Chinese Acquisitions

in Germany

 
 

Vocabulary

M&A	conquer	snapshot
destroy	strategic	acquisition
initial	souvenir	win-win situation
spree	packing	consulting
facility	party (3)	sweeten the deal
ensure	skeptical	promising
council	potential	concerned
reaction	mentality	representative
fear	pragmatic	take you aback
entire	team up	ambassador
relocate	overtake	competitor
conquer	turnover	counterfeit
goal (2)	major (2)	weight up (2)
depend	consider	automation
at stake	purchase	negotiation
find out	supplant	change hands
merger	specialize	acquisition
guide	upgrade	transaction
subsidy	solid (2)	bureaucracy
pursue	strategic	handle (2)
expand	takeover	churn out
keen on	regarded	in particular
focus	trade fair	reputation
scheme	preserve	semiconductor
minimal	share (3)	reproduction (2)

 
 
 
 
 
 
 
 

Video

 

 
 
 
 

Transcript

Some people find it amusing: the hordes of Chinese out conquering Germany with their cameras.

But some of these visitors have their eyes on every specific things — technology and machines made in Germany. And they’re not here for the perfect souvenir snapshot.

China has come to shop, and it’s buying up dozens of German companies.

“Most of our acquisitions are associated with strategic interests.”

China wants to shake its image as a producer of cheap goods and become a leader in global markets.

In just one year, it invested more than €10 billion in Germany.

Chinese Ambassador to Germany: “We’ve only just begun to invest in Germany. It’s a win-win situation.”

Win-win? What about job security?

German Employee: “The initial reaction is shock.

Some experts fear for the domestic economy.

Expert: “Basically, their plan is to supplant foreign products with Chinese ones.”

ZDF Zoom wants to know how dangerous is China’s shopping spree for Germany.

Yue Tang is a Chinese millionaire. He’s here in Karlsruhe on business.

Romaco, a leading global manufacturer of packing and process technology, is looking for a new investor.

Several parties from both Germany and abroad have already come to look at the production facilities.

Today it’s Yue Tang who’s offered the company €150 million, and sweetened the deal by ensuring that in the future, Romaco would be able to sell its machines in Asia without difficulties.

For the German management, this all sound promising.

But the company’s employees are skeptical because Tang’s company, Tuking, manufactures similar machines in China. The news of potential Chinese investment has employees concerned.

Sabine Karle-Kainzner, Works Council Representative: “The first reaction is shock. China is far away. The mentality there is different. They have different ideas about working hours. So it sorts of takes you aback.

But a large part of the workforce sees it pragmatically.

This is the third time we’ve been sold.”

This time however, the biggest fear is that with this sale, the entire production will be relocated to China.

Frank Hartlieb, Industrial Mechanic: “It wouldn’t be so great for us, of course, if production were moved elsewhere. But maybe we can also learn something from the Chinese.”

Investor Tang ensures them he’s not out to destroy Romaco. He wants to team up with the manufacturer to Karlsruhe to overtake competitors, such as Bosch.

Yue Tang, Truking Technology China: “China is a huge market. And Germany is highly developed, scientifically and technologically. Working together, Chinese and German companies could conquer the global markets.

We have a three year plan. We want to increase Romaco’s market share in China. Right now, the annual turnover there is only five to six million euros.

But in three years, it should be much more. Our goal is over 50 million euros.”

But then Romaco would be part of a Chinese corporation, and that would mean in the future, major decisions would be made by Chinese investors, a good reason for the German management to weigh up the situation carefully.

Dirk Bauernfeind, Managing Director, Romaco Pharmatechnik: “China is a very important market for us. So first we considered all the opportunities it would offer.

And in the case of China, low costs were also naturally a factor. But it’s also important to consider the kind of responsibility we have to our employees. What happens to this site? We have 180 employees here with families who depend on them.

Our first consideration is to ensure that this location is preserved.”

Purchase price, location, jobs. A lots at stake in the negotiations between Truking and Romaco.

We’ll come back later to find out what kind of agreement was reached.

Romaco is just one of many companies Chinese investors have shown interest in.

In 2016, around seventy companies in Germany were sold to Chinese investors. Over ten billion euros changed hands.

For companies like robotics manufacturer Kuka, Frankurt-Hahn Airport, and machine Krauss-Maffei, and shares in Deutsche Bank, Eurasian Consulting in Frankfurt engineered the Romaco deal.

It is one of several so-called mergers and acquisitions agencies specializing in business with China. They guide inexperienced investors and organize the financial transactions.

A takeover can happen in as little as three or four months because Germany offers excellent conditions: open markets, minimal bureaucracy and sometimes, even subsidies.

Huangping Zhang, Managing Director, Eurasian Consulting: “2016 was a record year for Chinese M&A activities abroad, and also in Europe and Germany. We’re seeing a solid upward trend.

Most of the acquisitions we handle pursue strategic interests. In other words, a Chinese entrepreneur will say, ‘I have an objective. I want to expand abroad, or I need to upgrade my technology’.”

Journalist: “Why are Chinese investors so keen on Germany in particular?”
Huangping Zhang, Managing Director, Eurasian Consulting: “German products and German technology are highly regarded there: the automobile industry, mechanical engineering, and machinery all have an excellent reputation in China.”

One reason Germany has become a focus of interest is because of a government scheme known as Made in China 2025. The country wants to put its days as a producer of cheap goods behind it, to become a technological leader and industrial superpower.

At the Hannover Messe, the world’s largest industrial trade fair, it’s clear where China’s interests lie: robotics, semiconductor technology and automation.

Up until now, Chinese companies simply copied products — no one does it better. No other country churns out reproductions or counterfeit goods.

The cost to Germany alone is over 7.3 billion euros.

*     *     *     *     *     *     *

Questions

1. The main idea or theme of this video are Chinese tourists in Germany. True or false? What is “Made in China 2025”? What is China’s overall goal and strategy?

2. Do Romaco’s managers favor or oppose a Chinese takeover, or in the middle? Do the employees feel optimistic or pessimistic about a takeover?

3. Why does Yue Tang want to buy Romaco?

4. Do Chinese manufacturers buy rights to reproduce German products? What do the labels say? Do Chinese companies generally innovate, invent and develop their own products? Is this good or bad for German companies?

5. The quality of German and Chinese products is the same. Is this right or wrong? Is this good or bad for German companies?

6. Is the legal system in China and Germany standardized and compatible? What can you say about bureaucracy?

7. Are there reciprocal trade and investment rules?

8. There is complete openness and trust in partnerships and join-ventures between German and Chinese companies. Is this correct or incorrect?

9. What did they say about private investments, funding and deals? Are they completely market driven?

10. Do Germany and the EU want continued trade, investment and growth? How do the Chinese feel?

 
 

A. How would you describe the tone of the report? Is it upbeat, cheerful, optimistic, hopeful, enthusiastic, pessimistic, cautionary, worrying, alarmist? Do you think it was very pro-Chinese, pro-Chinese, slightly pro-China, in the middle, neutral, balanced, slightly anti-Chinese, or anti-Chinese?

B. Is there much trade and investment between your country and China? Give examples.

C. What would business leaders like to see? What would workers want? Where is the government’s stance?

D. What will happen in the future?

E. What should governments, businesses and ordinary citizens do regarding China? How should they deal with China?