Barriers to Geo-Economic Adjustment: Germany’s Responses to Chinese Investment

• In Event: Emerging Challenges and Political Opportunities in a New Globalization Era

Abstract

How do governments respond to the security challenges stemming from openness? From US sanctions to Russia’s energy war, the economic networks that underpin globalization have proven not only to be an opportunity but also a vulnerability. Contra structural realist predictions, however, states continue to engage in interdependence even when the threats associated with them have been revealed. Building on insights from neoclassical realism, we argue that states’ ability to adjust to geo-economic coercion is determined, in part, by domestic political constraints. Specifically, we argue that when geo-economic adjustment affects the competitiveness of powerful domestic actors, these interests may generate pathological outcomes, which may sacrifice security and economic benefits for the sake of domestic political objectives. We illustrate our argument through a comparative case study of Germany’s varied response to two Chinese investment bids: the blocking of a Chinese firms from purchasing the Elmos Semiconductor SE factory and the approval of the Chinese state-owned shipping company, COSCO’s bid for a 35 percent stake in the Tellerort terminal at the Port of Hamburg. In both cases, concerns about the Chinese government’s access to critical technologies and infrastructure led the German government to review the attempted investments. However, while expert assessments were nearly unanimous in their recommendation to block the COSCO deal while signaling approval for the Elmos purchase, the German government instead blocked the Elmos deal and approved a COSCO partial ownership of the Port of Hamburg.

Authors

• Jonas Heering, Georgetown University

• Abraham Newman, Georgetown University