Will Geopolitics Also Poison German Cooperation with China?
On the eve of Chancellor Olaf Scholz’s visit to China on Nov. 4, the mainstream media are full of attacks on continued economic cooperation with the Chinese, arguing that Germany must not repeat the “mistake” of over-dependence, as in the case of Russia. In 2021, China accounted for 9.5% of Germany’s total foreign trade, with exports amounting to about €103.7 billion, while imported goods (chips and electronics, prominently) were in the range of €142.3 billion.
Given these amounts, Stefan Mair, the director of the German Institute for International and Security Affairs (SWP), an important consultant to the government, recently told the business weekly Wirtschaftswoche: “There will be no market that will replace China one-to-one in the next few years.” For many German companies, China is “the only dynamic, growing sales market”. Indeed, major German industrial companies, such as Volkswagen, BMW, BASF, Carl Zeiss, intend to keep substantial shares of their global production in China, and to increase their investments there. In the case of Volkswagen (VW), which now produces as many cars in China as in Germany, the commitment to remain is all the more notable as the German government decided in May to cancel all export credit insurances (the Hermes facility) for the company, because of its production in Urumqi, in Xinjiang province, where Beijing is accused of human rights abuses. VW is now investing without those Hermes guarantees.
In line with the European Commission’s policy toward China over issues such as Xinjiang, Tibet, Hong Kong and Taiwan, Berlin’s foreign ministry is presently working on new export and investment guidelines, that prioritize the view that China is a “systemic rival” due to its non-compliance with the western “values-based” system. Therefore, cooperation with the Chinese should be substantially reduced.
Chancellor Scholz has defended his visit to China on grounds that conflicts would be detrimental to German industrial interests, while he wants to “improve relations”. He has not indicated how far he is willing to go, but he did decide to approve a project for COSCO at the port of Hamburg, despite considerable opposition from his two coalition partners, the Greens and the Free Democrats. The one concession Scholz made made to the critics was to reduce COSCO’s share in the project from the originally planned 35% to 24.9%, thus limiting a decisive Chinese say on crucial project decisions.
The Hamburg port authority (HHLA) itself has, from early on, been in favor of partnering with the “New Silk Road” project, both in terms of maritime trade and railroad connections from the port into Germany and to the rest of Europe. The COSCO investment, with its emphasis on fully automated container loading/unloading, is expected to increase Hamburg’s competitiveness, in particular with Rotterdam. In addition, Hamburg is the home town and original political base of Olaf Scholz.