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Germany has halted the sale of a Volkswagen subsidiary to China due to concerns over national security, further straining the already tense relationship with its largest trading partner.

In June 2023, MAN Energy Solutions, a subsidiary of the Volkswagen Group, announced its intention to sell its gas turbines business to GHGT, a Chinese state-owned company.

Germany Blocks Volkswagen Subsidiary Sale to China

However, a review conducted by the German government in September has expressed concerns about the potential use of the gas turbines by China for military purposes, as reported by Reuters.

The decision to block the deal comes shortly after the European Union increased tariffs on electric vehicles from China, leading to a trade dispute with Beijing.

During a press conference on Wednesday, July 3, Germany's economy minister, Robert Habeck, emphasized the importance of protecting technologies relevant to "public security" from countries that may not always have a friendly relationship with Germany.

He stated that while Berlin welcomes investments from foreign companies, protecting these technologies is a priority.

During the press conference, Interior Minister Nancy Faeser expressed her approval of the government's decision, citing security reasons.

Reaction Divided Over Germany's Decision

According to figures released by the German government, the trade between Germany and China amounted to €255 billion ($275.3 billion) last year. However, Berlin's ties with Beijing have faced challenges in recent years as Germany aims to safeguard its domestic manufacturers and decrease reliance on China.

Meanwhile, China's Ministry of Foreign Affairs expressed its opposition to the politicization of normal commercial cooperation.

China suffered significant economic consequences due to its strong economic connections with Russia following the invasion of Ukraine.

This was primarily due to its heavy dependence on Russian natural gas. As a result, the country is now determined to minimize the likelihood of facing similar risks in the future.

MAN Energy Solutions expressed its respect for the government's decision. The company announced that it will be closing down its gas turbine division in the coming months, according to a statement shared with CNN.