Sun Yi, who leads the China business services bureau at the German offices of consulting firm EY (formerly known as Ernst & Young), doesn't reveal exactly how many German companies were taken over by the Chinese in 2017. One thing is clear though — it is less than there were in 2016.

That year, Germany was the most popular investment destination for Chinese companies in Europe, hosting 68 acquisitions. As Sun Yi explains, that number fell last year, as did the overall volume of transactions.

By her account, there is one clear reason for all of this. "In November 2016, the Chinese government agreed to strictly control the flow of capital abroad," she tells DW. Since then, German sellers have demanded higher sums as collateral than previously. "Money now has to be deposited into an account in Germany, or else a bank has to give a guarantee," she says. "Some planned deals have failed since."

Sun Yi, EY's head of Chinese Business Services

German angst over China

The recent obstacles are not only regulatory. A tangible discomfort around the issue of Chinese investment has also crept in on the German side.

"We are seeing the growing influence of the Chinese Communist Party on individual companies, exactly the opposite of what we heard in Davos last year. That's what annoys us," Dieter Kempf of the Federation of German Industry (BDI) told DW, referring to Chinese President Xi Jinping's championing of free trade at the 2017 World Economic Forum annual meeting.

The Communist Party has made no secret of its desire to dominate certain industries, such as technology, and unseat current incumbents. With the state's 'Made in China 2025' strategy, it has defined its target industries.

Read more: China emerging as Germany's main economic rival

Aerospace is one. That might explain why the German Ministry of Economics wants to probe the planned takeover of German aerospace supplier Cotesa by a Chines state-owned company.

"Since the introduction of investment auditing in Germany in 2004, no acquisition has been prohibited," the Ministry says. But last year the rules were tightened. "Since July 2017, around 30 acquisitions have been audited — equivalent to around half the revenue for the whole year," the Ministry confirmed to DW.

China enters the Citadel

Concerns over China's growing influence in Europe, not just economically but also politically, are dealt with in a new policy document from MERICS, the Berlin-based Mercator Institute for China Studies, titled: "Authoritarian Advance: Responding to China's Growing Political Influence in Europe".

The report deals primarily with political issues but it also urges EU action on some economic fronts, notably on how the bloc deals with Chinese investment.

It says that the EU "needs to continue providing alternatives to the promises of Chinese investments in European countries" and needs to avoid scenarios where falls in its own structural funding opens the door for Chinese investment.

The report also says that the EU should employ a "screening" mechanism which prevents any Chinese investment that is deemed to "run against European interests".

"While the EU should welcome foreign investment in general, it must be able to stop any state-driven takeover of companies in systemically important sectors," it says.

How the Kuka crumbles…

Germany — unsurprisingly, given the volume of Chinese investment that has already flowed into the country — is already on the alert. A major impetus for the German tightening of regulations was the takeover by Chinese conglomerate Midea of German robotics manufacturer KUKA in 2016. It was a wake-up call.

"KUKA is a key player in industry 4.0," says Oliver Emons of the Hans Böckler Foundation, a research body of the German Trade Union Confederation.

Oliver Emons, an observer of Chinese investments in Germany

To see such a respected, high-tech company fall into Chinese hands hurts. On the other hand, it was just the rule of the market in action — KUKA needed money, Midea needed the tech and in a form of economic OK-Cupid, they found each other.

As well as this kind of natural coupling, Chinese companies have in recent years cultivated an image of being seen to genuinely care about the long-term well-being of the German companies they invest in.

A study by the Hans Böckler Foundation found Chinese investment, on the whole, to be a positive thing. "If you look at the investments, we see that a large proportion of companies remain committed to their investments and to the staff," Emons, author of the study, told DW.

China's investment image takes a hit

There is another side to this though. When that study was being written, the first cases of job cuts were not yet known. For example, the former Osram subsidiary Ledvance, now in Chinese hands, cut 1,300 jobs recently.

KUKA also reportedly wants to cut around 250 jobs at its Augsburg headquarters, around a third of the workforce. Midea has given a jobs guarantee and KUKA boss Til Reuter says any job losses are unrelated to the Chinese presence.

Watch video 02:43 Share Duisburg: New Silk Road destination Send Facebook google+ Whatsapp Tumblr linkedin stumble Digg reddit Newsvine Permalink https://p.dw.com/p/2q6Ad Duisburg – New Silk Road Destination

Emons has his doubts. "Would he have done that were the Chinese not there?" he wonders. He believes that these kinds of cases will harm the image of Chinese investors and will fuel the already latent fear that exists over selling German technology to the Chinese.

For Sun Yi over at EY, such fears are unfounded. "First of all, the Chinese are not the biggest investors in Germany. The USA, Britain and the Swiss are all ahead of them," she explains.

"Secondly, with a few exceptions, the companies in Germany and Europe that Chinese firms have invested in generally have had nowhere left to grow within their own markets.”