Berlin has revised its approach to Beijing, replacing its once accommodating and sympathetic posture with something more wary and hostile.
Washington, no doubt, will claim that Germany has followed America’s lead in making a similar change. But given Berlin’s comprehensive approach, the product of considerable compromise, the Germans seem to have taken the lead, much as Japan did on this matter at the recent G7 meetings in Hiroshima.
Though the strategy document insists that China remains a “partner” in trade with Germany, it also describes Beijing’s “systemic rivalry” as “increasingly prominent.” Among other references, Berlin’s strategy document pointedly accuses Beijing of using “technical dependence ... to achieve political goals” and fusing “civilian and military policy.” These considerations and Beijing’s efforts to gain hegemony in the Indo-Pacific region constitute the new strategy claims, a threat to Europe and global security.
For some time, Washington has become increasingly distrustful and sometimes hostile toward Beijing. On a strict timing basis, it looks like Berlin is following. But given Berlin’s past criticisms of Washington and Mr. Scholz’s trade mission to China only recently, it is more likely that the German change reflects an independent decision. It is also noteworthy in this regard that Germany’s intelligence agency only recently labeled China the “biggest threat in relation to economic and scientific espionage and foreign direct investment in Germany.”
Berlin has received an oblique warning of China’s growing trade dominance ambitions from a recent report that in 2022, German exports to China rose a mere 3.1 percent. Still, its imports rose a whopping 33.6 percent, leaving Germany with a negative trade gap approaching 100 billion euros.
With these concerns in mind, the new German strategy aims to make Germany “less dependent in critical sectors,” singling out medical technology, medicinal products, and rare earths. The new strategy also seeks to amend the law to account for “security interests” in all trade arrangements as well as with German investments in China. It will develop a list of goods subject to export controls, with an emphasis on cyber security and surveillance. The strategy further aims to “broaden our [German] economic relations with Asia and beyond.”
Especially irritating to Beijing, no doubt, is how the new German strategy takes a strong and definite position on Taiwan. It commits Berlin to improve relations with the island, supports Taiwan’s participation in international organizations, and insists that any reunification with the mainland occurs peacefully and with “mutual consent.” The document also joins with the United States in pressuring China to give up its “developing nation” status at the World Trade Organization (WTO).
The Germans don't mention “de-coupling” from China trade, a notion that has become common in Washington. Instead, the Germans prefer the expression “de-risking.” By this, Berlin means to pursue continued trade links with China but nonetheless secure protection from dependence, Chinese bullying, and unfair trade practices. If the strategy does not seek to sever the two economies from each other, it does strongly recommend that German business diversify their supply chains away from China. When asked if Berlin would mandate such diversification, Mr. Scholz made clear that such a step would not be necessary, since German firms are already in the process of diversifying without government pressure. And as readers of the column know, the same is true of American and Japanese business.
Needless to say, Beijing is far from happy about this change in Germany. For some time now, as the United States and Japan resisted Beijing’s unfair and sometimes abusive trade practices, Europeans, especially the Germans, seemed eager to gain an advantage with China as the Americans and the Japanese made their distance. Just a few months ago, Mr. Scholz led a German trade delegation to Beijing, and only weeks ago, Chinese Premier Li Qiang emphasized China’s close connection to the European Union and particularly the “solid relationship” it has with Germany.
Beijing must have seen this European positioning as a kind of protection from American and Japanese hostility. With the recent G7 agreement to limit dependence on China and now Berlin’s new strategy, that line of protection has evanesced. So far, the world has seen little blowback from Beijing, but it is still early days.