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Germany must 'be more careful' with China, Habeck tells DW

November 13, 2022

Germany needs to diversify its business interests in Asia to reduce dependency on China, Economy Minister Robert Habeck has told DW in Singapore. He said the war in Ukraine helped demonstrate the need to diversify.

Robert Habeck speaks on a plane to Singapore, with reporters visible in the background. From 12.11.2022.
Robert Habeck told DW Germany was considering new limitations for businesses operating in China, such as reduced government guarantees for investment abroadImage: Britta Pedersen/dpa/picture alliance

"We are, of course, interested in trade with China, but not in stupid trade with China," Germany's Robert Habeck told DW in Singapore on Sunday. 

Speaking on the sidelines of a conference exploring ways to diversify German business investments in Asia, Habeck said that Russia's invasion of Ukraine had shown Berlin, and the world, the dangers of excessive reliance on single trading partners. 

Habeck disputed that Germany's stance on China remains somewhat confused, as a more cautionary tone being has been struck by politicians in recent months, while bearing in mind the fact that China remains Germany's second-largest export market and its largest source for imports. 

"The general strategy is completely clear," Habeck said. "We want to protect our critical infrastructure. We want to protect our sectors where critical goods and knowledge are developed. And beyond that, of course, we want to have a trade relationship with China. It's not decoupling." 

Here, Habeck said the German approach was slightly softer than that of the US. 

"I know that the US is sometimes saying harsher words, and this is not our way," he said. "So where it's unproblematic, it's not a problem to have trade with China. But in the problematic areas, we have to be more careful than we have been before." 

German vice chancellor: 'We've made up our mind about China'

Focus on protecting critical goods and intellectual property at home

Germany's government put a stop to two Chinese buyouts of companies in the semiconductor or computer chip industry this week, saying that they risked a loss of know-how in a critical sector where Beijing is rapidly expanding its influence. 

"Goods that come from critical sectors like telecommunications, energy sector, chips and semiconductors must be protected," Habeck said. "This does not mean that there's no possibility to do business. But we have to take care that we have [our] own sovereignty in this field. And this is how we are acting now."

Habeck also cited certain core infrastructure as examples of Chinese investment that could be "problematic in some areas — let's say ports, airports, hospitals." 

This follows the partial purchase of a terminal at the Port of Hamburg — Germany's largest — by Chinese company Cosco, which went ahead in a diluted fashion despite resistance from Habeck and several ministries last month. 

Noting that the deal was reduced in scope, Habeck nevertheless repeated that he would have preferred to stop it altogether. 

"I think it's only a half measure, a half victory in a way," Habeck said. "But we need to have unity in the Cabinet. And this was the only way to get this unity. So it was a step forward, but not the whole way."

However, Habeck said that what was happening should be seen as "a process," following roughly 30 years, or more, of German politicians saying that the Chinese market was the future and should be the target of many if not most major investments. 

"So what we're doing is something big right now. We are changing the practices of our China strategy and politics. And this is of course, this is a phase. And we have to learn and we have to think about it. And from the general analysis going into the details is sometimes complicated," he said.

The company logo and red rhinoceros mascot for the Elmos semiconductor factory in Dortmund.
The government in Berlin this week blocked Chinese investors from acquiring two companies, including semiconductor maker Elmos in DortmundImage: Dieter Menne/dpa/picture alliance

Limiting government guarantees on foreign investment?

Habeck, whose full title is German Vice Chancellor and Federal Minister for Economic Affairs and Climate Action, spoke to DW's Richard Walker in Singapore in English on Sunday, at the 17th Asia-Pacific Conference of German Business.

He and Chancellor Olaf Scholz are attending the event.

Asked how Berlin might encourage German companies to invest in other Asian economies, he said the government was considering revisions to its guarantees on German companies' investments abroad. 

"If companies will invest in China above a certain amount — let's say €3 billion sounds reasonable — they can do that, but we won't guarantee for that anymore. But we will guarantee for more investment in other countries," Habeck said, exploring the first part of the idea. 

"And then we have a percentage rate of the whole amount of all investment. If this is higher than — let's say, 20 [or] 25% — we will have an extra fee that you have to pay more if you're still investing in one country, so that we avoid the clump risk in all the investments in one country," he said. 

A Chinese attack on Taiwan would be 'far more catastrophic' than war in Ukraine

Asked about the prospect of Chinese aggression against Taiwan, as the most extreme example of events that could dramatically affect trade with China, Habeck said "this is a scenario that nobody can really plan for." 

"This is something very threatening. And this will have a disastrous effect on the whole world. We have seen that a regional conflict, like the Russian war on Ukraine, has brought the whole world into turbulence," Habeck said. "That [a Chinese attack on Taiwan] would be far more catastrophic. So this is something we definitely have to avoid. And I hope that China knows that the whole world is watching."

Some German companies have a heavy physical presence in China. Car giant Volkswagen, for instance, not only reports around 40% of its global sales in China, it says it has 40 factories in the country. 

When asked what would happen to VW facilities in China in the event of widespread international sanctions comparable to those against Russia at present, Habeck avoided a direct answer but said that German multinationals "have to know what they are doing," and must keep in mind whether "they risk their business model" with the extent of their presence in China. 

Habeck mentioned VW, BMW, Daimler and BASF as the four biggest German players on Chinese soil.

'All of the government,' Social Democrats included, aware of the risks

In Germany's three-party coalition government, Chancellor Scholz's Social Democrats have been less strident than Habeck's Greens and the pro-business Free Democrats in calling for a tougher line on China. 

Scholz's visit to China soon after President Xi Jinping secured an unprecedented third term in charge of the Chinese Communist Party drew criticism domestically and abroad. He became the first G7 leader to visit Beijing since the outbreak of the COVID pandemic. 

Habeck alluded to this on Sunday, saying the compromise on the Cosco port purchase was necessary to preserve coalition unity. But he also argued that the coalition was of one mind on the general direction of travel, albeit while disagreeing on some details. 

"I would say we have made up our mind about China. We see the problem. We and all of the government, also the Social Democrats in the government, we know the risk," he said. "There might be some — I wouldn't say dispute — but different thoughts" on more "concrete" situations, he said. 

A similar tension has been apparent in the coalition concerning Russia, with the SPD probably the most reticent of the governing three parties when it comes to sanctions and other economic penalties targeting the Kremlin. 

DW's Richard Walker conducted the interview in Singapore. 

Edited by: Wesley Rahn 

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Mark Hallam News and current affairs writer and editor with DW since 2006.@marks_hallam