Schaeffler KG, the German maker of precision machinery and auto parts, is finding China isn't as welcoming as it once was. Schaeffler has been frustrated in its effort to invest $128 million in China to build factories and acquire Luoyang Bearing Science & Technology Co., China's largest maker of ball bearings. The deal is being held up by Chinese regulators who say they are protecting home-grown technology used in the Shenzhou spacecraft for China's lunar mission.

"The Chinese government has been striving for a Chinese solution,'' says Gerhard Zaiss, a spokesman for Herzogenaurach, Germany-based Schaeffler. Now, China's Yongmei Coal Group and Zhejiang Tianma Bearing Co. are in talks about a joint takeover of Luoyang.

China, which has lured $622.4 billion from overseas since 1978 and surpassed the U.S. in 2003 as the largest recipient of foreign investment, is turning off the tap that helped feed two decades of growth. With new restrictions on investment, China risks impeding its own modernization efforts and invites a backlash from its trading partners, China specialists say.

"Every China watcher has this in the back of their mind,'' says Don Straszheim, vice chairman of Newport Beach, California- based Roth Capital Partners, who specializes in China. "The stage is being set for increasing tensions.''

Source:佚名