Germany may allow China's Cosco to take a smaller stake than originally planned in a Hamburg port terminal, in what an economy ministry source on Tuesday described as an "emergency solution" to approve the deal but mitigate the impact.
Shipping giant Cosco made a bid last year to take a 35% stake in one of logistics firm HHLA's three terminals in Germany's largest port, but the German coalition has been divided over whether to let the deal go ahead.
The compromise would see Berlin approving a sale of 24.9% of the terminal to Cosco, several government sources said. It will be discussed by the cabinet tomorrow.
The sources said Germany's economy and foreign ministries still wanted to block the deal entirely but were unlikely to succeed, with Chancellor Olaf Scholz expected to prevail over the objections from other ministers.
HHLA declined comment and a Cosco representative was not immediately available for comment
How the government handles the matter is seen as a gauge of how far Germany is willing to toughen its stance on China, its top trading partner, due to concerns about being overly dependent on the increasingly assertive authoritarian country.
The news comes a week before Scholz is due to travel to China.
Supporters of the deal say it will allow Hamburg, where Scholz was mayor before becoming chancellor, to keep pace with rival ports that are also vying for Chinese trade and some of whom are partly owned by Cosco.
"The federal government departments involved see a limit to 24.9 percent as an 'emergency solution' to prevent worse things from happening," the economy ministry source said, adding a smaller stake would give Cosco less say in running the terminal.
"Of course, this does not solve the actual risk issues, so the departments continue to believe that a complete ban is the right way to go," the source said, speaking on condition of anonymity because the matter is confidential.
A second source said the government could try to attach additional guarantees to the deal to further mitigate Cosco's influence on the running of the port terminal.
"Of course it's now up to Cosco to say we're also happy with 24.9 percent," a third source said.
Beijing has previously said it hoped Germany would view the deal in an "objective and rational light" without politicising economic relations.
Andreas Audretsch, a senior lawmaker from Scholz's coalition partner the Greens, said his party wanted to ban the deal.
"The fact that Cosco should now take over less than 25 percent of the terminal is not a compromise, but an emergency solution to prevent worse things from happening," he said.
"Germany can no longer afford to be naïve when dealing with autocracies."
(Reuters - Reporting by Christian Kraemer, Andreas Rinke, Alexander Ratz and Jan Schwartz Additional reporting by Brenda Goh Writing by Maria Sheahan and Matthias Williams Editing by Miranda Murray, Mark Potter and Emelia Sithole-Matarise)