The German government is expected to veto today the planned purchase of a local machine tools manufacturer by Chinese investors.
The move, if confirmed at the Cabinet meeting in Berlin, would be the first time Germany has directly prevented one of its firms from being sold to Chinese corporations.
It comes amid broader European misgivings about China's growing access to leading-edge technologies through corporate takeovers.
Germany's government has repeatedly voiced its concern about the skewed nature of its investment relationship with China.
While the overall value of Chinese investments in Germany rose to €13.7 billion (S$21.9 billion) last year, much of the Chinese interest is in buying small to medium-sized technological companies, the real motors behind Germany's industrial prowess.
Many are family-owned and sometimes undervalued. Large Chinese investors, often backed by the state or with access to state funds, pick them up one by one.
Nor is there much doubt that Chinese investment patterns closely match Beijing's development priorities. A study published in May by the Bertelsmann Foundation, a leading German research outfit, noted that two-thirds of Chinese investments in Germany between 2014 and 2017 were concentrated in 10 key industries singled out by the Chinese government for its "Made in China 2025" development plan, particularly electric cars, biomedicine, aeronautics, the science of new materials and robotics.
Leifeld Metal Spinning, the German company being targeted by a Chinese takeover bid, is a copybook example of a small technological gem just waiting to be snapped up.
It is tiny, employing only 200 workers, and is tucked away in the small town of Ahlen in the western part of Germany. Yet, it is a leading manufacturer of specialised metals used in the automotive, aerospace, missile and nuclear industries.
Leifeld's putative suitor is the Yantai Taihai Group, a Chinese industrial concern from Shandong province active in all fields of metal processing as well as being a supplier for the energy sector.
Until recently, the German government lacked powers to intervene in many of these corporate takeovers.
Chancellor Angela Merkel and her ministers watched helplessly as China's Guangdong-based Midea Group, an electrical appliances manufacturer, snapped up Kuka, a leading German producer of robotic systems for the car and aerospace industries.
But that experience prompted new German legislation last year, which made it easier for Berlin to veto takeovers of strategically important companies if the investment is deemed to put German public order or safety at risk.
These powers are likely to be invoked today for the first time, and they mirror measures other European governments are planning to use.
The German government is also getting more assertive by blocking potential Chinese investments through other means. Last week, officials used the KFW bank, a government-owned financial institution, to buy a 20 per cent share in electricity grid operator 50Hertz.
The unusual move, which raised eyebrows among the country's investment community, was made in order to pre-empt a €1 billion offer for the same stake in the German company from SGCC, China's state-owned electric utility.
German businessmen are not impressed with their government's apparent piecemeal approach as it "may threaten the climate for foreign investment", as Mr Stefan Mair, a member of the executive board of the BDI, the German employers' association, put it.
However, the authorities are undeterred. And they are spearheading a Europe-wide effort to restrict Chinese investments in what governments deem sensitive industries.
All eyes are now on Beijing's Tsinghua Unigroup, which is rumoured to be using financial intermediaries to buy into Linxens, a French company specialising in micro-connectors for banking cards and radio-frequency identification antennas. Its worldwide presence includes a facility in Singapore.
The deal, yet to be officially confirmed by either partners and reputed to be worth €2.2 billion, may test European regulators' tolerance.
And more restrictive measures are on the way. In September last year, the Commission, the European Union's executive body, unveiled a proposal for a Europe-wide screening system of any proposed foreign investment in Europe's critical infrastructure. This would include energy, transport, communications, data storage and key technologies such as artificial intelligence, cyber security, space or nuclear.
China is most likely to be affected by this, if only because the measure is aimed in particular at foreign investors that may be owned or indirectly backed by a government, frequently the case with Chinese investments in key European technologies. Which is perhaps why China's own Commerce Ministry has also just unveiled new draft rules aimed at subjecting foreigners seeking to buy "strategic" stakes in listed Chinese companies to broader national security reviews.