When German Chancellor Olaf Scholz took office in 2021, he promised that his government would shift its relationship with China away from economic dependence. Three years later, talk of reducing dependence on China has been replaced by calls for equal access for foreign companies to the Chinese market.
The strategy would put Germany at odds with a number of close allies, including the United States and other European countries, who want China to scale back its recent surge in exports in the green energy sector, including electric vehicles. U.S. Treasury Secretary Janet L. Yellen spoke about imposing trade restrictions on China.
Scholz will be accompanied on his three-day visit to China by chief executives from several major German-based multinational companies, and will also meet with Chinese leader Xi Jinping in Beijing on Tuesday. It was included. All of the company's leaders oversee large operations in China and are keen not only to maintain but in many cases to expand.
Scholz will therefore face the delicate task of balancing the export-oriented needs of the domestic economy with pressure from allies who are using their country's position to press demands on China.
How deep are the relations between Germany and China?
German companies invested 10.4 billion euros (about $11 billion) in China last year, and unlike their Japanese and American counterparts, they show little sign of slowing down.
Some analysts see this as evidence of Germany's strength in its position to advance its agenda with the Chinese leader.
“Germany plays a very special role in China's economic development and foreign trade relations,” said Max J. Sengren, chief economist at the Mercator Institute for China Studies in Berlin. Electronics and electronic technology, as well as machinery and chemicals, remain important exports from Germany to China.
“Germany has an important role to play in terms of access to technology and capital as countries such as the United States and Japan tighten their positions in relation to China,” he said. “Germany is definitely in a strong position here.”
How are German companies faring in China?
Approximately 5,000 German companies are active in China. However, in a recent survey of 150 members of the German Chamber of Commerce in Greater China, two-thirds said they felt they faced unfair competition at home.
German companies believe their products have superior quality, innovation and technological leadership compared to those manufactured by their Chinese competitors. But with increasingly limited access to government officials and regulators, Germans fear they will lose out on business that is key to their global success.
In remarks released by the Prime Minister's Office ahead of his meeting with Xi on Tuesday, Scholz emphasized the role German companies have played in supporting China's economic growth.
“Over the past two days, I visited Chongqing and Shanghai with a business delegation and was impressed by how German companies are contributing to China's growth, innovation and sustainability,” Scholz said.
What about concerns about Chinese products flooding Germany?
European Commission President Ursula von der Leyen last week expressed concern that Europe remains the last market fully open to China. Last fall, the European Union launched an investigation into whether Chinese-made electric cars benefit from unfair subsidies, and a decision is expected by this summer. He cited Brazil, Turkey and the United States as countries that have taken measures that could lead to trade restrictions on Chinese goods.
Among the executives who accompanied Mr. Scholz were the heads of BMW and Mercedes-Benz, but Volkswagen's chief executive resigned at the last minute over the conflict. All three of Germany's major automakers have invested heavily in China and appear to be trying to remain competitive in the market.
“China is the world's largest car market,” Mercedes-Benz CEO Ola Källenius said in comments to German public broadcaster ARD. “We are a leading luxury car manufacturer and we are growing strongly in China. “Exiting from such a large market is not an option. On the contrary, we are expanding our position here.”
Representatives of the German car industry say that thousands of jobs in Germany depend on revenues generated in the Chinese market. German automakers are increasingly relying on Chinese teams for research and development in areas such as autonomous driving, which is less advanced than in Europe.
During the visit, ministers from both countries signed an agreement to work towards standardization of autonomous driving technology.
“Our guiding principles should always be free trade and competition,” BMW Chairman Oliver Zipse said, naming Japan, South Korea and other countries that sell cars in Europe. “We don't feel threatened by Chinese automakers.”