Germany’s China strategy reflects the country’s delicate balancing act
The strategy, a compromise between the three ruling coalition parties, is mindful of German businesses’ need for the country’s largest trading partner amid economic pain
For a trade-oriented power like Germany, there will be very little room for an open challenge of Beijing’s geopolitical advances
Looking beneath the veneer of rhetoric in Germany’s new China strategy, which accuses Beijing of following a more “assertive” conduct in world affairs, one sees that the strategy is really an act of political balancing short on concrete policies.
The German blueprint went down badly with the Chinese government, with a spokesman saying it “goes against the trend of the time and will only exacerbate the division of the world”. It could not be otherwise. Beijing cannot tolerate being depicted as a systemic rival in the political-economic sphere, a human rights offender in Xinjiang, Hong Kong and Tibet, and a potential threat to world stability because of its military assertiveness in the China seas and the Taiwan Strait.
Taking a page from the European Commission’s critical stance on China, Berlin’s new strategy focuses on “de-risking”, rather than decoupling, from China. The ultimate goal is to eliminate any economic dependency on China, avoiding recent mistakes such as its heavy reliance on Russian oil and gas.
The problem for the government led by Social Democrat Chancellor Olaf Scholz is how to translate this concept into action. Scholz essentially said it was up to German businesses to consider their market options with regard to China.
Thus, German companies should manage risks themselves, while the national government will work with them to raise awareness that critical dependencies on the Chinese economy can be problematic.
German industries already know this well. A survey published last month by the German Chamber of Commerce in China revealed that companies had low expectations of a quick improvement in the Chinese business environment, given geopolitical tensions and Beijing’s drive for self-reliance.
German Chancellor Olaf Scholz and Chinese Premier Li Qiang hold a press conference during German-Chinese government consultations in Berlin on June 20. Photo: Reuters
But it remains to be seen if German businesses will be able to become more independent of the Chinese market. Last year, they invested a record €11.5 billion (US$12.9 billion) in China. Some suggest a retreat from China can only be achieved with targeted and mandatory policies, including a state fund to compensate companies suffering losses from de-risking.
It seems the Scholz administration is ready to take some concrete steps, even if they are presented as neutral and not specifically aimed at China. Indeed, the German interior ministry is reportedly working on measures to protect the country’s critical infrastructure. This comes after the German government controversially let Chinese shipping company Cosco buy a minority stake in a container terminal at Hamburg port, an issue that divided the three-party ruling coalition.
Disguising an anti-China initiative as a country-agnostic regulatory action is an approach borrowed from the European Union’s modus operandi. It is worth noting that by the end of the year, the European Commission plans to present a proposal to introduce tougher export controls, strengthen the screening of inbound investments and create a mechanism to scrutinise outbound investments.
Such measures should come on top of a new anti-coercion tool that will be used against trade actions like those taken by China against Lithuania since 2021, and regulations that protect European industries from Chinese dumping and export subsidies.
Germany’s attitude to the economic security strategy proposed by the European Commission will reveal its real intentions towards Beijing. The same is also true for Berlin’s promised military commitment to the Indo-Pacific, which is part of its China strategy and has the potential to irritate the Chinese leadership.
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For the first time, German troops will participate in joint exercises in Australia with some 30,000 military personnel from 12 other nations. The Talisman Sabre drills, the largest manoeuvres between Australia and the United States, will be held from July 22 to August 4.
In 2021, a German warship cruised in the South China Sea for the first time in almost 20 years. Last year, 13 German military aircraft joined combined exercises in Australia, the European country’s biggest peacetime air operation.
Immediately after Russia’s attack on Ukraine in February last year, Scholz announced a fund worth €100 billion (US$110 billion) to reinforce German defences. That said, it is likely that German’s military presence in the Indo-Pacific might reflect nothing more than political signalling, given the operational readiness of Berlin’s forces is questioned, and this goes also for the European theatre.
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Berlin’s strategy towards China is a compromise between the three parties forming the government. While Scholz’s Social Democrats primarily see China as a partner, their coalition partners (the Greens and Free Democrats) tend to consider Beijing more of a competitor and an “institutional rival”.
Yet all the three political parties agree that China’s cooperation is indispensable in fields such as the fight against climate change. A stable relationship with Beijing could actually be vital in the face of Germany’s economic pains.
The tripartite coalition is navigating in dangerous waters, with the German economy struggling to recover from the triple effects of the Covid-19 crisis, high inflation and Russia’s war against Ukraine. Recent polls show that the Christian Democrats, the main opposition force in Germany’s parliament, are on the rise along with the far-right Alternative for Germany party, which has apparently shifted its approach by taking a more pro-China position.
China is Germany’s single largest trading partner. Ultimately, to prop up the national economy and the increasingly unstable position of the government, Scholz and his allies might need German industries to increase business with and in China. For a trade-oriented power like Germany, there will be very little room for an open challenge of Beijing’s geopolitical advances – unless the Chinese mainland tries to change the status quo across the Taiwan Strait with an armed intervention.
Emanuele Scimia is an independent journalist and foreign affairs analyst
