China's state-owned Cosco had originally sought a 35-percent stake in the Hamburg port

Berlin (AFP) - Germany’s coalition government on Wednesday allowed a Chinese firm to buy a reduced stake in a Hamburg port terminal, after Chancellor Olaf Scholz resisted calls to ban the controversial sale outright over security concerns.

Under the compromise agreed by Scholz’s cabinet, Chinese shipping giant Cosco has the go-ahead to buy a stake “below 25 percent” in the Tollerort container terminal owned by HHLA, the economy ministry said in a statement.

“The reason for the partial prohibition is the existence of a threat to public order and safety,” said the ministry.

China’s state-owned Cosco had initially sought a 35-percent stake and the deal would have automatically gone ahead if a compromise solution wasn’t found this week.

The breakthrough came ahead of Scholz’s visit to China next week as the first European Union leader to make the trip since November 2019.

Scholz, a former Hamburg mayor, backed the Cosco deal and has repeatedly stressed the importance of strong trade ties between China and Europe’s biggest economy.

But six ministries wanted to veto the sale, including those of defence, economy and foreign affairs, at a time of heightened concerns about critical infrastructure falling into foreign hands.

The row pitted Social Democrat Scholz against his coalition partners, the Greens and the liberal FDP, who said lessons had to be learned from Germany’s breakdown in ties with Russia.

Beijing welcomed Wednesday’s green light and hit back at critics.

“We hope the relevant parties will view pragmatic cooperation between China and Germany rationally and stop baselessly hyping it up,” said foreign ministry spokesman Wang Wenbin.

Scholz meanwhile was “convinced” that the smaller stake offered to Cosco “does not create strategic dependence”, German government spokeswoman Christiane Hoffmann told reporters.

- ‘Naive’ -

Badly burned by the over-reliance on Russian gas imports, many in Germany are wary of falling into the same trap and becoming too dependent on China economically.

The European Commission also voiced scepticism over the Hamburg project, a source close to the matter told AFP at the weekend, amid fears sensitive information about activity in the port could be relayed to China’s government.

The agreement to settle for allowing a reduced stake of 24.9 percent, thereby depriving Cosco of voting rights, “reduces the acquisition to a purely financial participation”, the economy ministry said.

German harbour logistics firm HHLA for its part said Cosco’s participation would help secure jobs at Hamburg’s port and boost its role as a key trading “hub” with Asia.

But the face-saving compromise failed to silence critics.

Anton Hofreiter, a Green party lawmaker and chairman of the German parliament’s European affairs committee, said approving the deal was the wrong decision.

Scholz’s argument “that this is a purely commercial project is fatally reminiscent of the statements on Russia and Nord Stream (gas pipelines),” he told Funke media group.

“The attitude can be described as naive at best,” he said.

Franziska Brandmann, leader of the FDP’s youth wing, likewise accused the government of being “naive”.

Conservative opposition leader Friedrich Merz said Germany needed “a reassessment of its relationship with China”, noting that the Asian giant was becoming “more repressive” at home and “increasingly aggressive” abroad.

- Tougher stance -

Chinese firms already hold stakes in other European ports, including Rotterdam and Antwerp, but the EU’s stance against Beijing has hardened since then.

Germany too has in recent years taken a closer look at Chinese investment in sensitive technologies and other areas, and reserves the right to veto acquisitions.

The economy ministry said Wednesday that as part of the Cosco compromise, the Chinese firm would not be allowed to appoint senior staff members or have a veto right on strategic business decisions.

Any future attempt to increase the shareholding above the 25-percent threshold would trigger a fresh government review, the ministry added.

China is a key trading partner for Germany, especially for its flagship automotive industry.

But the relationship has been soured in recent years by China’s strict zero-Covid policy, the escalation of tensions over Taiwan and concern over human rights issues in the Muslim-dominated Xinjiang region.