A Chinese company that agreed to acquire a German aerospace parts supplier may be forced to back out of the deal, with the German government having reportedly intervened in the takeover worrying concerns the shift of core technologies into Chinese hands.

While the Chinese company, a unit of State-owned China Iron and Steel Research Institute Group, is waiting for details of the official probe into its bid to buy Cotesa GmbH, it is losing confidence in the deal, according to a source inside the group.

"I'm not aware of the specifics of the deal and the German government investigation yet, but if it did intervene, we understand the deal is over because we have been through this type of government intervention before in the US and Japan and there is just no way around it," the source told the Global Times on Sunday. 

The source spoke on condition of anonymity because he was not authorized to speak to the press about the case.

The Financial Times reported on Thursday that the German Ministry of Economics has intervened in the deal, with an investigation "to check whether it complies with Germany's law on foreign trade."

In the report, an unidentified spokesperson of the ministry did not provide further information as to how and why this specific case was targeted for an investigation and which specific German law on foreign trade was involved.

The German Ministry of Economics did not immediately respond to an email seeking information.

The deal, which reportedly involved an investment of 100 million euros (120 million U.S. dollars) to 200 million euros (240 million U.S. dollars), had been agreed upon between the two companies before the investigation. 

If the Chinese company backs out, it would add to a growing list of Chinese companies' failed overseas merger and acquisition (M&A) deals, as suspicion of Chinese investments has been growing not only in Germany but the West in recent years amid China's rise.

The German government has stopped several high-profile Chinese deals, including the takeover of chipmaker Aixtron. In July, the German government changed its law to block foreign takeovers in critical sectors.

"This is a trend prompted by Chinese companies' global shopping frenzy in 2016 and China's rise in technology and in the manufacturing sector, and it's only going to intensify because the competition between China and these established technological powers is only going to intensify," said Chen Fengying, an expert at the China Institutes of Contemporary International Relations.

Chen told the Global Times on Sunday that, as unease about China's rise grows in the West, Chinese companies will have to adjust their strategies such as bringing in a third party in this kind of M&A deal to cope with potentially unfair treatment and regulatory scrutiny.

Chen said the acquisition frenzy by Chinese companies in 2016, which saw numerous deals that did not make any business sense to outsiders, coupled with China's stated goal of becoming a manufacturing power under its "Made in China 2025" initiative "really scared countries like the US and Germany."

The US has also blocked several Chinese deals involving high-technology companies and financial services, including Ant Financial's proposal to purchase MoneyGram, which was terminated last week after failure to win US regulatory approval.

Commenting on the failed Ant Financial-MoneyGram deal, Geng Shuang, a spokesman for the Chinese Foreign Ministry, on Wednesday urged the US to "provide a fair and predicable environment for Chinese companies investing and operating in the US."

Email: lansuying@nbd.com.cn