For Germany’s likely new leader Olaf Scholz, Hamburg is at the centre of a growing dilemma over China
- Hamburg’s economic ties with China are stirring concerns it could be exposed to the vagaries of great power politics as US-China tensions spill into global supply chains
- How to handle that delicate balance of interests will confront Germany’s incoming government, likely led by Olaf Scholz, from the get go
Germany’s Social Democrats win election, chancellor candidate Scholz celebrated by his supporters
But Scholz has maintained a strategic ambiguity on what China policy might look like under his leadership of Europe’s biggest economy. His Social Democratic Party’s election programme barely mentioned China, and foreign policy hardly featured in the campaign.
With the Biden administration pressing Europe to align more clearly with the US in its stand-off with Beijing, Scholz will come under immediate pressure to show his hand on what Secretary of State Antony Blinken has called the world’s “greatest geopolitical test”.
“The name Scholz hardly rings a bell to the Chinese public,” China’s state-run Global Times newspaper said in an article the day after the SPD won the election on September 26, adding that he'd been “reticent about his blueprint on China policy”.
It added, though, that “Chinese observers said Scholz shares abundant connections with China, and the new government will be more likely than others to continue Merkel’s policy”.
That is not necessarily a given. Electoral maths dictates that at least initially he will be a weaker chancellor than Merkel, unlikely to enjoy the same control over foreign policy as she does after almost 16 years in power.
His prospective coalition partners in the Greens and the Free Democratic Party are more critical of Beijing than was Merkel, who drove through an EU investment agreement with China last year in the face of US opposition. Scholz himself has made much of working more closely with European partners.
Talks on a common platform for government are only just beginning. However, the Greens are determined to push for their foreign policy priorities, especially in regard to being more vocal on the issues of Taiwan and China’s ethnic Uygurs, according to Till Steffen, the party’s newly elected member for the Hamburg district of Eimsbuettel.
“There will be a difference with policy on Russia and China” from the Merkel era, said Steffen, who served as justice senator in Hamburg’s SPD-Greens administration when Scholz was mayor.
That is likely to mean more focus on democracy and human rights rather than any wholesale reduction in economic cooperation. “I’m not sure if any government can reduce trade with China because the German economy is too dependent on China,” he said.
At the start of Merkel’s tenure, Berlin’s policy was one of Wandel durch Handel, literally “change through trade” – economic engagement aimed at bringing Beijing on board with western institutions and values. Now, many see that approach as not just failed, but as having instead changed Germany to become beholden to China.
It’s a charge felt acutely in Hamburg. The world’s most populous nation is the port’s biggest trading partner by some way. The city is Europe’s third-biggest port, after Rotterdam and Antwerp, but it’s the continent’s No. 1 rail port and has more than 200 container train connections to China each week as part of the “New Silk Road”.
About one in every three containers shipped via the port in 2019 was destined for China. In the first six months of 2021, seaborne container handling with China was more than four times the volume of that with the US, its No. 2 partner, according to the Port of Hamburg authority.
COSCO is one of more than 550 Chinese companies that have set up offices in Hamburg. Among them is XCharge, a Beijing-based maker of fast-charging stations for electric vehicles.
“Hamburg is where our European subsidiary is located and where we have built our European service network around,” Heather Xue, XCharge’s vice-president for marketing and strategic development, said by email. “We do hope to see the ties between the two countries continue to be improved in the post-Merkel era.”
Hamburg was built on free trade, and traces its mercantile origins to a guarantee of tariff-free access for ships from the North Sea up the River Elbe made by the German king and Holy Roman Emperor Barbarossa in the 12th century.
Today, it’s Germany’s richest state, with the highest GDP per capita in the country. The city of 1.8 million people is home to about 100 consulates – including those of both China and the US – and the centre is conspicuously affluent, cosmopolitan and still steeped in maritime tradition.
Streets with names like Shanghaiallee and Hongkongstrasse allude to its rich trading links, while traditional ships strain at their moorings in HafenCity, the huge redeveloped habor area whose landmark building is the Elbphilarmonie concert hall, its undulating roof reminiscent of tossing seas.
Ties with China are not about to be dislodged. None of the coalition parties want to compel German businesses to pull out of China; not even Katherine Tai, the hawkish US trade secretary, advocates economic “decoupling.”
Rather, the desire among German business is for a clearer line on Beijing from the next government, and for more European consensus in its approach, according to a person familiar with China policy and industry. They asked not to be named discussing politically sensitive matters.
Just as important is China’s own position, according to Mareike Ohlberg, a senior fellow at the Asia Program of the German Marshall Fund of the United States.
Beijing has no interest in cutting ties overnight, but the gradual aim is to become less dependent on foreign countries while keeping them partly reliant on the Chinese market, she said. “Germany would be well served by recognising that and acting accordingly,” said Ohlberg, who is based in Berlin.
Certainly, the expectation among businesses in Hamburg is that the next government will be tougher on China when it comes to issues such as market access and intellectual property, as well as on social and environmental compliance, said Hillger at the chamber of commerce.
“China is and will remain important for Hamburg’s companies, so we need to deal with China in some way or another, everybody agrees on that,” she said. Still, that imperative is complicated by “a complete shift in public perceptions and discourse”.
It’s the direction of travel already under way in Berlin and Brussels, with tighter investment screening and new trade defence mechanisms. A supply chain law aimed at bolstering resilience was already enacted by Germany and is set to be introduced at EU level this fall. None are aimed exclusively at China, but each measure has China in mind.
“Merkel was seen by Beijing as honest and straight,” said Joerg Wuttke, head of the European Union Chamber of Commerce in China. “There wasn’t this kind of being nice in Beijing and being b****y in Berlin and I think that’s what the Chinese leadership appreciated.” Scholz, he said, “is the same guy”.