Berlin Cable

Jun 29, 2023

What to Expect from Germany’s China Strategy

Long in the making and paused for a while, Berlin’s new approach to its biggest trading partner will be published soon. The actions taken by the Scholz government speak of a new direction already.

German Chancellor Olaf Scholz greets Chinese Premier Li Qiang on the day of German-Chinese government consultations in Berlin, Germany June 20, 2023.
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“Direct dialogue, personal conversations, real exchanges—in our extraordinary times full of global challenges and crises, this is more important than ever. … Let’s continue the dialogue, so we understand each other well.” Thus spoke German Chancellor Olaf Scholz, welcoming a high-ranking nine-person Chinese ministerial delegation led by new Prime Minister Li Qiang to the chancellery last week.

Don’t worry, though. Germany’s usually reserved chancellor hasn’t turned touchy-feely all of a sudden.

It was the best spin to give the 7th Sino-German government consultations, a relic from the Angela Merkel era, paused since 2019 because of the COVID-19 pandemic. The world is a different one now, of course, but who could be against dialogue with China—at a time when the United States is urgently seeking to cool down the US-China relationship that has dangerously heated up? As shown by the fact that US Secretary of State Antony Blinken, after many weeks of Chinese stalling, finally made his trip to Beijing at the same time as Li visited Berlin.

And while Beijing is in no particular hurry to respond to the Biden administration’s overtures and intensify its exchanges with Washington, it certainly likes to talk to the Europeans, the Germans in particular. After the recent visit of French President Emmanuel Macron—with European Commission President Ursula von der Leyen in tow—which delivered decidedly mixed messages, Germany was the focus of this latest Chinese government outing.

A Role Switch

This led to something of a role switch. While it used to be German governments, until very recently, that went out of their way to praise the state of Sino-German relations in rosy language, it was Prime Minister Li who treated his listeners to impressive numbers at the subsequent Sino-German Forum: 6,000 German companies that are active in China, 2,000 Chinese ones active in Germany; 70 bilateral formats, over 100 city partnerships. The forum also saw the signing of nine new agreements, including one inter-governmental one on a new “climate and transformation”—you guessed it—“dialogue."

Li also made clear that the new buzzword “de-risking,” which has supplanted the term “decoupling,” is not to the Chinese government’s liking and is, in his view, just a camouflage for possibly “discriminatory measures” aimed at an innocent China, promising: “We won’t de-risk our relationship with Germany.” Earlier in his own speech, Scholz had not used the term while stressing that “reducing risks does not mean a turning-away from globalization.”

A Changed Approach

While some aspects of the meeting were a continuation of the German China policy of old (and the fact that media questions were allowed after Scholz’ and Li’s “press meeting”—a regression which, observers agreed, would not have happened during Merkel’s time in office), most spoke of a fundamentally changed approach. In fact, the way Berlin is thinking about and dealing with China, Germany’s most important trading partner—which, for a handful of important German companies such as Volkswagen and Siemens, is also a key market—has already been put on a new footing in recent weeks and months.

This will be reflected in the new China Strategy that is to follow the recently released first-ever German National Security Strategy (NSS). The China Strategy has been long in the making; an early draft was leaked last year. Infighting between the three parties, the Social Democrats (SPD), the Greens, and the pro-business (but China-skeptic) Free Democrats (FDP) that form Scholz’ coalition, caused delays and a pausing of the process. It will now be published during the summer, possibly as early as July.

The NSS has already put down some markers. While it repeats the tired trios of China as a “partner, competitor, and systemic rival” (“We see that the elements of rivalry and competition have increased in recent years, but at the same time China remains a partner without whom many of the most pressing global challenges cannot be resolved.”), sentences pointing to China’s various attempts to “remold the existing rules-based international order,” to assert a regionally dominant position with “ever more vigor,” and to it acting “time and again” against Germany’s interests, speaks of a new realism. So does the annual report by Germany domestic intelligence agency, the Bundesamt für Verfassungsschutz, describing China as “the greatest threat” in terms of economic espionage, noting that China’s Ministry of State Security has been greatly intensifying attempts to obtain information on areas of economic and scientific interests. By chance it was published on the day of the Chinese visit.

“De-risking” Taking Shape

The most important elements of the new strategy are likely to be a push, already highlighted by Scholz and others, for diversification when it comes to Germany’s dependencies on critical (raw) materials from China—i.e., the country should not be Germany’s sole source—as well as to its reliance on the Chinese market (trading with China should not be without alternatives). This is “de-risking” in terms of reducing one-sided dependencies. However, “de-risking” will also mean that Germany will make sure it does nothing to enhance China’s already considerable military capabilities, which may include some limited form of outbound investment screening, which the European Commission suggested in its draft Economic Security Strategy on June 20.

Another element will be to deny Chinese companies control over Germany’s critical infrastructure, which in theory already exists. In practice, however, Deutsche Telekom has built a lot of the 5G networks in Germany with Huawei hardware, and state-owned COSCO has been allowed to take a minority state in one of Hamburg’s four port terminals. One of the big tests of the new strategy will be whether the government will take serious action on this front.

In a way, the China Strategy document will be not so much about China, but about Germany: How will the country position itself to cope with the challenge that China poses? Some of the changes have been in the making for some time (during the last of Merkel’s four terms, the government secretly started to look into its China dependencies). It has been Russia’s war against Ukraine, however, that is now driving them with previously lacking conviction.

It is a point that German officials are making to their Chinese counterparts, in an attempt to weigh on Beijing’s cost-benefit calculations: Germany’s (and Europe’s) “de-risking” is happening because of a war that Beijing has failed to criticize. Scholz used the government consultation to once again publicly call on China to use its influence with Russia to stop the war. He also stressed that it was important that Beijing does not support Moscow in its brutal war with weapons deliveries. The following day he told Germany’s parliament that he had warned his Chinese guests against military moves on Taiwan—a repeat of a message he delivered to Beijing in his much-criticized visit (including by this column) last year, first revealed by Noah Barkin’s “Watching China in Europe” newsletter.

Reading between the lines of the Sino-German dialogue, Germany’s new tone is certainly coming through.

Henning Hoff is Executive Editor of INTERNATIONALE POLITIK QUARTERLY.

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