China Desk

China desk: what companies from China need to know in Germany

Companies from China have invested in Germany for decades, from automotive suppliers and machinery manufacturers to battery producers, solar and electronics companies, trading houses and technology firms. For our China desk, the starting point is that the legal environment has changed considerably.

Germany remains open to investment, and a subsidiary can be set up within weeks, but investment screening has tightened, export controls and sanctions have become central to supply chains, the EU's Foreign Subsidies Regulation adds a new review layer, and data transfers between the EU and China are subject to strict requirements on both sides. Political attention to economic security means that transactions involving China require careful planning of timetables, structures and communication.

Our China desk brings together the German law issues that Chinese companies and investors typically face in Germany. It is part of our international clients practice. We describe the legal framework and how we work; we do not make claims about our team's nationalities or languages beyond what we confirm in individual engagements.

Market entry for companies from China

Most companies from China enter Germany through a limited liability company (GmbH), which requires share capital of at least EUR 25,000 and notarised articles of association. Corporate documents of shareholders in China usually need legalisation or an apostille, depending on the status of the Hague Apostille Convention between the two states, and certified translations.

Managing directors need not live in Germany, but they must be able to fulfil their duties, including timely insolvency filing and tax compliance. Opening a bank account can take time because banks apply enhanced due diligence to beneficial ownership chains, especially where state-owned enterprises or complex holding structures are involved. The company must report its beneficial owners to the transparency register. See our GmbH formation checklist.

Employees from China need a residence title permitting employment. Managers and specialists can use the EU Blue Card or the intra-corporate transfer card for temporary assignments, and the accelerated skilled worker procedure can shorten visa processing. Employment in Germany is governed by mandatory German law regardless of the contract's governing law, including dismissal protection, working time limits and works council rights. See our page on immigration and global mobility.

Tax structure

Germany and China have a double tax treaty that reduces withholding taxes on dividends, interest and royalties and allocates taxing rights. Relief from German withholding tax depends on substance requirements under German anti-treaty-shopping rules, so intermediate holding companies, for example in Hong Kong, Singapore or Luxembourg, need real economic activity. Transfer pricing documentation is required for transactions between the German subsidiary and Chinese group companies, and German tax audits regularly examine the pricing of intra-group supplies, licences and service charges as well as the functions actually performed in Germany.

Joint ventures and partnerships

Joint ventures between Chinese and German companies remain common in automotive, batteries, renewable energy and industrial technology. The joint venture agreement should regulate capital contributions, technology licences and their scope, management and veto rights, deadlock resolution, transfer restrictions and exit, including put and call options and valuation. Competition law limits information exchange between the partners and can require merger control filings for the joint venture itself.

If the German partner holds sensitive technology, investment screening can apply to the Chinese partner's stake, and export control rules can restrict what the joint venture may share with group companies in China. Clear governance rules matter more than usual, because regulatory change can force restructuring of the partnership. Our China desk regularly sees these points decide whether a partnership is feasible.

Commercial contracts and distribution

Chinese manufacturers selling in Germany through distributors or agents should note that German commercial agents can claim a goodwill indemnity on termination that cannot be excluded in advance, and that courts extend this to integrated distributors. Standard terms used in supply contracts with German customers are reviewed for fairness under § 307 BGB even between businesses, so liability and warranty clauses drafted under Chinese law may not be effective under German law.

Products placed on the EU market must comply with EU product safety, CE marking and producer responsibility rules, and an EU-based economic operator must be responsible for them. Online sales through marketplaces require registration for packaging and electrical equipment take-back in Germany. See our page on distribution, agency and franchise.

Investment screening of acquirers from China

Acquisitions by Chinese investors are reviewed more closely than in the past. Under the Foreign Trade and Payments Ordinance, the Federal Ministry for Economic Affairs and Energy can examine acquisitions by non-EU investors of 10% of the voting rights in operators of critical infrastructure and listed sectors such as media, cloud services and critical technology, 20% in further listed sectors such as semiconductors, artificial intelligence, robotics and critical raw materials, and 25% in other cases (§ 56 AWV).

Acquisitions in the listed sectors must be notified and may not be completed before clearance. The review considers whether the acquirer is controlled by a foreign government and whether there are risks to public order or security, and the government has prohibited or restricted several acquisitions by Chinese investors in recent years.

A ministry draft for a new Investment Screening Act, published for consultation in October 2026, would reform the regime. Greenfield investments are generally not subject to screening, but acquisitions of assets such as production lines or intellectual property can be. Mitigation measures, such as restrictions on access to technology, ring-fencing of sensitive businesses or governance commitments, can make a transaction approvable.

Minority investments, for example in start-ups, can also be caught if they reach the relevant thresholds or confer board seats and information rights, and indirect acquisitions through funds or intermediate holding companies are attributed to the ultimate acquirer. Timetables should allow for the full review period of up to two months in the first phase and four months in the main examination, which can be extended. See our pages on foreign investment control and our FDI filing checklist.

The EU Foreign Subsidies Regulation

The EU Foreign Subsidies Regulation (Regulation (EU) 2022/2560) allows the European Commission to review subsidies granted by non-EU states that distort the internal market. Acquisitions must be notified where the target, a merging party or the joint venture is established in the EU with EU turnover of at least EUR 500 million and the parties received combined foreign financial contributions of more than EUR 50 million in the three preceding years.

Public procurement bids above EUR 250 million also trigger notification. Financial contributions are defined broadly and include loans from state-owned banks, tax incentives and contracts with state entities. Chinese companies with state-owned shareholders or financing are particularly affected and should collect data on financial contributions across the group. The Commission can also start ex officio reviews. See our page on state aid and the FSR.

Export control, sanctions and countermeasures

Companies trading between China and Germany must comply with EU export controls on dual-use items, which require licences for exports of listed goods, software and technology, and with the EU's sanctions against Russia, which prohibit the supply of many goods to Russia and have targeted companies in third countries, including China, that were found to support Russia's military. German subsidiaries of Chinese groups are subject to EU rules in full, including the obligation to prevent circumvention. Technology transfer within the group, for example by giving engineers in China access to German design data, can require an export licence.

At the same time, China's Export Control Law, in force since December 2020, and its licensing requirements for materials such as gallium, germanium, graphite and rare earths affect supply chains in Germany, and the Anti-Foreign Sanctions Law allows Chinese parties to take action against those who implement foreign sanctions. The EU Blocking Statute protects against certain US sanctions, not against Chinese countermeasures. Groups operating in both jurisdictions need entity-level compliance analysis and documented business reasons for decisions. See our page on export control and sanctions and our insight on China export controls and countermeasures.

Supply chain due diligence and forced labour rules

German companies sourcing from China are subject to the Supply Chain Due Diligence Act if they have at least 1,000 employees in Germany, and they pass due diligence requirements to Chinese suppliers through codes of conduct, questionnaires and audits. The EU Forced Labour Regulation will prohibit products made with forced labour from the EU market from 14 December 2027, with particular attention to certain regions and sectors.

Chinese suppliers to German customers should expect detailed questions about their own supply chains, and contracts should allocate audit rights, remediation obligations and termination rights in a way that can be implemented in practice. Our China desk helps both sides structure these obligations.

Technology transfer, IP and data transfers

Technology is often the reason for investment in Germany and the focus of regulators. Licence and research cooperation agreements should define ownership of improvements, access to know-how and the conditions for transfers abroad, and protect trade secrets through reasonable confidentiality measures, a precondition for protection under the Trade Secrets Act. Patents and trademarks should be registered in Europe early; German courts and the Unified Patent Court offer effective enforcement, including injunctions.

Personal data of employees and customers in Germany may only be transferred to China if a transfer mechanism under Chapter V GDPR applies, usually standard contractual clauses combined with a transfer impact assessment that considers government access to data in China. Remote access from China to data stored in the EU counts as a transfer.

Conversely, China's own data export rules apply to personal data and important data leaving China. Connected products sold in Germany are subject to the EU Data Act and, from 2027, the Cyber Resilience Act, and in sensitive areas such as telecoms networks, critical components can be prohibited for security reasons. See our page on GDPR and German data protection law.

Disputes between Chinese and German parties

For contracts between Chinese and German parties, arbitration is usually the best choice for dispute resolution, because both China and Germany are parties to the New York Convention, so arbitral awards can be enforced in both countries. Institutions in Germany, Hong Kong, Singapore and mainland China are all used, and the seat, the language and the applicable law should be chosen deliberately.

Recognition of foreign court judgments in Germany depends on the conditions of § 328 ZPO, including reciprocity (§ 328 ZPO), which makes the enforcement of Chinese judgments in Germany possible but less predictable than arbitration. German law and the UN Sales Convention, to which both states are parties, are common choices for supply contracts, and the dispute resolution clause should be consistent across all contracts of a project. See our page on international arbitration.

Restructuring and exit

Some Chinese-owned German companies face restructuring because of changes in their markets or in group strategy. Restructuring in Germany involves works council consultation, social plans and, where the company is in financial difficulty, the duties of managing directors to monitor solvency and file for insolvency in time. Parent company support, such as comfort letters or subordinated loans, should be documented carefully because it affects the going-concern forecast. Exits through sale to a German or international buyer are subject to merger control and, depending on the buyer, investment screening.

How our China desk helps

Our China desk advises Chinese companies and investors on setting up and running their German business: formation of subsidiaries, employment and immigration, commercial contracts and distribution, and tax structuring with tax advisers. We advise on acquisitions and joint ventures, including investment screening, merger control and FSR notifications, and on export control, sanctions and data transfer compliance.

We represent clients in disputes before German courts and in arbitration. We also advise German companies on cooperation with Chinese partners, on sourcing and supply agreements with suppliers in China and on the legal side of reducing dependencies in their supply chains. To discuss your plans, please contact us. This page provides general information, not legal advice.