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CWA # 1282, 20 April 2024
Germany and China: It’s the economy, stupid

  Femy Francis

Five Takeaways of Chancellor Scholz’s visit to in Beijing

Femy Francis 

On 13 April, German Chancellor Olaf Scholz started his three-day visit to Beijing. He was accompanied by an entourage of executives from German companies, high-profile state secretaries and ministers. He met the Chinese President Xi Jinping and Premier Li Qiang and discussed the interest of German companies in China and expressed his concerns regarding the market and economy. Both leaders called for mutually beneficial cooperation.

Xi asserted that China-Germany relations have no “risks,” rather they serve as a guarantee of a stable relationship while reflecting on their 10th anniversary of strategic partnership. He said: “There is no fundamental conflict of interest between China and Germany and they do not pose a security threat to each other.” Scholz also affirmed the upholding of a multilateral international order with China and rejected confrontation while advocating for free trade policies. 

Mercedes Benz group executive, who was part of Scholz high-level delegation Ola Kaellenius said: “We will continue to invest in China, strengthen cooperation with our Chinese partners, promote electrification as well as digital transformation, and continue to contribute to Germany-China economic and trade cooperation.” The meeting focused on establishing a stable working relationship with China to further Germany’s economic interests and ambitions. 

There have been a few criticisms regarding  Scholz’s visit as he walked on a tightrope to not disrupt the economic ambition by instigating tough questions on domestic politics and human rights conditions in China. 

Following are the five takeaways of his visit.

1. The importance of economy and trade for Germany
The economic stakes trump all, China is Germany's biggest trading partner and remained the top partner for eight years straight. The economic partnership is worth EUR 254.1 billion, with German exports to China being worth USD 104 billion. Germany has also heavily invested in 84 companies in the southwestern region of China, constructing and developing the Chongqing region. The hydrogen-fuel-cell plant operated by Bosch a German company was also the first place Scholz visited in Chongqing. The delegation that went with Scholz focused on encouraging German-China economic cooperation, where BMW CEO Oliver Zipse asserted that there are more opportunities in China rather than risks. This comes at a time when the EU is investigating subsidies on Chinese electric vehicles. The tone of the visit echoed the sentiments of the high-level German industrialist delegation as they sought to further economic cooperation with China in the face of a shrinking economy. 

2. Germany’s search a level playing field
Scholz during his visit asserted for “open and fair” competition between China and European companies. He said that while the German market welcomes Chinese-made cars, it vehemently opposes the dumping, overcapacity and the violation of intellectual property rights. Scholz stated that at some point, there will be Chinese-made cars in Germany and Europe, and China will have to ensure  that the competition is fair. 

In 2024, a German Chambers of Commerce in China survey found that two-thirds of German businesses expressed they faced “unfair competition” in and with China. The US Secretary of Treasury Janet Yellen also voiced similar concerns. Where overcapacity and dumping of cheap products not only affect the competition but also the quality of the product. This has led to massive product dumping by China in Africa and other Southeast Asian countries, devastating the local market. 
 
3. Ignoring human rights issues and Ukriane
During the visit, the human rights issues and the Ukraine war were sidelined. The German Chancellors barely mentioned the human rights issues in China, something that was expected. On the Ukraine war, Scholz asked China to stop selling goods to Russia as they could be used for military advantage. To which Xi expressed that China has no party in the Russia-Ukraine war and that it has consistently promoted talks of peace. 

Human Rights Watch called the trip a “wasted opportunity,” where Germany ignored the long and egregious human rights violation records. It stated that Germany’s China strategy should have learned from its Russia experience that abusive governments make unreliable partners. 

4. Germany’s nuanced position on China vis-à-vis its EU partners
Germany’s approach to China is different from the EU’s, the German approach to China stands to be contrary to the rest of the European Union countries and the US. Facing a shrinking economy, Germany desperately wants to stabilise ties with its largest trading partner. While for other European Union countries, China’s investments and cooperation are looked into through the lens of scepticism, Germany wants to embrace China. Scholz's visit echoed the sentiments of economic powerhouses of Germany as he campaigned for them in China.  

5. Xi’s Red Carpet to Germany
Xi on China-Germany relations and future, the visit observed a friendly undertone as both leaders discussed the future of their bilateral cooperation. Xi outlined that China and Germany are the second and third largest economies in the world and that consolidation of their cooperation is not only vital for their mutual development but has a significant impact on the Eurasian continent and even the world. He saw their bilateral relationship as mutually beneficial and asserted that there is no “risk” but only opportunities. 

President Xi also noted that both countries supported free trade and economic globalization and called for vigilance against protectionism, hinting at the West. Xi saw the meeting as an economic road to Europe amidst strong “decoupling” threats by the West. Germany’s willingness to work with China backs their claim of not being a risk, Xi intends to extend this cooperation not only for economic gains but to defuse negative narratives surrounding Chinese investments and trade. 

References 
Finbarr Bermingham, “Visit to China by German Chancellor Scholz shows divisions in EU over how to engage with Beijing on trade and Russia,” South China Morning Post, 17 April 2024
Alexandra Stevenson and Melissa Eddy, “Germany’s Leader Walks a Fine Line in China,” The New York Times, 16 April 2024
Wenzel Michalski, “German Chancellor’s Trip to China a Wasted Opportunity,” Human Rights Watch, 18 April 2024
Cao Desheng, “Xi, Scholz call for mutual progress,” China Daily, 14 April 2024

About the author

Femy Francis is a Research Assistant at NIAS.

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