Despite the Rhetoric, No Alternative to Economic Cooperation with China

Unwilling to admit that the sanctions imposed on Russia are causing more damage to Europe than to Russia, Western geopoliticians are busy promoting the narrative that cooperation with China can be replaced by cooperation with other partners in the world. A look at Germany, China’s leading partner in Europe, exposes this assertion as reckless adventurist talk which would have devastating consequences on the German economy.

A new study by the German Economic Institute (IW) admits that in spite of all the propaganda, German investment in China totaled about €10 billion between January and June 2022, well above the previous six-month peak recorded since the turn of the millennium of €6.2 bn. Although this sum partially represents shifts of production out of Germany, particularly in the automobile and chemical sectors, Chinese industry has also become a crucial supplier of much-needed components for German industrial production. China, for instance, is the world’s leading producer of lithium batteries, supplying 77% of global output. Its production is thus becoming indispensable for the manufacture of e-cars, which are heralded as the future of automobiles. That dependency on supplies from China is likely to stay for some time, as there is no alternate producer visible internationally.

Therefore, it is not surprising that the share of German imports from China rose to 12.4% in the first half of 2022, up from 3.4% in 2000. Since exports to China have not kept pace, the trade deficit had jumped to nearly €41 bn by mid-2022, the IW study noted, assessing that the gap will further widen in the future. Author of the study Jürgen Matthes noted that “the German economy is much more dependent on China than the other way round”.

Cutting all industrial cooperation with China would cost the German economy up to 10% of GDP, the Munich-based IfO found in a different study, warning that “de-globalization could not only lead to increased unemployment and lower growth, but ultimately threaten the country’s political stability”.

Moreover, the idea that “China can be replaced as trade partner” overlooks the fact that that cooperation between Europe and China is irreplaceable in pioneer areas of technology development. Knowledgeable insiders point out that in research and development sectors such as magnetic levitation trains, thermonuclear fusion, sensors, and space technology, there is hardly any alternate partner for German scientists and engineers outside of China.

Knowing that, it is certainly not in Germany’s best interests to have a parliamentary delegation visit Taiwan on a high-profile political mission (planned for October), mimicking the provocations of U.S. Speaker of the House Nancy Pelosi (cf. above). Nor is the current deployment of five Eurofighter jets of the German Air Force for an anti-China exercise in Australia.