Germany’s fear of China could see it left behind on the Belt and Road journey

Norbert Knittlmayer says extreme caution over concern of a ‘sell-out’ to China is making the German government lose sight of the many opportunities presented by the multi-nation initiative

PUBLISHED : Monday, 14 November, 2016, 2:15pm
UPDATED : Monday, 14 November, 2016, 8:08pm

Sino-German business relations seem to be all gloom and doom nowadays. Germany is afraid of a “sell-out” of key hi-tech industries to Chinese investors strategically orchestrated within the Chinese government, as well as of “unfair disadvantages” for German companies doing business in China. Many officials no longer perceive reciprocal trade and investments as a win-win for both countries; some even suggest that “win-win” might imply that “China wins twice”. After the German Ministry of Economic Affairs withdrew clearance for the acquisition of Aixtron, Germany’s leading deposition equipment provider to the semiconductor industry, by Fujian Grand Chip Investment Fund, the business magazine Capital headlined: “Ende des Kotaus vor den Chinesen” (End of the kowtow to Chinese).

Some [German officials] even suggest that ‘win-win’ might imply that ‘China wins twice’

For many years, the German government and business leaders had been very enthusiastic about bilateral trade and investments with China. Now, the German government seems to have reversed course. Although it has to protect national interests and voice concerns in support of legitimate interests of German companies, solely emphasising the difficulties of and potential risks in Sino-German business relations will not strengthen German industries and businesses in the future; neither in China nor at home.

Germany trembles as Chinese march into its industrial turf

Whereas several governments along the New Silk Roads have welcomed China’s “One Belt, One Road” initiative, Germany’s response has been restrained and reluctant. Despite the many opportunities this could bring, the government has not developed a coherent strategy to engage it. Instead of exploring the potential benefits of the Belt and Road, the German government seems to focus on rather secondary issues, such as China’s compliance with European tender laws and regulations in infrastructure projects. Indeed, Sigmar Gabriel, the German vice-chancellor and economic affairs minister, remarked during his recent visit to Hong Kong: “There is a difference between China and us. China has a strategy.”

Germany risks China’s ire as it puts brakes on two planned takeovers

Centre-left politicians such as Gabriel are under strong domestic pressure to prove their bona fides with the working-class core constituencies of their parties, a large number of whom are today perceived as the so-called “losers of globalism”. Simply bashing China may help to avoid poll numbers of Gabriel’s Social Democratic Party of Germany from plunging further, and maybe it will slow the rise of the new right-wing party Alternative for Germany. But, spreading gloom and doom is not a viable alternative to lacking a strategy for nurturing business relationships between China and Germany in the years to come.

Norbert Knittlmayer is partner and a managing director of Marccus Partners in Duesseldorf, Germany. He advises on global cross-border investment issues.