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A Balancing Act

German Chancellor Olaf Scholz’s high-stakes visit to China shows that Germany will remain pragmatic in its China policy

By Yu Xiaodong Updated Jan.1

Construction progresses on the Contemporary Amperex Technology Thuringia GmbH (CATL) battery cell factory, a Chinese battery manufacturer, Thuringia, Germany, April 4, 2022

On November 4, 2022, German Chancellor Olaf Scholz made a high-profile visit to China. Meeting with Chinese President Xi Jinping and Chinese Premier Li Keqiang, Scholz is the first G7 leader to visit China since the beginning of the Covid-19 pandemic and the first Western leader to visit China after the 20th National Congress of the Communist Party of China (CPC) held in October, during which Xi secured his third term as the Party’s general secretary.  

During his meeting with Scholz, Xi said China regards Europe as a comprehensive strategic partner and supports the strategic autonomy of the European Union, adding that its relations with Europe are not targeted, dependent on, or subject to a third party, apparently referring to the US, China Daily reported.  

“China will work with Germany and Europe to step up coordination and cooperation in international affairs and jointly look for solutions for such global issues as climate change, biodiversity and food security,” Xi said.  

For his part, Scholz said that China is an important trading partner for Germany and for Europe as a whole, and that Germany firmly supports trade liberalization, supports economic globalization and opposes decoupling. The two sides also discussed the Ukraine crisis and other global issues, such as climate change.  

Scholz’s short but significant visit came at a sensitive time when there are growing calls within Germany and Europe to reduce economic dependence on China. During the 16-year tenure of former chancellor Angela Merkel, who visited China 12 times, Germany established strong economic ties with China. In 2014, the two countries agreed to establish a “comprehensive strategic partnership,” and China has been Germany’s top trade partner since 2016.  

But since the US started to adopt a confrontational stance against China on various issues by establishing a “valuebased” united front among Western countries, Germany and the EU as a whole implemented a tougher stance on China, which the EU has labeled a “systemic rival” since 2019.  

After the Russia-Ukraine war erupted in February, 2022, Germany joined the West’s sweeping sanctions against Russia, to which Russia retaliated by reducing and cutting off gas deliveries, which not only exposed Berlin’s reliance on Russian oil and gas but also prompted a sense of vulnerability toward its alleged economic dependence on China.  

Since replacing Merkel as chancellor in December 2021, Scholz, who leads a new three-party coalition government, has maintained a strategic ambiguity about his China policy. Scholz’s trip to China is considered by many as a bold move to clarify his administration’s China policy – Germany will not decouple from China. 

‘No Decoupling’ 
Before embarking on his trip, Scholz vetoed the objections of six ministers and defied Washington’s warnings to approve a deal that allowed Chinese shipping giant Cosco to purchase a stake in a Hamburg port terminal, though a compromise was made as the company’s original bid to buy a controlling 35-percent stake was reduced to 24.9, which would bar the company from gaining operational control over the terminal.  

In an article released before his China trip that explains the rationale of his visit, Scholz said that just as China has adopted a “dual circulation” strategy to reduce its dependence on other countries, Germany is serious about dismantling “one-sided dependencies in the interest of smart diversification.” But it requires “prudence and pragmatism,” said Scholz.  

In an apparent effort to push back at Washington’s pressure on Germany to pick a side between the US and China, Scholz recalled Germany’s “painful experience of division during the Cold War” and said that Germany has no interest in seeing new blocs emerge in the world. “The new US National Security Strategy also rightly emphasizes the goal of preventing a new confrontation between opposed blocs,” Scholz added.  

Stressing that “no country is the ‘backyard’ of another,” Scholz said that “new centers of power are emerging in a multi-polar world” and “China remains an important business and trading partner for Germany and Europe – we don’t want to decouple from it.”  

Regarding China’s investment in Germany, Scholz said his government differentiates based on whether a business “creates, or exacerbates, risky dependencies,” adding that this is not the case in the controversial Hamburg port deal.  

On China’s relationship with the EU, Scholz said the EU is correct to describe China as “filling the three-fold role of partner, competitor and rival.” Calling on European leaders to “explore where cooperation remains in our mutual interest,” he stressed that China plays a crucial role in various fields, including fighting against Covid-19, protecting the climate and addressing the global food crisis. 

‘Sense of Urgency’ 
According to Zheng Chunrong, director of the German Studies Center at Shanghai-based Tongji University, Scholz’s somewhat surprising visit to China appears to convey a sense of urgency.  

“The growing calls for decoupling from China both inside and outside Germany may have prompted Scholz to feel that it has become imperative to clarify his position with a trip to China,” Zheng told domestic media outlet guancha.cn. “If these voices are allowed to develop unchecked, he may face more constraints, and it could be too late to take action later.”  

Zheng noted that Scholz’s trip was scheduled after the EU summit held in late October 2022. “He may have seen and heard something at the summit which injected a sense of urgency for him to visit China at that time.”  

Lu Xiao, an assistant professor at the Institute of International Relations at Peking University, believes the timing of Scholz’s trip to China was carefully chosen to coincide with the midterm elections in the US as Washington was preoccupied with domestic issues.  

“The US tried to use the Ukraine crisis to keep Germany on a tight leash to serve its anti-China agenda,” Lu said, “Scholz’s China trip showed that Germany will try to maintain its foreign policy autonomy and will not follow Washington’s playbook on China.”  

Regardless of the timing, there is no doubt that Scholz’s visit was well-received in China. “Germany is very sober about how it should handle its relationship with China in order to safeguard its own national interests,” noted Ding Chun, director of the Center for European Studies at Shanghai-based Fudan University, “It is against Berlin’s interests to decouple from China and Scholz’s visit to China indicates that its leadership will take a pragmatic approach to its China policy.”  

Cui Hongjian, senior research fellow and director of the Department for European Studies at the China Institute for International Studies, believes Scholz’s visit to China helped clarify how his administration perceives the relationship with China in the post-Merkel era. “It sends a clear message that Germany will not join Washington’s efforts to rally its European allies to isolate China,” Cui said.  

“It also means that China and Germany will continue to serve as anchors of stability in an increasingly turbulent world while injecting strong confidence for overall global stability,” Cui added. 

Growing Investment 
Scholz was accompanied on his China trip by a delegation of 12 top German business leaders, and received strong backing from the German business community. Martin Wansleben, managing director of the Association of German Chambers of Industry and Commerce, told media that it was “right to make this visit, because Germany, Europe and the world depend on China in many ways, as well as to solve emerging problems, including climate change and food safety.”  

In an op-ed signed by the leaders of several German companies including BASF chairman Martin Brudermueller, Siemens CEO Roland Busch, Merck Group CEO Belen Garijo, and Bosch CEO Stefan Hartung in the Frankfurter Allgemeine Zeitung, they warned that Germany would miss out on economic growth and threaten its prosperity if it were to sever ties with China.  

“The enormous potential of the Chinese market gives us the opportunity to scale up faster to larger standards, so that we can then act more successfully in other markets,” they said: “A withdrawal from China would cut us off from those opportunities.”  

In the past couple of years, despite the global Covid-19 pandemic, Germany’s direct investment in China has increased. According to financial analysis platform Macrobond, German investment in China reached about 10 billion euros (US$10.4b) during the first half of 2022. Statistics released by China’s Ministry of Commerce showed that Germany’s direct investment to China increased by over 30 percent in the first eight months of 2022. Foreign direct investment (FDI) from Germany to China was up 21 percent in 2021, while FDI from the EU was down by 11 percent.  

Scholz’s visit also helped boost the confidence of major German firms. On November 14, 2022, German carmaker BMW confirmed the company had signed agreements with Chinese partners to invest an additional 10 billion yuan (US$1.4b) to increase capacity at a battery plant in Northeast China’s Liaoning Province.  

German chemicals giant BASF had already announced in July 2022 it had final approval to build an integrated plant in South China’s Guangdong Province, which will involve an investment of up to 10 billion euros (US$10.4b) by 2030. In September, the first plant of its Verbund site in Guangdong was inaugurated. In October, German automobile maker Volkswagen announced that it plans to invest up to 2.4 billion euros (US$2.5b) to set up a joint venture with Horizon Robotics, one of China’s leading auto chip developers, to develop autonomous driving solutions for the Chinese market.  

According to statistics released by the German government, bilateral trade between the two countries reached more than 245 billion euros (US$254.2b) in 2021, an increase of 15.4 percent from the previous year and accounting for about 10 percent of Germany’s total imports and exports.  

“Europe’s anti-China sentiment is derived from a sense of vulnerability against the backdrop of the Russia-Ukraine conflict, energy crises and the surge in anti-globalization. But the reality is that China’s huge market and solid supply chain are indispensable for Europe,” said Ding Chun. 

Influence on EU 
With all the significance of Scholz’s China visit, it is still too early to conclude the future relationship between China and Germany, which will also influence the larger China-EU relationship.  

Both prior to and after his trip, Scholz continued to face strong criticism from within his coalition government by both the Green Party and the Free Democrats, and opposition parties, such as the Christian Democratic Union. Just ahead of Scholz’s visit to China, German Foreign Minister Annalena Baerbock from the Green Party called for a tougher policy toward China at a meeting of G7 foreign ministers.  

On November 9, 2022, the German government blocked prospective Chinese investment in two domestic semiconductor producers, citing security reasons. In response to the decision, Chinese Foreign Ministry spokesperson Zhao Lijian called on the German government to “refrain from politicizing normal economic and trade cooperation, [and] still less using national security as a pretext to practice protectionism.”  

“Scholz’s visit could serve as a model for other European countries, and the China-Germany relationship could be an exemplar for other major Western countries in their approaches towards China,” Wang Yiwei, director of the Center for European Studies at the Renmin University of China in Beijing, told NewsChina. There is also speculation that French President Emmanuel Macron could be the next European leader to visit China. But it remains to be seen whether the ChinaGermany and China-EU rapprochement can truly remain on this pragmatic path, Wang said.

Products from German manufacturer Siemens are displayed at the 5th China International Import Expo, Shanghai, November 5, 2022