By Milton Ezrati
August 1, 2023
German Chancellor Olaf Scholz. (Photo by Sean Gallup/Getty Images)
Berlin has a new China strategy. It stands in stark contrast from Germany’s once accommodating and sympathetic posture and can only be described as wary and distant, if not quite hostile. Washington, no doubt, will claim that Germany has followed the American lead in this direction. But given Berlin’s comprehensive approach, the product of considerable compromise, it is the Germans that seem to have taken the lead, much as Japan did on this matter at the recent G-7 meetings in Hiroshima.
The 64-page strategy document from Chancellor Olaf Scholz’s coalition government, claims that China has changed and so Germany must. It describes Beijing as eager to dismantle the “rules-based international order” that, the strategy document claims, has governed international trade and finance for decades. Berlin’s new posture resists what it describes as Beijing’s aim to make China independent of the rest if the world while at the same time making other economies dependent on China. These objectives and Beijing’s efforts to gain hegemony in the Indo-Pacific region constitute, Berlin now claims, a threat to Europe and global security. Though the strategy document insists that China remains a trade “partner” with Germany, it also describes Beijing’s “systemic rivalry” as “increasingly prominent.” Among other references, this strategy document accuses Beijing of using “technical dependence [. . .] to achieve political goals” and of fusing “civilian and military policy.”
Washington, since the Trump administration, has shown an increasingly distrustful and sometimes hostile approach toward Beijing. On a strict timing basis, it looks as though Berlin is following. But given Berlin’s past criticisms of Washington’s hostility and Chancellor Scholz’s trade mission to China only recently, it is more likely that the German change reflects an independent decision. It is also noteworthy in this regard that Germany’s intelligence agency only recently labeled China the “biggest threat in relation to economic and scientific espionage and foreign direct investment in Germany.” Berlin has received an oblique warning of China’s growing trade dominance in a recently released report from Germany’s Federal Statistical Office that in 2022, German exports to China rose a mere 3.1 percent but its imports rose a whopping 33.6 percent, leaving Germany with a negative bilateral trade gap approaching 100 billion euros.
The new German strategy aims to make Germany “less dependent in critical sectors,” singling out medical technology, medicinal products, and rare earths. The new strategy seeks to amend law to account for “security interests” in all trade arrangements as well as with German investments in China. It intends to develop a list of goods subject to export controls, with an emphasis on cyber security and surveillance. The strategy further aims to “broaden our [German] economic relations with Asia and beyond.” No doubt especially irritating to Beijing is how the new strategy takes a strong position on Taiwan, committing Berlin to improving relations with the island, supporting Taiwan’s participation in international organizations, and an insistence that any reunification with the mainland occur peacefully and with “mutual consent.” The document also joins with the United States in pressuring Beijing to give up its “developing nation” status at the World Trade Organization (WTO).
Berlin is careful to avoid any mention of “de-coupling” from China trade, a notion that has become common in Washington. The Germans prefer the expression “de-risking.” By this Berlin means to continue trade links with China but nonetheless secure protection from dependence, Chinese bullying, and unfair trade practices. If the strategy does not seek to sever the two economies from each other, it does strongly recommend that German business diversify their supply chains away from China. When asked if Berlin would mandate such diversification, Chancellor Scholz made clear that such a step would not be necessary, since German firms are already in the process of diversifying from China without government pressure. And as readers of the column know, the same is true of American and Japanese business.
Unsurprisingly, Beijing is far from happy about this new German attitude. For some time now, as the United States and Japan resisted Beijing’s unfair and sometimes abusive trade practices, Europeans, most especially the Germans, seemed eager to gain advantage with China as the Americans and the Japanese made distance. Just a few months ago, Scholz led a German trade delegation to Beijing, and only weeks ago, Chinese Premier Li Qiang emphasized China’s close connection to the European Union (EU) and particularly the “solid relationship” it has with Germany. Beijing must have seen this European positioning as a kind of protection from American and Japanese hostility. With the recent G-7 agreement to limit dependence on China and now Berlin’s new strategy, that line of protection has evanesced. So far, the world has seen little blowback from Beijing, but it is still early days.