The federal government adopted its first national strategy on China on Thursday. She defined the Asian superpower as “partners, competitors and systemic rivals” and called for a significant reduction in reliance on Chinese goods while maintaining economic ties worth hundreds of billions of dollars.
The new policy calls for export controls and screening of investments by German companies doing business in China to protect the flow of sensitive technology and know-how.
Chancellor Olaf Scholz’s government approved the 64-page document on Thursday after months of discussions and delays attributed to disagreements within his three-party coalition over the harshness of their position. The strategy addresses European Union issues calling for “risk reduction” in relations with China.
“We don’t want to detach ourselves from China, we want to minimize our risks. This includes strengthening our European economy and reducing dependencies,” said German Foreign Minister Annalena Baerbock. “The more diverse trade and supply chains are built, the more resilient our country is,” she added.
The strategy is tougher on China than the governments under Chancellor Angela Merkel, who saw China as a huge growth market for German goods.
This push forged a close relationship with China, with more than a million German jobs directly dependent on China and many more indirectly. Almost half of all European investments in China come from Germany, and almost half of German manufacturing companies rely on China for part of their supply chain.
But supply chain problems caused by the coronavirus pandemic highlighted the extent to which Germany and Europe had become dependent on China for goods – from medicines to processed minerals essential to green technologies. Russia’s invasion of Ukraine last year also raised fears that Beijing could abuse economic dependencies in a similar way Moscow has weaponized Germany’s dependence on its natural gas exports.
The strategy calls on companies to “more internalize” the geopolitical risks of doing business in China so that they do not have to resort to state funds in the event of a crisis. The government said it was working on creating incentives to encourage German companies to diversify their businesses beyond China.
“We understood that it is in our own national interest to ensure our economic security,” Baerbock said, adding that Germany “cannot afford to have to pay more than 200 billion euros to get out of the country.” to get out of dependency”. “As happened when Russia cut off gas supplies to Western Europe.
However, it remains questionable whether and how companies will support the policy. Some mid-sized and family-owned companies said geopolitical risks had made their business in China more difficult, but industrial leaders such as BASF and Volkswagen responded to calls for “de-risking” by doubling their investments in China but focusing them locally.
“Volkswagen Group will continue to invest in China,” said Ralf Brandstätter, Volkswagen’s China boss and board member, in response to the policy announcement.
“China is a dynamic growth market and a major driver of technological innovation,” he said, adding that it is “ultimately crucial for the global competitiveness of Volkswagen and the entire German automotive industry.”
The strategy will now go to Parliament, where MPs are expected to start debating it when they meet again in September. The policy is intended to provide guidance for companies, government agencies, universities and other institutions dealing with China, and to serve as a response to Beijing’s foreign policy.
Last month, Germany unveiled its first national security strategy, calling for “robust” defense and other measures as part of an effort under Mr Scholz to coordinate the country’s foreign, domestic and economic policies. However, the government had excluded China from the overall strategy given its importance as Germany’s largest trading partner, whose bilateral trade volume reached almost 300 billion euros or about 334 billion US dollars last year.
The strategy makes clear that Berlin has no intention of changing its “one China” policy, which urges that only “peaceful means and mutual consent” can resolve Beijing’s claim on Taiwan. “Taiwan is important for Germany both as a location for German companies and as a trading partner,” it said.