The China shock: Germany turns away from its biggest trading partner | Germany | News and in-depth reporting from Berlin and beyond | DW | 27.05.2022

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Germany

The China shock: Germany turns away from its biggest trading partner

China persecutes the Uyghurs and backs Russia's war in Ukraine. That's prompting Berlin to rethink its relations with Beijing. But this "systemic rival" is also Germany's biggest trading partner.

People wearing masks protest against China's treatment towards the ethnic Uyghur people and calling for a boycott of the 2022 winter Olympics in China

China's position on human rights is a point of contention for Germany

The "Xinjiang Police Files" document the scale and brutality with which the Chinese state oppresses its mainly Muslim Uyghur minority. The cache's publication comes at a time when many are thinking — and speaking out — about values-based foreign policy.

German politicians have expressed shock. Foreign Minister Annalena Baerbock called for a transparent investigation. Human rights, "which Germany is committed to protect globally," are a fundamental part of the international order, Germany's Foreign Office said in a statement.

In addition to rethinking their policies towards Russia, policymakers are now questioning relations with Beijing, with renewed urgency after the Uyghur files were leaked.

Watch video 00:22

Baerbock: 'These images are horrific and disturbing'

Finance Minister Christian Lindner cites a need to reduce Germany's economic dependence on China as quickly as possible

Speaking at the World Economic Forum in Davos this week, German Chancellor Olaf Scholz expressed concern over China's growing power. China is of course a "global actor," Scholz said. Just as this does not mean that China needs to be isolated, "neither can we look the other way when human rights are violated the way they are now in Xinjiang," Scholz said.

And Vice-Chancellor and Economy Minister Robert Habeck on Wednesday advocated that Germany distance itself more from China. "We are diversifying more actively and reducing our dependency on China. Upholding human rights weighs heavier," Habeck said.

Partner, competitor, systemic rival

For a quarter of a century, relations between Germany and China were, first and foremost, economic ties. That worked so well that, in 2021, China remained Germany's biggest trading partner for the sixth year in a row. The burgeoning commerce was politically flanked by an intensive bilateral dialogue.

Officially, Germany and China have a comprehensive strategic partnership. The two sides meet every two years for consultations in which government heads and the majority of cabinet ministers take part.

Berlin's new ruling coalition, which came to power in December 2021, initially intended to set forth this legacy of Chancellor Angela Merkel's conservative-led government. The center-left Social Democrats (SPD), the neoliberal Free Democrats (FDP), and the Greens wrote in their coalition agreement: "We wish to continue the governmental consultations with China." In contrast to earlier formats, however, these should have a stronger European focus, the document says.

Olaf Scholz giving his speech in Davos this week

Chancellor Olaf Scholz found clear words on China in his speech at this year's World Economic Forum

Most recently the emphasis in the German-Chinese partnership has shifted markedly toward rivalry, as the coalition agreement notes. "To uphold our values and interests in the systemic rivalry with China, we need a comprehensive China strategy in Germany within the framework of joint EU-China policy," the document says.

This China strategy is currently being formulated in Germany's Foreign Office.

One can expect that China's stance toward Russia in the war in Ukraine will significantly influence this strategy. In the journal International Politics earlier this year, Mikko Huotari, director of the influential Berlin-based China think tank Mercator Institute for China Studies, wrote that engagement with China should be calibrated "in relation to the extent of Beijing's support for Putin."

Huotari also stressed the "overriding priority of reducing those dependencies on China that threaten to limit Germany's strategic ability to act in the event of sustained tensions or a crisis."

A new energy era — with China?

As painful and costly as Germany's wakeup to its energy dependence on Russia was, German economic ties with China are far tighter and more intensive. Strategic conflicts are emerging, for example over Germany's goal of phasing out fossil fuels. Berlin is planning to greatly expand rooftop solar panels to replace oil, gas, and coal as power sources. One important commodity used in making these panels is polysilicon. But 40% of global production takes place in China — and especially in the northwestern province of Xinjiang, the homeland of the persecuted Uyghurs.

Wolfgang Niedermark, executive board member and China expert at the Federation of German Industry (BDI) lobby group, said: "We have a dependency on China in the strategically important field of mineral resources. We must quickly get these input dependencies under control and invest in new partnerships." 

The BDI is rethinking business relations with dictatorships.

"We want to continue cooperating economically, including with states that are not liberal democracies. That is the only way the EU can be a strong and internationally relevant player. But we cannot allow ourselves to become dependent," Niedermark told DW.

Watch video 03:28

Will Germany depart from Merkel's policy on China?

Who's dependent on whom?

Actually, in terms of trade, China depends on the European market more than Europe does on China, says Jörg Wuttke, President of the EU Chamber of Commerce in China.

"We export goods at a value of 600 million euros every day to China. The Chinese export 1.3 billion euros of goods daily to Europe," Wuttke said in a DW interview.

But imports and exports are only part of a bigger picture, he adds.

"It's totally different when we look at investment. Big [European] corporations in car making, chemicals, and machine building have invested heavily and generate business in China, where they produce for the Chinese market," Wuttke said.

According to figures provided by Germany's economy ministry, German direct investment in China totaled 86 billion euros by the year 2018. And investments in China have proven extremely profitable.

"This profitability has buttressed share prices at home and created jobs as well," Wuttke said. He cites millions of jobs in Germany that depend on these investments, listing the fields of engineering services, precursor products and engine parts as examples.

Observers are expecting yet another paradigm shift in German foreign policy to be outlined in the government's forthcoming China strategy. A first indication was seen in May when Chancellor Olaf Scholz broke with the tradition of his predecessors and chose Japan, not China as the destination of his first trip to the Far East.

This article was originally written in German.

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