BERLIN (AFP) - The German government said on Friday (July 27) it took a minority stake in electricity transmission firm 50Hertz for "national security" reasons, thwarting Chinese investors from buying into the strategic company.

"On national security grounds, the federal government has a major interest in protecting critical energy infrastructure," the finance and economy ministries said in a joint statement.

Berlin has therefore tasked a public bank to purchase a 20-per-cent stake put up for sale by Australian infrastructure fund IFM and which has been sought by China's State Grid.

The Chinese group had already tried to take a minority stake in the company earlier this year.

But their first attempt was blocked as 50Hertz's majority shareholder - Belgian power transmission system operator Elia - snapped up the stake and expanded its holdings to 80 per cent.

Chinese companies have been going on a shopping spree across Europe, snapping up airports, harbours and engineering firms.

They have also made several high-profile acquisitions of German high-tech firms, a trend that has been viewed sceptically by Berlin.

Germany's coveted automobile industry is also not spared from Chinese interest, with Geely shocking the sector when it took almost 10 per cent in Daimler, which owns the Mercedes brand.

A study by consultancy EY found Chinese companies bought 54 German firms last year and invested US$13.7 billion in Europe's largest economy.

Underlining concerns over the spate of Chinese acquisitions, domestic intelligence chief Hans-Georg Maassen had said in May that "one won't need to spy if one simply buys up entire companies".

'Critical infrastructure'

Current legislation allows the German government to block an investment from a non-EU country only if the investor wants to take 25 per cent or more.

Berlin last year also toughened up rules for foreign takeovers, by extending the range of companies eligible for a probe under "critical infrastructure" provisions or considered to be developing "key technologies".

In the case of 50Hertz, the government was unable to block the purchase outright as the stake concerned fell below the 25-per-cent threshold.

It has therefore deployed the unusual tactic of buying the stake itself in order to stop foreign investors.

But Berlin said the measure would be "temporary" and that it intended to sell off the shares again in the future.

Welcoming the government's move, 50Hertz said it showed "how fundamentally important the transmission network is as part of the critical infrastructure of our country." 50Hertz is one of four transmission system operators (TSOs) in Germany and ensures that 18 million people are supplied with electricity.

Its grid covers the states of Brandenburg, Berlin, Hamburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia.

Friday's announcement came a day after media reports that Berlin is preparing for the first time to veto the takeover of a German company by Chinese investors for strategic reasons.

Business weekly Wirtschaftswoche reported the economy ministry will prevent Chinese investor Yantai Taihai Corporation from buying Leifeld Metal Spinning.

The 200-employee firm produces high-strength parts for the car and aerospace industries that also have nuclear applications.

"The cabinet will make the decision on August 1," the magazine said.