Germany Says China Trade Could Create Perilous Dependence

The German government on Thursday approved its first national strategy against China, defining the Asian superpowers as “partners, competitors and systemic rivals”, to maintain economic ties worth hundreds of billions of dollars, while also targeting Chinese products. It called for a drastic reduction in dependence on

The new policy calls for export controls and investment reviews for German companies doing business in China to protect the flow of sensitive technology and know-how.

The government led by Prime Minister Olaf Scholz adopted a 64-page document on Thursday after months of debate and delays stemming from disagreements within the tri-party coalition over how tough the position should be. bottom. The strategy reflects the European Union’s theme of encouraging “risk aversion” in relations with China.

“We don’t want to decouple from China, but we want to minimize risks. This includes strengthening the European economy and reducing dependencies,” said German Foreign Affairs Annalena Burbock. the minister said. “The more diverse trade and supply chains we build, the more resilient our country will be,” she added.

The strategy is tougher on China than the one adopted by the Chinese-led government. Chancellor Angela Merkel saw China as a huge and growing market for German products.

The push has created closer ties with China, with more than a million stakeholders german job In addition to being directly dependent on China, many more countries are indirectly dependent on China.nearly half of all Investing in Europe I’m from Germany in China, almost half of German manufacturers rely on China for part of their supply chain.

But supply chain problems caused by the coronavirus pandemic have exposed Germany and Europe’s dependence on China for products ranging from pharmaceuticals to processed minerals vital to green technology. Last year’s Russian invasion of Ukraine also raised concerns that China would abuse its economic dependence in the same way Russia weaponized Germany’s dependence on natural gas exports.

The strategy calls on companies to “internalize more strongly” the geopolitical risks associated with doing business in China to avoid having to tap state funds in the event of a crisis. The government said it was working on providing incentives to encourage German companies to diversify their operations outside of China.

“We understand that it is in our own national interest to take care of our economic security,” Mr. Barbock said, adding that Germany “needs to pay more than €200 billion to get out of its dependence.” He added that he could not afford to think. ”, just like what happened when Russia cut off the flow of gas to Western Europe.

But questions remain about whether and how companies will support the policy. Geopolitical risks are complicating business in China, although some mid-sized and family-owned companies say they are complicating doing business in China. By localizing, we are responding to the request of “risk avoidance”. .

“The Volkswagen Group will continue to invest in China,” said Ralf Brandstetter, Volkswagen’s China head and board member, in response to the policy announcement.

“China is a dynamic growth market and a major innovation driver,” he said, adding that it was “ultimately important to the global competitiveness of Volkswagen and the German automotive industry as a whole.”

The strategy will now be submitted to parliament, and lawmakers will begin discussing it at their September meeting. The policy is intended to guide companies, government agencies, universities and other institutions in their dealings with China and to serve as a response to the Chinese government’s foreign policy.

Germany released its first National Security Strategy last month calling for a “robust” defense and other policies as part of an effort to coordinate foreign, domestic and economic policies under Mr. Scholz. But the government has kept China out of its overall strategy, given its importance as Germany’s largest trading partner, with bilateral trade reaching about €300 billion ($334 billion) last year. .

The strategy makes it clear that Berlin will not change its “one China” policy, which claims that only “peaceful means and mutual consent” can resolve China’s claims to Taiwan. “Taiwan is important to Germany both as a base for German companies and as a trading partner,” he said.

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