago when anything critical I wrote about German business was seen as an attack by the City of London on teutonic culture. To suggest wrongdoing at one institution is to undermine the whole fabric of the German economy."