The visit marks a point of tension in Germany’s stance of seeing China as “a partner, a competitor, and a systemic rival”
China is Germany’s largest trading partner with an annual trade exceeding €245 billion in 2021. While, in 1990, China accounted for one percent of Germany’s total trade, it represents 9.5 percent in 2021. In terms of investments, major German investment in China is done by multinational companies like Volkswagen, BMW, Mercedes-Benz, and German chemical industries. These companies have significantly expanded their investments in China representing up to almost 29 percent of total investments made in 2019. In the first six months of 2022, German investments rose to a record €10 billion, the highest since 2000 when the investments amounted to €6.2 billion. German companies have further announced that they will continue to increase investments in China. For example, Siemens has plans to expand in the digital industry; BMW to expand its production capacity; and BASF’s has plans to invest €10 billion by 2030 to build a new site in the country. Together, the four biggest multinationals (BASF, BMW, Volkswagen, and Mercedes-Benz) have contributed 34 percent of total European FDI into China between 2018 and 2021. On the other hand, Chinese investment in Germany between 2014 and 2019 amounted to approximately $40 bn, highlighting German investments outweighing Chinese investments in Germany. In terms of political relations, Germany is in the process of reassessing its relations with China. While the economic partnership remains the cornerstone of relations, Germany also considers China a vital partner on issues such as climate change. Nonetheless, in the past few years, there has been strategic rethink in its outlook towards China, largely driven by concerns over its economic dependencies, Beijing’s increasingly aggressive posture in its neighbourhood and in international relations, concerns over human rights, and now Beijing’s expanding relations with Russia in the aftermath of the Ukrainian crisis. Another key issue driving the re-assessment is the dynamics of US-China relations. The hardening of the American position on China and the former’s adoption of a “democracy vs authoritarian” narrative is not shared by the Germans. Thus far, Chancellor Scholz’s government has followed the policy laid down by Angela Merkel of not taking sides in the conflict, which involves its most important ally on one side (the US) and its most important economic partner (China) on another. However, the coalition is working towards formulating a coherent German policy outlook towards Beijing. This has been visible in Foreign Minister Annalena Baerbock’s announcement of the development of a China strategy under the larger German national security strategy, and Economic Minister Robert Habeck’s announcement of a new trade policy, ‘promising no more naivety in trade dealings with Beijing’. Apart from this, Berlin is also increasing its diplomatic outreach to Asia, especially in the Indo-Pacific region, as part of its re-assessment policy. The adoption of the Indo-Pacific Guidelines followed by the sending of its frigate ‘Bayern’ to the region highlights Berlin’s attempts to increase its engagement with the countries here.
The Foreign Ministry of Germany describes relations with China as ‘multi-faceted and intense’ and goes on to call Beijing ‘a partner, a competitor, and a systemic rival’.
As Berlin tries to diversify its relations, domestic public opinion also remains critical of China. In a Pew Research Survey released in August 2022, 71 percent of Germans viewed China unfavourably as compared to 37 percent in 2001. Similarly, according to Deutschland trend survey released in early November, 87 per cent of those surveyed would like the Federal government to become economically independent of non-democratic countries; 49 percent believed that the government should reduce economic cooperation with China; and 63 percent believed that China posed threat to world security.
The hardening of the American position on China and the former’s adoption of a “democracy vs authoritarian” narrative is not shared by the Germans.
There were four key outcomes from the visit. First, was the statement with President Xi Jinping jointly opposing ‘the use or threat of use of nuclear weapons…
Chancellor Scholz also acknowledged that there continues to be critical dependencies on China in some sectors; however, Germany was aiming to ‘dismantle one-sided dependencies in the interest of smart diversification’.
What can be concluded is that first, Germany will continue to engage with China while acknowledging the challenges it poses. This stream of thought was visible in Chancellor’s op-ed, where he wrote, “We will seek cooperation where it lies in our mutual interest, but we will not ignore controversies either.” This is primarily the acknowledgement that there are concerns within Germany regarding the unprecedented growth of Chinese power along with the challenge it poses to the international order, however, isolating the country is not an option as Beijing remains a partner on various global issues. Second, the economic relations between the two countries remain the cornerstone of their partnership. Given high inflation and rising cost of living, it would be unrealistic for Germany to push for ‘de-coupling’ from China and Chancellor Scholz has insisted that this will not be possible. The message from this visit is clear, in the short-term, the economic relations are expected to stay strong as Berlin continues to rethink its ties with Beijing through its trade and national security policies.
Given high inflation and rising cost of living, it would be unrealistic for Germany to push for ‘de-coupling’ from China and Chancellor Scholz has insisted that this will not be possible.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Ankita Dutta was a Fellow with ORFs Strategic Studies Programme. Her research interests include European affairs and politics European Union and affairs Indian foreign policy ...Read More +