Will Germany Come to China’s Rescue?

Will the dominant economy in Europe choose a future with China over one with the US?
December 5, 2019 Updated: December 7, 2019
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Commentary

With President Trump in London to discuss the future of NATO, the future of the Eurozone itself is unclear. Germany finds itself rising to a great power position it hasn’t known in almost 65 years. This emerging reality is due in part to a very messy, on-again, off-again Brexit divorce, as well as deteriorating relations with the United States.

That trend is still heading downward.

Things became dicey between the United States and Germany in 2013, when the Obama administration was found to be listening in on German Chancellor Angela Merkel’s phone calls. But President Trump’s demands that Germany contribute more to NATO’s defense budget and stop buying natural gas from Russia have certainly helped solidify the negative feelings between the two nations’ governments. Germany’s expanding relationship with China may well help turn that trend into a hard reality.

That’s undesirable, but it may be a difficult outcome to avoid.

China Looks for Markets

In the midst of the ongoing trade war with the United States, China is shopping for markets and Germany would like to pick up at least some of the slack. But the deepening ties between the two countries began before Trump took office, in 2016. From that year through 2018, China has been Germany’s largest trading partner, importing 219.46 billion dollars’ worth of German products last year.

The United States was fourth, behind runner-up Holland and third-place France.

It’s an interesting development. For decades, Germany didn’t really have a foreign policy or trading dilemma to the degree that it does now. Throughout the post-World War period, Germany has lived in the shadows of both the old Soviet Union (USSR) and the United States. For the past 30 years, since the Berlin Wall fell (and the USSR’s in 1991), Germany’s economic posture within Europe has grown, especially with re-unification of the former East and West German countries back into one. Coincidentally, 1989 was also the year that saw China violently put down a democratic rebellion in Tiananmen Square. From that point onward, Germany’s freedom grew while China’s shrank.

Germany Emerging From the US Shadow

And yet, today, both nations find themselves needing the other economically and increasingly at odds with the United States, both politically and economically. But Germany’s second-tier status—if that—in global politics is changing. That subordinate role no longer fits the dominant player in the European Union (EU).

China is happy to oblige Germany, and is already seeing some success in widening the fractures within the U.S.-Germany relationship. Today, the Huawei spyware scandal is proving to be more of a challenge for both nations than it would have been in the past. The United States has asked, if not insisted, that Germany along with other European allies, ban the deployment of the notorious Huawei 5G network equipment that has been proven to be an eavesdropping and data gathering tool for the Chinese Communist Party (CCP).

Germany Walking a Tightrope

German trade officials, however, are wary of doing so. They fear offending their biggest trading partner, China, more than they fear offending their main security partner, the United States. Germany’s national security authorities, on the other hand, want to be rid of the Huawei equipment to protect military secrets. That would presumably include U.S.-led NATO military secrets, of which Germany remains a part, at least for the moment.

But it’s not all Black Forest cake and sweet rice balls between Germany and China, either. Chinese automotive factories, for example, are now competing with German cars for the rapidly shrinking Chinese car market. Care to guess which cars will be bought in China in today’s trade-war climate?

Furthermore, according to recent estimates, the tide of German-made products flooding into China is already receding.  Many German companies have been largely left out of the much-promised, but rarely delivered access to the Chinese market. Like other Western companies, Germany is beginning to feel the hangover of trading with China.

China-Germany Trade Peaked?

But that’s not Trump’s fault. Germany’s economic numbers were already slowing from 2017 to 2018, falling from 13.3 percent in 2017 to 8 percent in 2018 to 2.7 percent by October of 2019. And China’s imports from Germany fell 3.6 percent year-over-year in August of 2019.

Still, even if the trade war with the United States gets resolved sooner than later, the Eurozone—and especially Germany—is likely to be key to China’s economic plans going forward. In fact, the Eurozone is, arguably, the real target of China’s One Belt, One Road initiative (OBOR, also known as Belt and Road) from a market and investment standpoint.

That is amply demonstrated by China’s efforts to buy German automaker BMW, which ended up with BMW becoming the majority partner in China’s Brilliance Automotive firm. This is a significant policy reversal for China, and looks like a strategy for deepening the China-Eurozone economic relationship.

Breaking the Atlantic Alliance?

From a strategic perspective, deepening its market penetration into Europe would give China the leverage it desperately seeks to permanently unwind the already weakening Atlantic alliance. This would isolate America from the world’s largest economic trading zone and their biggest global ally via NATO.

A key point to understand is that unlike Western nations, from China’s perspective, the military-economic trade-off is less of an issue. The long-term vision is market penetration, technology transfer and then manufacturing and market domination, followed by rising political influence. Corporate profits aren’t China’s top priority as they are for Western corporations.

In the current trade environment, however, even that calculus seems less plausible than it did even a year ago. China’s economy continues to contract, as does Germany’s. That means that expanding trading relations may be on the wish list of both nations, but likely will be a much longer process and perhaps to a lesser degree than they’d like. That’s simply due to the need for Europe—and Germany specifically—to address their own economic and employment challenges, just as China must do as well.

James Gorrie is a writer and speaker based in Southern California. He is the author of “The China Crisis.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.