BERLIN (BLOOMBERG) - When Wolfgang Tiefensee first made his pitch to the world's biggest maker of electric-vehicle batteries, he was told he stood no chance of luring investment to Germany.
More than a year and two trips to China later, Contemporary Amperex Technology Ltd. agreed to build its first foreign plant in the eastern German state of Thuringia. According to Tiefensee, CATL overlooked the high taxes, labor and energy costs relative to other locations because he promised what the government in Berlin is not willing to give: access to German high-tech R&D.
In reaching its decision, CATL didn't just want to build "the usual factory," Tiefensee, the state's economy minister, said in an interview. "It was far more important to them to develop research cooperation to dispel China's reputation as simply seeking to copy technical know-how for its own use."
The federal government applauds the investment but doesn't necessarily share Tiefensee's enthusiasm for such close collaboration with China. In fact, German Economy Minister Peter Altmaier is promoting a European consortium for battery-cell production, with the aim of enabling Europe to ultimately compete with China in electric vehicles.
That goal runs counter to Tiefensee's push for Germany to grant CATL access to the research consortium.
The German Economy Ministry declined to comment, while CATL management didn't respond to e-mailed requests for comment.
Thuringia's wooing of CATL illustrates the difficulty national governments face in holding the line on China policy even in their own countries. As capitals from Berlin to Canberra and Tokyo become increasingly skeptical of Beijing's intentions, regional administrations are rushing to court China regardless.
That contradiction in approach is starting to ring alarm bells across the European Union, with national governments waking up to the actions of regional officials regarded as naïve in foreign policy areas that are more usually outside their remit.
Countries including Japan, Canada and Australia have moved to shelter key assets from Beijing's reach "European regional governments often lack the knowledge and skills to comprehensively assess what are often medium- to long-term risks that come with doing business with the Chinese Communist Party and state-owned enterprises," said Jan Weidenfeld, head of European affairs for the Mercator Institute for China Studies in Berlin.
Conversely, those same state enterprises as well as "formally private" Chinese companies, "have cleverly exploited the lack of expertise at regional government level," he said.
The phenomenon is not confined to Europe. In Australia, the state of Victoria signed a memorandum of understanding with China in October to cooperate on President Xi Jinping's signature Belt and Road Initiative.
The state government at first refused to publish the terms of the document, only making it public after criticism by Prime Minister Scott Morrison, whose federal government opposes joining the BRI programme.
While global attention is fixed on President Donald Trump's aggressive stance towards China on trade, technology and market access, countries including Japan, Canada and Australia have moved to shelter key assets from Beijing's reach. In November, the European Union approved bloc-wide rules to prevent foreign investments from threatening national security, a move directed principally at China.
Germany, the EU's biggest economy and the world's No. 3 exporter, has gone further still, lowering the threshold for examining foreign takeovers and widening the scope of deals covered to sectors like media.
In August, Chancellor Angela Merkel's government blocked the purchase of German machine tool manufacturer Leifeld Metal Spinning AG by a Chinese investor, Yantai Taihai Group, the first such veto ever.
Both main parties in Merkel's coalition are meanwhile devising their own China strategies. Yet Germany's powerful states, the Laender, risk undermining those efforts as they beat a path to China.
The prime minister of the northern German state of Schleswig-Holstein travelled to Hangzhou in September with a 60-strong delegation to strengthen regional ties and attract Chinese investors. The regional government of North Rhine-Westphalia, Germany's most populous state, followed with a mission to China in October.
Meanwhile in June, the Austrian regional government of Burgenland took a delegation of 30 on a trip to China for nine days.
Xavier Bertrand, head of the northern Hauts-de-France region, met with potential investors in China last year in a bid to help turn around the area's economic malaise by attracting logistics and technology businesses.
"I am convinced in the years to come China will prevail as the main economic partner," Bertrand said in April. Three months earlier, during his own visit to China, French President Emmanuel Macron called on the EU to provide funds to stop nations and companies having to look abroad for investment.
National capitals are watching all this China activity with concern. Establishing business deals and contacts in China is seen as natural, but the risk is that local officials are ignorant of the political dimension of their visits, misunderstanding the long-term nature and goals of China's industrial policy, for example.
They may be asked to approve Chinese additions to school curricula, or to host Confucius Institutes, cultural centres managed from Beijing. In Berlin, there is talk of providing training for regional officials on what to expect in China as a result.
In the case of attracting CATL to Thuringia, it's hard to accuse Tiefensee of naivety. A former federal transport minister in Merkel's first term coalition, in his meetings with CATL founder Zeng Yuqun and high-ranking Chinese officials, Tiefensee committed to make CATL's case knowing that it was a condition of securing the 240 million-euro plant - the most important investment in the state for decades, he says.
"This company lays great store by a research partnership," said Tiefensee. "That was also the reason the deal was signed."
He maintains that "it's not right to exclude one company from research and development."