Germany on course to de-risk China ties

Germany has announced a new policy aimed at addressing the increasingly assertive nature of China, according to Chancellor Olaf Scholz. After months of contentious debate on how to approach Germany’s top trade partner, the strategy aims to reduce critical dependencies while maintaining engagement with Beijing.

In a tweet, Scholz stated that the objective was not to sever ties with China but to decrease reliance on it in the future. The new policy, aligned with the European Union’s approach to China, aims to be realistic while not being naive, said Foreign Minister Annalena Baerbock.

The document reflects the delicate balance achieved within the German coalition government, which comprises the Greens party advocating a more assertive stance on human rights and a tougher approach to China, and the Social Democrats supporting a trade-friendly position.

Describing China as a “partner, competitor, systemic rival,” the new policy acknowledges the importance of China as Germany’s largest trading partner while emphasising the need to address Germany’s growing dependencies on China.

Germany’s concerns regarding China’s attempts to influence the international order in line with its single-party system and its disregard for human rights are highlighted in the document. It also cites China as the greatest threat to economic and scientific espionage and foreign direct investment in Germany, according to a report by Germany’s intelligence agency.

While Beijing has expressed concern over Germany’s firmer stance, it has also raised fears within German industry, which has become increasingly reliant on the Chinese market. Companies like Volkswagen and Siemens have outlined growth strategies heavily dependent on China.

Volkswagen’s Chief Operating Officer, Ralf Brandstaetter, welcomed the political objective of the new China strategy, reiterating the need to reduce one-sided economic dependencies and create incentives for diversification.

Scholz has emphasized that Germany seeks to de-risk rather than decouple from China. However, he has stressed the importance of diversifying trading partners and expanding economic relations with Asia and beyond.

China, wary of potential decoupling from its biggest EU partner, has expressed the need for a level playing field for Chinese companies and highlighted its desire to improve relations with the European Union amidst growing criticisms.