The German government has prohibited the complete takeover of satellite startup KLEO Connect by a Chinese company, according to two government sources. The decision was made by the economy ministry, which determined that Shanghai Spacecom Satellite Technology, already holding a 53% stake in KLEO Connect, would not be allowed to acquire the remaining 45% minority stake owned by German company EightyLeo.

KLEO Connect aims to create a network of over 300 small, low earth orbit satellites, along with the necessary ground infrastructure, to provide global communications services. This plan is similar to SpaceX’s Starlink project. The emerging space sector, including satellite networks, is increasingly seen as strategically important, particularly in light of recent discussions surrounding the possible use of such networks for defense purposes.

Elon Musk, the CEO of SpaceX, recently revealed that he had turned down a Ukrainian request to activate his Starlink satellite network in Crimea’s Sevastopol last year, as he feared it would be involved in an act of war. This incident highlighted the potential geopolitical implications of satellite networks.

The German government has recently adopted a tougher stance on China, with Chancellor Olaf Scholz’s administration emphasizing the need to reduce strategic dependencies on the Asian superpower. In November, Germany blocked Chinese investment in two domestic semiconductor producers due to concerns over national security and the transfer of sensitive technological knowledge to Beijing. However, in May, the government approved China’s state-owned shipping giant COSCO’s acquisition of a Hamburg port-based container terminal, despite objections from various ministries.

The United States and the European Commission also expressed concerns about the aforementioned deal, which had been in the works for some time, according to sources and media reports. These instances demonstrate Germany’s evolving approach to Chinese investment and strategic partnerships.