By Madeline Chambers and Caroline Copley

BERLIN (Reuters) - Germany's economy minister called on Wednesday for an international "level playing field" in foreign investment amid concerns over rising Chinese interest in German firms and said Berlin wanted the European Union to tackle the issue.

Sigmar Gabriel drew a distinction between open markets and what he called "a state-capitalist interventionist market", a clear reference to China, where German companies have long complained of obstacles to investment and acquiring local firms.

"What we can't do is sacrifice German companies and German jobs on the altar of open markets when in reality there isn't a level playing field. Open markets require the same rules of the game," Gabriel, who is also vice-chancellor, told reporters.

"This is not about protectionism but about creating fairness ... It's not about a specific company or country. It's about open markets based on fairness, on fair competition under the same conditions."

However, Gabriel denied a newspaper report suggesting that Germany would change its own law to block a 4.5 billion euro ($5.1 billion) bid by Chinese home appliance maker Midea for German industrial robot maker Kuka.

Kuka is the latest and biggest German industrial technology group to be targeted by a Chinese buyer as the world's second-largest economy is transforming itself into a high-tech industrial link from a low-cost manufacturer.

Earlier this week, Shanghai Yiqian Trading Company said it would buy Germany's Hahn airport.

Chancellor Angela Merkel may raise the issue of fair competition when she visits China next weekend.

ECONOMIC PRIORITY

Midea's offer has prompted Berlin to consider how crucial Kuka's technology is for the digitalization of industry, an economic priority for Merkel's government.

Gabriel, who has also been vocal about the impact of low Chinese steel prices on European industry, has said he would welcome a European counter-offer for Kuka but the government has made clear it cannot intervene in a corporate matter.

Asked about a report in Die Zeit weekly that Berlin was considering extending the scope of a law that allows the government to bloc a purchase if it poses a threat to security, Gabriel said: "There will be no Kuka law, that is rubbish."

"It's about needing to start talking about this in Europe. It's not about changing a law in Germany."

German influence could remain in Kuka via unlisted mechanical engineering group Voith, which holds 25.1 percent of Kuka shares, allowing it to block strategic decisions.

Voith CEO Hubert Lienhard, who has previously said Kuka management's positive stance towards the bid was premature, told Reuters he would wait for the concrete offer from Midea.

"We will look at our alternatives and our course of action as soon as we have the offer," he said.

Lienhard, also head of the Asia Pacific Committee of German Industry (APA), said there was no reason to panic about crucial technologies being lost.

"I do not see a sell-off of German industry," he told Reuters, adding about 80 percent of German industry consisted of small and medium-sized companies mostly privately owned, making hostile takeovers impossible.

($1 = 0.8795 euros)

(Additional reporting by Andreas Rinke; Writing by Madeline Chambers; Editing by Gareth Jones)