Germany re-evaluates its relationship with China

Fed up with China’s tough stand on Taiwan, industrial espionage, human rights violations in Xinjiang and unfair competition, German government has hardened its approach towards China. This move has irked China which has outrightly rejected Germany’s charges, urging later to view its ties with Beijing objectively.

While efforts are on to prepare Germany’s first China strategy document next year, German Chancellor Olaf Scholz has said that violence must be banned from international relations while commenting on the Taiwan question. His remarks on Taiwan have to be seen in the context of the fact that China is Germany’s most important trading partner. If Berlin takes a clear stand against Chinese efforts to retake Taiwan, this could risk serious conflict, above all in economic terms. Yet if Germany keeps quiet, the country undermines its claims to have a “values-based” foreign policy.

However, the German leadership has decided to reduce its trade dependence on China. Currently, it is dependent on Chinese raw materials, batteries and semiconductors.

Last month, Germany’s economy minister Robert Habeck had stated that the government was working on a new trade policy with China to reduce dependence on China, promising “no more naivety” in trade dealings with Beijing. Habeck said that China was a welcome trading partner, but Germany could not allow Beijing’s protectionism to distort competition and would not hold back criticism of human rights violations under threat of losing business. This was the first time the Minister has made clear that this tougher line was being translated into policy measures.

The government’s tough line has unnerved many big business houses.  According to available information, German business Chiefs have clashed with the government over China policies. The Green Party, which runs the ministry, has long advocated taking a harder line on China with Habeck announcing that Germany would adopt a tougher approach on trade.

Available reports from Berlin suggested that politicians and executives in Germany have broadly come to agree that the country needs to reduce its economic dependence on China, given their concerns about industrial espionage, unfair competition or human rights violations – concerns that Beijing has strongly rejected as being unfounded.

Russia’s invasion of Ukraine has also been a blow to the long-held German maxim that economic interdependency would help open up authoritarian states and sharpened Berlin’s focus on how it should weigh profit against risk in its relations with them.

The three-way coalition government that took office in December, is due to publish Germany’s first China strategy document next year. Out of three, the Greens and Free Democrats, are more hawkish than Chancellor Olaf Scholz’s Social Democrats (SPD), who want to avoid triggering a U.S.-style Cold war with China. This could be one of the reasons as to why Chancellor might approve the Chinese take-over of the German chip manufacturing firm Elmos. The semiconductor production of Dortmund-based Elmos is being taken over by Sweden’s Silex, a wholly owned subsidiary of China’s Sai Microelectronics. The said approval is being granted despite strong advice against the same by the German intelligence agency and warnings from the EU, besides warning from six of his own federal ministries, including the Vice Chancellor Robert Habeck.

However, Berlin has initiated systemic measures to reduce its dependency on China. Most of these measures are non-controversial, like seeking new sources for some of its key industrial commodities such as rare earth metals. But few proposals have raised alarm bells in the business community as it fears the measures would put them at a competitive disadvantage in what is still the world’s fastest growing major economy, despite an expected slowdown next year. According to a recent report, the economy ministry was considering curbing export and investment guarantees as part of its new China strategy.

Besides taking measures economically, Germany has also raised its guard against China militarily. Germany sent a record 13 military aircraft to join Exercise Pitch Black 2022, a military drill involving the US, Australia and 15 other countries, which is seen as a collective effort led by Washington in order to form an anti-China frontline and to pressure China over the Taiwan question.

Germany is increasingly joining other Western allies in flexing more muscle in the Indo-Pacific region, citing so-called growing alarm over Beijing’s territorial ambitions. Negativity on China policy has become a basic trend in Germany nowadays, directly related to increased geopolitical sentiment in Europe under the impact of the COVID-19 pandemic and the Russia-Ukraine conflict, Liu Zuokui, a research fellow on European studies at the Chinese Academy of Social Sciences (CASS), reported on the Global Times. Observers urged Germany to view ties with China objectively and pragmatically, brushing aside the unwarranted ideological struggles made up by the West.

The outcome of the 20^th National Congress in China, where the last few sensible leaders in CCP have been removed and where Xi Jingping has tightened his authoritarian rule and surrounded himself with only “yes men”, could further push Germany to harden its stand against China on all spheres including Taiwan.