Does Germany depend too much on China?

German companies are suffering from the US-China trade dispute. According to a survey conducted by the German Chamber of Commerce in China, 83% of the companies operating in China have said that they are affected. And only 27% of the companies expect to meet or exceed their 2019 business targets. EPA-EFE/Michael Kappeler / POOL [EPA-EFE/Michael Kappeler / POOL]

While US President Donald Trump is taking aggressive action against China’s trade policy, the German government is reluctant to comment on the recent events in Hong Kong because the German economy needs China. EURACTIV’s partner Der Tagesspiegel reports.

Chancellor Angela Merkel’s (CDU) German government is preferring to try and keep down the tone, including about the oppression of the Muslim minority of Uighurs and Hong Kong.

At the time when Willy Brandt was elected to the Chancellor’s office fifty years ago, he advocated for a “change through rapprochement” policy for the East and initiated a policy of ‘détente’ with Eastern European states.

But when it comes to China, one could say that there appears to be “no change through rapprochement”, even after decades of ever more closely interwoven politics.

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What is the current situation in Hong Kong?

On Tuesday (19 November) afternoon, about 100 activists in Hong Kong were still waiting in the polytechnic university, which had been surrounded by the police since Sunday (24 November). The activists ignored the call of Hong Kong’s controversial head of government, Carrie Lam, to surrender.

Since Sunday (17 November), police around the university have arrested more than 1,000 activists. Meanwhile, China emphasised its power to rule on issues related to Hong Kong’s constitution.

On Monday, Hong Kong’s High court declared anti-mask law imposed by the Hong Kong government unconstitutional.

Now, a spokesman for the Chinese People’s Congress has said that only his institution could make decisions about the Hong Kong constitution. This statement is likely to encourage many protesters to believe that the political principle of “one country, two systems” enshrined in Hong Kong’s Basic Law would no longer apply.

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Europe should increase its economic assertiveness abroad and put forward a new strategy to face China’s rivalry, as the challenges posed by Beijing are already affecting the way European countries are preparing to compete with global powers, experts and diplomats agreed on Thursday (12 July).

What about relations between Germany and China?

Relations depend on what is being compared.

At the annual government consultations, the tone seemed positive, with the mention of increased trade in past years, cooperation in the G20 and the UN.

There were also hopes that China will open up to the Western values and social norms that Germany and Europe fostered three to four decades ago.

But such hopes have not yet become a reality. China is not becoming more ‘westernised’, and it is not opening its market goods to the same extent as it uses Western markets for its products. In general, however, Germany and China respect each other.

Regular encounters have created trust. And in crises such as the 2008 financial crisis, everyone has experienced that joint success can be achieved in crisis management. And perhaps some insights such as the sense of environmental and climate protection have found their way into Chinese government policy more quickly thanks to the exchange.

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What is the economic outlook?

When German companies discovered the Chinese market, they were attracted by cheap labour costs and the vast market, while China was more dependent on Germany and the transfer of technologies.

But this has now changed.

Paradoxically, some companies which have seen success in China, such as VW, are becoming increasingly dependent on Chinese business.

For the VW Group, it is so vital for its balance sheet and projects such as the expansion of electric mobility, that China can dictate the conditions for the group.

In some areas of technology, China is already ahead of the game.

When it comes to battery technology, this was achieved thanks to a combination of industrial and foreign policy to procure rare raw materials such as cobalt. In the field of digital development, China has limited access to large US companies and invested a great deal of energy in developing its ‘know-how’.

What is the big dilemma?

Merkel’s travels, always accompanied by large business delegations, have undoubtedly boosted prosperity in Germany. In 2018, bilateral trade amounted to almost €200 billion.

While the US has a robust domestic market and Trump can flex his muscles accordingly, Germany is far too dependent on exports from China, especially in the automotive and mechanical engineering sectors.

German companies are suffering from the US-China trade dispute. According to a survey conducted by the German Chamber of Commerce in China, 83% of the companies operating in China have said that they are affected. And only 27% of the companies expect to meet or exceed their 2019 business targets.

The Federation of German Industries considers China to be a “systemic competitor”. The German government has also become more sensible. With the help of the state-owned KfW Bank, the State Grid Corporation of China was prevented from acquiring a stake in 50 Hertz, one of Germany’s leading operators of power highways.

German ambassador to the EU: 'China is changing us'

Europe should increase its economic assertiveness abroad and put forward a new strategy to face China’s rivalry, as the challenges posed by Beijing are already affecting the way European countries are preparing to compete with global powers, experts and diplomats agreed on Thursday (12 July).

What has changed politically?

China is becoming increasingly aggressive, both internally and externally. The chairman of the Foreign Affairs Committee in the Bundestag, MP Norbert Röttgen (CDU), pointed out that China had changed fundamentally under President Xi Jinping and had established a monolithic rule tailored to him.

“China has become expansive on the outside and uncompromisingly repressive on the inside,” Röttgen said.

But at the same time, China has become indispensable as a political and economic partner at the international level. Röttgen warned that the German government must strike a general balance in its policy on China.

“Violations of international law, such as the claim to power over the South China Sea, are unacceptable,” the German MP added.

In Hong Kong’s case, China had promised the principle of “one country, two systems,” but “had begun to infringe and restrict it. Germany must work towards unity among Europeans in their dealings with China, according to Röttgen.

“Only then will China take us seriously,” he added.

How does Berlin address these problems?

For many years now, the German government has maintained a human rights dialogue with China, which includes ‘detrimental’ themes that are not included in the regular bilateral talks.

This means that when German government representatives visit China, the Chinese leadership is usually not publicly confronted with accusations of violating human rights.

From the opposition’s point of view, the German government’s silence must come to an end.

“Merkel must finally find clear words to say about China,” said Green MEP and parliamentary spokeswoman on human rights, Margarete Bause.

This applies both to the compliance with international treaties and to the respect of human rights standards. Because of the tensions in Hong Kong and the situation in Xinjiang, the German government should no longer do business as usual.

The “change through trade” approach appears to have failed.

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[Edited by Zoran Radosavljevic]

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