Germany says China trade could create dangerous dependency

Germany says China trade could create dangerous dependency

The German government on Thursday approved its first national strategy on China, defining the Asian superpower as “a partner, competitor and systemic rival” and notable in its dependence on Chinese goods while maintaining economic ties worth hundreds of billions of dollars. called for a reduction.

The new policy calls for export controls and screening of investments by German companies doing business in China to protect the flow of sensitive technology and information. But it fails to say exactly how Berlin plans to review Chinese investment in Germany, an issue that has been a cause for concern recently.

Chancellor Olaf Scholz’s government adopted a 61-page document on Thursday after months of discussion and delays caused by disagreements over how tough their position should be within his three-party coalition. The strategy echoes EU subjects who urge ties with China to be “free of threat”.

The government said that reducing dependence on Chinese producers and consumers would ultimately strengthen the German economy.

“We do not want to separate from China, but want to reduce our risks. This includes strengthening our European economy as well as reducing dependence,” said Foreign Minister Annalena Bierbock. “The more diverse trade and supply chains that are established, the more resilient our country will be,” he said.

The strategy takes a tougher stance toward China than that adopted by governments led by Chancellor Angela Merkel, who saw China as a huge growth market for German goods.

That pressure forged a strong relationship with China, with more than a million people German Jobs Which are directly dependent on China and indirectly on many others. about half of all european investment are from Germany in China, and nearly half German manufacturing businesses rely on China for some part of their supply chain.

But supply chain issues prompted by the coronavirus pandemic have exposed the extent to which Germany and Europe have become dependent on China for goods ranging from medicines to processed minerals needed for green technology. Russia’s invasion of Ukraine last year also raised fears that Beijing could exploit economic dependence in the same way Moscow weaponized Germany’s dependence on its natural gas exports.

Under the strategy, companies are asked to “more strongly internalize” the geopolitical risks of doing business in China, to prevent the need to tap state funds in the event of a crisis. The government said it is working on providing incentives to encourage German companies to diversify their businesses beyond China.

The policy also calls for re-evaluation of export guarantees for sensitive technology and to ensure its security Germany’s intention to draw up a list of technology used in areas including cyber security and surveillance that would be subject to export controls was stressed.

“We have recognized that it is in our own national interest to take care of our economic security,” Ms. Barebock said. He said Germany could not afford itself the need to “pay more than 200 billion euros to get out of dependence”, as happened when Russia stopped the flow of gas to Western Europe.

The Chinese government, through its embassy in Berlin, on Thursday protested the way the policy was described, Emphasizing that it is a partner with Germany, not a rival.

The embassy said in a statement that it “firmly opposes” attempts to “interfere in China’s internal affairs, distort and discredit China, and even harm China’s core interests”.

Whether and how companies will support this policy remains a question. Some medium-sized and family-led businesses have said geopolitical risks complicate their business in China, but major industrial players such as BASF and Volkswagen have doubled down on Chinese investment in China.

“Volkswagen Group will continue to invest in China,” said Ralf Brandstetter, Volkswagen’s head of China and a member of the board.

“China is a dynamic growth market and a major technological innovation driver,” he said, adding that it is “ultimately important for the global competitiveness of Volkswagen and the entire German automotive industry.”

The strategy will now go to Parliament, where MPs are expected to start debating it when they reconvene in September.

Last month, Germany unveiled its first national security strategy, calling for a “stronger” defense and other policies. But the government had left China out of the overall strategy given its importance as Germany’s biggest trading partner, with bilateral trade volume reaching nearly €300 billion, or about $334 billion, last year.

The strategy makes it clear that Berlin opposes military action by Beijing to assert its claim to sovereignty over Taiwan, a self-governing island democracy. “The status quo of the Taiwan Strait can only be changed through peaceful means and mutual consent. Military escalation will also affect German and European interests.”

The China strategy is the latest move in reshaping Germany’s foreign policy, more than a year after Mr. Scholz decided to take a more serious stance toward Russia following the invasion of Ukraine, the executive of the Mercator Institute for China Studies director Mikko Huotari said. ,

“Looking at China from a risk-oriented perspective is a big step in a different direction,” Mr. Huotari said. “It’s a big change for Germany.”

Keith Bradsher Contributed reporting from Beijing.

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