Vladimir Putin’s war on Ukraine must not be allowed to undo decades of Sino-German economic cooperation

China is not Russia. Its economic ties with Germany run far deeper, and Berlin needs good relations with Beijing to retain its leading position in Europe
Without key raw materials from China, including metals, Europe and in particular Germany will not be in a position to advance ecological change

Thomas O. Falk

Published: 1:30am, 14 Jul, 2022

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Relations between China and Germany go back a long way and have intensified since diplomatic relations were established in 1972 under German chancellor Willy Brandt. Since then, both sides have benefited greatly in areas such as science, technology and education – as well as trade, key to the flourishing cooperation.

A rising China needs Germany and the rest of Europe as markets for its products to ensure economic growth. Germany needs China for its manufacturing, particularly in electronics and chemicals, and for raw materials.

Previous German chancellors Helmut Kohl, Gerhard Schröder and Angela Merkel understood that amicable and beneficial relations with China were in Germany’s best interests.

Today, China is by far Germany’s largest trading partner, with bilateral trade worth more than €245 billion (US$250 billion) last year. Germany remains Europe’s primary investor in China, with direct investment increasing from US$1.5 billion in 2010 to US$14.55 billion in 2020.

It is a relationship that works. However, Russia’s war in Ukraine is now having an adverse impact on Sino-German cooperation.

Berlin has, in the past, been highly critical of Beijing’s handling of human rights. Now China’s refusal to condemn the Russian invasion and join Western sanctions against Moscow has called into question the strategic partnership. After all, Germany’s “Zeitenwende” (turning point), postulated by Chancellor Olaf Scholz after Russia’s attack, will also see Berlin readjust its stance on Beijing.

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President Frank-Walter Steinmeier announced recently that Germany must not become dependent on China for key raw materials. “In some strategically important fields, our dependence on Chinese raw materials is significantly greater than our dependence on Russian gas in recent years,” he said.

But this statement is based on reactionist views and ill-advised values rather than sound political and economic conclusions. Germany’s U-turn must not disguise that it was caught off guard by Russia’s invasion of Ukraine, despite the red flags.

Germany has over the past decades grown dependent on Russian gas, oil and coal – particularly during Steinmeier’s time as foreign minister.

Despite evidence of Russian President Vladimir Putin increasingly being seen as a pariah, the Russia-Georgia war in 2008 and annexation of Crimea in 2014 – plus contract killings on German soil and hacking attacks on the Bundestag – Merkel and Schröder continued to champion Russian-German relations.

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The tone only changed following Putin’s war on Ukraine and subsequent energy crisis, with Germany now facing the possibility of running out of gas, which could leave people without heating this winter.

But China could now inadvertently get caught up in the backlash over Russia’s aggression, amid German naivety, with the false equivalency prevailing in Germany that China is basically another Russia.

This is a misjudgment, however. Russia, with an economy smaller than Italy’s, is essentially a gas station with nuclear weapons that has initiated the most significant war on European soil since the second world war.

Yes, Germany made itself dependent on Russian energy, but this is a temporary issue and the government is working hard to rectify things.

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China is the present and the future, and for Berlin to maintain its leading position in Europe, German-Sino relations must continue to flourish, rather than decline.

Of course, it’s possible to be critical of China’s stance on a number of global issues. But Germany should give Beijing the benefit of the doubt and emphasise that there’s no comparison with the regime in Moscow.

Unlike Russia, Germany’s relationship with China is very much two-way. It is not about largely unprocessed raw materials such as oil or gas, but products in complex supply chains. German companies are heavily involved through their investments, while China relies on German technology.

More than two decades ago, business with China accounted for about 1 per cent of German trade volume. Today, more than one-tenth of German imports come from China. German exports to China have also increased significantly, accounting for more than 7 per cent of total exports.

Workers are seen on the assembly line of the FAW-Volkswagen Automobile Company in Chengdu, in southwest China’s Sichuan province, in 2020. Photo: Xinhua

Another pivotal point, especially if Germany and the rest of Europe are serious about going green, is that the European Union is 75-100 per cent dependent on imports for most metals. Among the 30 raw materials the EU classifies as “critical”, several are imported almost exclusively from China, such as rare earths (98 per cent), magnesium (93 per cent) and bismuth (93 per cent).

The EU estimates that with the move towards cleaner energy, demand for cobalt alone will be five times higher by 2030. Moreover, Germany’s ambitious electric-vehicle vision requires lithium, and EU demand could increase 18-fold by 2030.

Steinmeier can demand alternatives to China for raw materials as much as he pleases. But, without China, Europe and in particular Germany will not be in a position to advance ecological change or continue to prosper.

Germany, which has played a positive role in promoting China-EU relations, must be aware of this, and Putin’s war must not be allowed to undo decades of cooperation.

There will always be differences of opinion between Beijing and Berlin. But it shouldn’t hide the fact that positive Sino-German relations have been and continue to be a win-win state of affairs.

Thomas O. Falk is a UK-based independent journalist and political analyst