The German government is likely to block the takeover of a German company by Chinese investors, using veto powers given by a tough foreign investment law passed last year. The new rules were legislated following the successful 2016 $5 billion purchase by China’s Midea Group of Kuka AG , a robotics systems company for the auto and aerospace industries.

Decision expected Wednesday

German business magazine Wirtschaftswoche reported the government is blocking the acquisition of Leifeld Metal Spinning, a machine tool manufacturer based in the north-western town of Ahlen, by a Chinese company. The decision to block the sale is expected to be taken formally at the next cabinet meeting on Wednesday. The deal was investigated by the German economics ministry, which has the authority to look at any acquisition by a company based outside the EU that is buying 25% or more of an entity based in Germany. They believed the deal would be a ‘risk to public order and safety.’ The government wants to keep the company’s expertise in the field of rocket and nuclear technology in national hands.

Strategic threat

It will be the first time the veto has been used. The new legislation adopted last year allows a veto of takeovers of strategically important companies if the investment puts the public order or safety at risk. The government has specifically targeted China’s attempt to acquire key technology. The new rules apply mainly to targets in the defense sector and developers of critical software powering financial and telecommunications services, public transport or power grids. Germany has become concerned about growing appetite for German technology, which analysts say is a key factor behind the strength of Germany’s export-reliant economy. Beijing’s “Made in China 2025” plan to gain global dominance in key high-tech sectors may eventually push out foreign interests as the state achieves higher levels of expertise.