German Chancellor Olaf Scholz sought to strike a delicate balance during a visit to China this week, promoting business ties with the country's biggest trading partner while criticizing Germany's surge in exports to Europe and aid to Russia.
Scholz met with Chinese leader Xi Jinping at Beijing's Diaoyutai Guest House on Tuesday, the culmination of a three-day visit with a delegation of German government officials and business leaders. He is also expected to meet with Premier Li Qiang as the two countries navigate strained relations over Russia's war in Ukraine and China's standoff with the United States, Germany's most important ally.
During his visit, Scholz promoted the interests of German companies, which are finding it increasingly difficult to compete in China. He also cited growing concerns within the European Union that the region's markets are becoming a dumping ground for Chinese products produced at a loss.
Scholz's visit to China is his first visit to China since last year, when the government adopted a strategy that defined the Asian power as a “partner, competitor and systemic rival” and called on Germany to reduce its dependence on Chinese products. It was a visit.
Germany's economy shrank last year, and its weakness exposed its dependence on China for growth. Energy prices are rising due to the war in Ukraine, which was facilitated by the Chinese government's support of the Kremlin. German companies are pushing for greater access to China and complain they face unfair competition.
During this visit, which began in the vast industrial city of Chongqing in southwestern China and continued on to Shanghai and Beijing, the Prime Minister visited German companies with large-scale investments in China, met with trade representatives, and met with university students. did.
“Competition must be fair,” Scholz told a group of German-speaking students in Shanghai on Monday. “We want a level playing field,” he said.
Scholz's visit was an example of the difficult dance Germany is trying to perform. The idea is to maintain economic ties with China while addressing U.S. pressure on China to work more closely with the United States. He was also expected to convey European leaders' geopolitical and trade concerns to China.
At the meeting, Scholz emphasized Germany's commitment to trade with China, but also warned of the need to curb the flow of Chinese goods into Europe. At the same time, he balked at a European Union investigation into China's use of subsidies for green technology industries, saying any discussion on trade must be based on fairness.
“This should be done not from a protectionist motive, but from a position of confident competitiveness,” Scholz told reporters on Monday.
China has sparked trade disputes with Europe and the United States as it promotes green manufacturing, such as electric cars and solar panels, which also receive government support. But with 5,000 German companies active in the Chinese market, Germany stands to lose more than many of its European partners if China retaliates against the European Union.
Maximilian Butek, secretary general of the German Chamber of Commerce in China, said: “If the EU takes too hard a stance against China, we can expect countermeasures, which would be a disaster for us.” .
“For us, it is extremely important that the Chinese market remains open,” he said.
Mr. Scholz was also expected to raise concerns in his meeting with Chinese leaders about Beijing's support for Moscow's wartime economy, particularly about continued sales to Russia of goods that could be used on the battlefield. .
In a discussion with students in Shanghai, Scholz mentioned Russia's war in Ukraine and said the world works best when all countries accept some basic common principles.
“One of them is that we shouldn't be afraid of our neighbors,” Scholz said, without naming any countries. “Borders cannot be changed by force.”
By recruiting leaders like Scholz, China hopes to drive a wedge between Europe and the United States. State media reports said his visit would highlight economic ties with Germany and prove the strength of China's ties with Europe.
The Chinese government will no doubt welcome the message that German companies are contributing to China. Asian giants are trying to attract foreign investment to revitalize an economy sluggish due to a housing downturn. Some Western companies and investors are also upset by Mr. Xi's emphasis on national security, believing it increases the risk of doing business in the country.
From China's perspective, Germany may be its best hope for slowing or easing trade restrictions from Europe, said Noah Barkin, senior China advisor at research firm Rhodium Group.
German automakers have invested billions of dollars in China, and much of their revenue comes from there. Many fear German companies will be hit hardest if the European Commission imposes higher tariffs on Chinese exports and Beijing retaliates.
Chinese officials “know that German companies are investing heavily and are using that politically to influence political decision-making in Berlin,” Barkin said.
Germany's biggest companies, including BMW, Mercedes-Benz and BASF, have significant investments in China and have a strong and effective lobby in Berlin, Barkin added. Several executives from these companies visited China with Mr. Scholz.
“China's supply chain is full of German products,” said Jorg Wutke, former president of the EU Chamber of Commerce in China. “If China competes with Germany on price, no one will make any money.”
Chinese authorities dismissed European accusations of unfair trade practices as baseless and a “classic act of protectionism.” They said China was “strongly dissatisfied and firmly opposed” to the EU investigation, hinting that it could retaliate against the EU's actions.
Chinese Commerce Minister Wang Wentao visited Europe last week to demonstrate Beijing's support for Chinese companies and push back against accusations that China is underselling goods to the region and posing risks to global markets.
In an interview with German newspaper Handelsblatt, China's ambassador to Germany, Wu Keng, said that the competitiveness of China's electric vehicles “relies on innovation, not subsidies.”
“The challenge facing developed countries lies in the fact that Chinese companies are more efficient,” the ambassador said.
prince I contributed a report from Hong Kong.