Chancellor Angela Merkel's cabinet agreed to lower the shareholding threshold at which Berlin can intervene in certain sectors on grounds of public safety concerns to 10 percent from 25 percent previously.

The move is a response to mounting concern that China's state-backed companies are gaining too much access to key technologies in Germany and other European countries while Beijing is shielding its own companies from foreign takeovers.

Since taking office in March, Economy Minister Peter Altmaier has repeatedly stressed that Germany wants to remain a free market economy which is open to foreign direct investments.

At the same time, he wants China to ensure a level playing field in economic relations and has warned that the government had a duty to protect critical infrastructure such as power and communication networks.

Germany introduced its initial 25 percent threshold in 2004 and expanded its veto powers in 2017. The measures are meant to protect vital infrastructure such as energy, water, food supply, telecommunications, finance and transportation.

With the new rules, the government also added certain media outlets to the list of companies which are regarded as critical for public safety.