Beijing asks German businesses to ‘help Europe view China correctly’

German investors and business owners with a stake in China have grown increasingly concerned amid diplomatic strife and zero-Covid disruptions
China’s foreign ministry similarly asked American businesses in December to play a ‘bridging role’ between their two countries

China trade

Frank Tangin Beijing

Published: 7:00pm, 29 Mar 2022

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The German business community in China is being called on to add impetus to Beijing’s attempt at cooperation and improved relations with the European Union, as panicky investors have been caught up in diplomatic tensions and seen their businesses disrupted by China’s zero-Covid strategy.

During a meeting with several heads of the German Chamber of Commerce in China on Monday, deputy foreign minister Deng Li acknowledged their “active contribution” in economic cooperation and said the chamber serves as “a factor of stability” in bilateral relations.

“We hope the Chamber of Commerce and German enterprises continue to play an active role in deepening bilateral pragmatic cooperation – introducing the vigour and potential of Chinese markets to Europe and Germany, and help Europe view China correctly,” Li said in a statement on Monday.

The meeting was held as 2022 marks the 50th anniversary of diplomatic relations between China and Germany, and after bilateral relations were strained last year when German businesses warned that China’s attempt to target Lithuania over its relationship with Taiwan could force them to close manufacturing operations in Lithuania, a member of the EU trade bloc.

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Beijing and Brussels have also been at odds over a variety of issues in the past two years, including human rights abuses in Xinjiang and the imposition of Hong Kong’s national security law. As a result, a hard-negotiated comprehensive agreement on investment between China and the EU was shelved last year.

German participants in Monday’s meeting included Volkswagen Group China CEO Stephan Wollenstein; Jens Hildebrandt, chief representative of the Delegation of German Industry & Commerce Beijing; and Daimler Greater China chairman Hubertus Troska, according to an online statement released by the ministry.

It is not the first time that China’s foreign ministry has turned to the foreign business community. In December, deputy foreign minister Xie Feng told American businesses that they should play a “bridging role” between China and the United States and “actively” contribute to a healthy and stable bilateral relationship.

Monday’s meeting also came amid early signs that international investors are withdrawing from the world’s second-largest economy. Overseas investors’ holdings of Chinese bonds fell by 67 billion yuan (US$10.5 billion) in February. There were also net outflows of US$56.5 billion yuan via the mainland-Hong Kong Stock Connect programme in the past month, according to East Money, a securities-related services firm.

02:51

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Meanwhile, the coronavirus lockdowns imposed on Shenzhen and Shanghai, two key economic hubs, have raised fears among European businesses that more disruptions will arrive.

Germany, the current chair of the Council of the EU, is a key trading partner for China, with the value of their bilateral trade rising 22.5 per cent to US$235.1 billion last year. It is an important destination for Chinese investment, totalling US$15.7 billion, and is also a major source of technologies that China needs. The value of all technology transfers reached US$96.6 billion by the end of 2021, including US$6.3 billion from 761 instances last year.

Germany had also invested a total of US$38 billion in China, mainly in industries such as automotive, chemicals, power-generation equipment, transport and telecommunications, by the end of last year, according to data from the foreign ministry.

German carmakers, which have already built a significant business presence in the world’s largest car market and are still stepping up efforts to grab a larger share, are key supporters and beneficiaries of improved China-EU ties.

Volkswagen chairman warns against China-EU decoupling as tensions rise

Volkswagen AG’s top executive, Herbert Diess, warned in December that it would be very damaging if Germany or the EU wanted to decouple from China. “As a global company, we will never stop advocating for globalisation, a multilateral rules-based trading system and engagement,” he said.

Wollenstein also said in a LinkedIn post two months ago that the carmaker is determined to keep pressing on “fearlessly” in China, like a tiger.

Beijing has opened its arms to foreign investors, trying to keep them onshore and attract more investment with its huge market.

The country received a record high US$173.5 billion worth of foreign direct investment last year. And FDI rose 74.8 per cent, year on year, to US$37.9 billion in January and February, according to government data.