When German Chancellor Olaf Scholz took office in 2021, he pledged that his government would shift his country’s relationship with China away from one of economic dependence. Three years later, talk of reducing dependence on China has been replaced by calls for equal access to China’s market for foreign companies.
That strategy puts the Germans at odds with many of their closest allies, including the United States and other European countries, who would like to see China curb its recent surge in green energy exports, including electric vehicles . US Treasury Secretary Janet L. Yellen spoke about imposing trade restrictions on China.
The chief executives of several top German-based multinationals joined Mr. Scholz on his three-day tour of China, which included a meeting with Xi Jinping, China’s top leader, on Tuesday in Beijing. All of the company’s leaders oversee large operations in China that they want not only to maintain, but in many cases to expand.
That leaves Mr Scholz faced with the delicate act of balancing the export needs of his domestic economy with pressure from allies to leverage his country’s position to make demands on the Chinese.
How deep is the relationship between Germany and China?
German companies invested 10.4 billion euros, or $11 billion, in China last year and, unlike their counterparts in Japan and the United States, have shown little sign of slowing down.
Some analysts see this as evidence of German strength in its position to advance its agenda with Chinese leaders.
“Germany plays an extremely special role for China in the development of its economy and also in foreign trade relations,” said Max J. Zenglein, chief economist at the Mercator Institute for China Studies in Berlin. Electronics and electronic technology, along with machinery and chemicals, remain important exports from Germany to China.
“As countries like the US and Japan position themselves much more strongly in relation to China, Germany has an important function in terms of access to technology and capital,” he said. “Germany is definitely in a position of strength here.”
How are German companies doing in China?
Around 5,000 German companies are active in China. But 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 in the country.
German companies believe that their products offer superior quality, innovation and technical leadership compared to those made by their Chinese competitors. But increasingly limited access to government officials and regulators worries Germans that they will lose the businesses that are key to their global success.
Mr Scholz highlighted the role German companies have played in helping China develop its economy, in statements released by the chancellor’s office ahead of his meeting with Mr Xi on Tuesday.
“Over the past two days, together with a business delegation, I visited Chongqing and Shanghai and was impressed with how German companies contribute to growth, innovation and sustainability in China,” said Mr. Scholz.
What about fears of Chinese goods flooding Germany?
Ursula von der Leyen, president of the European Commission, expressed concern last week that Europe remained the last market fully open to China. Last fall, the European Union opened an investigation into whether electric vehicles made in China benefit from unfair subsidies, with a decision expected by this summer. He cited Brazil, Turkey and the United States as countries taking steps that could lead to trade restrictions on Chinese goods.
Among the executives traveling with Mr Scholz were the heads of BMW and Mercedes-Benz — Volkswagen’s chief executive pulled out at the last minute, citing a conflict. All three of Germany’s major automakers have invested heavily in China and appear intent on remaining competitive in the market.
“China is the largest car market in the world. We are a leading luxury car manufacturer and we have grown strongly in China and have a strong presence,” Ola Källenius, chief executive of Mercedes-Benz, said in comments to German public broadcaster ARD. “Withdrawing from such a large market is not an option, instead we are expanding our position here.”
Representatives of the German car industry point out that thousands of jobs in Germany depend on the revenue generated in the Chinese market. German carmakers increasingly rely on teams in China for research and development in areas such as automated driving that are not as advanced in Europe.
During the trip, ministers from both countries signed an agreement to work towards standardizing self-driving technology.
“Our guiding principle must always be free trade and competition,” said Oliver Zipse, BMW’s chairman, naming Japan, Korea and other countries that sell their cars in Europe. “We don’t feel threatened by the Chinese automakers.”
