* Gov't looks into takeover of Saxony-based company
* Ministry could block sale to Chinese state-owned firm
* Cotesa CEO hopes for quick approval of investment (Adds details, company reaction)
By Michael Nienaber
BERLIN, Dec 22 (Reuters) - The German economy ministry said on Friday it had launched a review of a planned Chinese bid for aerospace supplier Cotesa, a move which could lead to Berlin blocking the sale.
The case, which comes after Berlin tightened its rules on foreign corporate takeovers in July, has echoes of the German government's decision last year to withdraw approval for China's Fujian Grand Chip Investment Fund to buy chip equipment maker Aixtron over security concerns.
"Currently, there is a foreign investment review under way regarding the sale of Cotesa," an economy ministry spokeswoman said, adding she could not comment on the details.
Cotesa CEO Joerg Huesken told Reuters that his company is being pursued by a subsidiary of the China Iron & Steel Research Institute, a state-owned company that aims to make Chinese aircraft maker Comac competitive with Airbus and Boeing .
"It's a done deal. We're now waiting for Berlin's approval and we hope that the decision comes quickly," Huesken said, adding that the Chinese buyer had pledged in the contract to invest heavily in Cotesa's business locations in Germany.
He declined to comment on the value of the bid for Cotesa, a privately-held company from Germany's Mittelstand of small and medium-sized enterprises.
German business daily Handelsblatt reported that the Chinese company had offered to pay between 100 million and 200 million euros ($119 million-$237 million) for a majority stake in Cotesa.
Located in the east German state of Saxony, Cotesa specialises in producing carbon-fibre components, supplying both Airbus and Boeing, according to the company's web page. It has annual sales of 65 million euros and nearly 800 employees.
Huesken said Airbus and Boeing had no objections to the takeover. "On the contrary, the reactions were very positive. Both companies signalled they would increase orders," Huesken added.
The Cotesa case highlights the balancing act European authorities face between limiting takeovers by Chinese state-backed groups of prized European assets and alienating China as an important source for new investment capital.
Under Germany's new takeover rules agreed in July, operators of infrastructure companies should be better protected from investors from outside the EU.
In addition, the government will be able to take twice as long - four months - to review such deals.
The German government has repeatedly called on China to open its heavily protected market and create a level playing field in which foreign investors should be allowed to buy Chinese firms.
The purchase last year of German robotics maker Kuka by Chinese company Midea raised concerns that China was gaining too much access to key technologies while shielding its own companies from foreign takeovers.
The final decision in the Cotesa case, however, may be taken out of Germany's hands since the firm also supplies Boeing, which is viewed as a strategic U.S. company. This means the sale could also be blocked by a U.S. government committee. ($1 = 0.8439 euros) (Reporting by Michael Nienaber, editing by Thomas Escritt and Adrian Croft)