{"id":52662,"date":"2023-11-14T15:19:20","date_gmt":"2023-11-14T06:19:20","guid":{"rendered":"https:\/\/apinitiative.org\/?p=52662"},"modified":"2023-11-17T16:37:57","modified_gmt":"2023-11-17T07:37:57","slug":"germanys-china-strategy-is-epoch-making-but-ambiguous-by-takumi-itabashi","status":"publish","type":"post","link":"https:\/\/apinitiative.org\/en\/2023\/11\/14\/52662\/","title":{"rendered":"Germany\u2019s China strategy is epoch-making but ambiguous by Takumi Itabashi"},"content":{"rendered":"

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\nGeoeconomic Briefing No.168 November 14, 2023
\nEconomic Security Group<\/u><\/a><\/p>\n

Germany\u2019s China strategy is epoch-making but ambiguous<\/h3>\n
\nTakumi Itabashi
\nProfessor, the Graduate Schools for Law and Politics at the University of Tokyo<\/p>\n

PDF<\/a><\/p>\n

European Commission President Ursula von der Leyen gave a keynote speech to the Mercator Institute for China Studies and the European Policy Center on March 30, outlining her vision for a new de-risking approach to the European Union\u2019s relations with China.<\/p>\n

De-risking is different from decoupling as it can be described as an approach of reducing excessive reliance on China in key fields while cooperating with Beijing on issues such as climate change.<\/p>\n

Nevertheless, this doesn\u2019t imply that the EU has made any specific decisions regarding its China strategy.<\/p>\n

In this context, Germany, which likely plays a key role in determining Europe\u2019s China strategy, unveiled its 64-page strategy on China in German, English and Mandarin on July 13.<\/p>\n

When discussing how the EU and Japan can cooperate in the field of economic security, it is important to look into Germany\u2019s China strategy to forecast the EU\u2019s future moves.<\/p>\n

A breakthrough in German diplomacy<\/u><\/a> \/ The significance of China<\/u><\/a> \/ Lack of assistance<\/u><\/a><\/div>\n

A breakthrough in German diplomacy Act<\/h3>\n

Germany\u2019s China strategy was announced six months later than expected.<\/p>\n

During that time, Berlin announced its first comprehensive National Security Strategy in June, four months later than initially scheduled.<\/p>\n

The national security strategy referred to China as “partner, competitor and systemic rival,\u201d while avoiding mention of Taiwan, which drew attention to its China strategy.<\/p>\n

Germany’s government is made up of a coalition of three political parties \u2014 Social Democrats (SPD), Greens and Free Democrats.<\/p>\n

While the SPD historically has sought closer engagement with China, the Greens want a tougher line on Beijing, particularly over human rights issues and Taiwan.<\/p>\n

The delay in the announcement of Germany\u2019s China strategy \u2014 and of its national security strategy \u2014 is reportedly attributable to the power struggle between the Federal Chancellery, led by Chancellor Olaf Scholz of the SPD, and the Federal Foreign Office, headed by Foreign Minister Annalena Baerbock of the Greens party.<\/p>\n

Some say the announcement was delayed due to the visit by Chinese Premier Li Qiang to Berlin in June \u2014 his first overseas trip as premier \u2014 for the seventh China-Germany intergovernmental consultation.<\/p>\n

Moreover, business circles are said to have intervened in an effort to avoid damaging economic ties with China.<\/p>\n

In this way, Germany\u2019s China strategy showed \u2014 even before its announcement \u2014 great consideration for Beijing. Nevertheless, the adoption of such a strategy marked a breakthrough in itself, and the document holds significance for Germany\u2019s history of China policies, both in terms of content and impact.<\/p>\n

The China strategy indicates that Berlin now officially regards Beijing as a threat to its national security and economic interests.<\/p>\n

In its national security strategy, Germany has already stated that China \u201cis trying in various ways to remould the existing rules-based international order, is asserting a regionally dominant position with ever more vigour, acting time and again counter to our interests and values.\u201d<\/p>\n

The China strategy uses a similar expression to describe the country, stating, \u201cChina is pursuing its own interests far more assertively and is attempting in various ways to reshape the existing rules-based international order.\u201d<\/p>\n

Berlin regards Beijing as a partner, competitor and systemic rival, and it appears that the latter two are now coming to the fore.<\/p>\n

\u201cChina has changed. As a result of this and China\u2019s political decisions, we need to change our approach to China,\u201d the China strategy document states.<\/p>\n

While the national security strategy did not mention Taiwan, the China strategy document states, \u201cWe also have economic and technological interests regarding Taiwan. Taiwan is important for Germany both as a location for German companies and as a trade partner.\u201d<\/p>\n

The document also says, \u201cThe status quo of the Taiwan Strait may only be changed by peaceful means and mutual consent.\u201d<\/p>\n

 <\/p>\n

The significance of China<\/h3>\n

Even so, the document stresses the urgent need to de-risk, not a decoupling of economies.<\/p>\n

While maintaining its trade relations with China as partners, Germany is committed to ensuring that this cooperation will become more reciprocal and diversifying its economic ties with other countries in Asia and elsewhere.<\/p>\n

Needless to say, China has great significance for the German economy.<\/p>\n

The country has been Germany\u2019s top trading partner for seven consecutive years since 2016, and goods worth some \u20ac300 billion were traded between Germany and China in 2022 \u2014 a record high.<\/p>\n

Germany relies on China for supply chains of key industries such as automobiles, machinery and chemicals. Roughly two-thirds of Germany\u2019s rare earth imports come from China.<\/p>\n

And it can be pointed out as a recent trend that Germany\u2019s trade deficit with China is expanding.<\/p>\n

While Germany\u2019s exports to China in 2022 rose only 3.1% from the previous year to some \u20ac107 billion, its imports from China increased 33.6% to around \u20ac191 billion.<\/p>\n

Germany\u2019s trade deficit with China surged 120% from a year earlier in 2022, reaching \u20ac84 billion, the largest since 1990.<\/p>\n

Investments by German companies are continuing within China. A record \u20ac10 billion was added in 2021, followed by another record of \u20ac11.5 billion invested in 2022.<\/p>\n

German firms occupy as much as a third of Europe\u2019s total direct investment in China, with investments by four major firms \u2014 Volkswagen, Daimler, BMW and BASF \u2014 particularly prominent.<\/p>\n

Volkswagen relies on the Chinese market for at least half of its annual net profits, and BASF made a record high investment of \u20ac10 billion in the country in 2022.<\/p>\n

Facing such a situation, the China strategy aims to reduce dependence on China in critical areas including rare earths, medical technology and medicinal products.<\/p>\n

The strategy says Germany will consult on whether existing instruments should further be developed so that all trade and investment will take into account national security and human rights aspects, and that the German government is applying its export control procedures to ensure that German products are not misused for human rights violations and internal repression in China.
\n <\/p>\n

Lack of assistance<\/h3>\n

Nevertheless, Germany\u2019s China strategy falls short of mandating outbound investment screenings, as recommended by the European Commission, and it does not outline specific public assistance measures for supply-chain diversification.<\/p>\n

Mandatory reporting for companies heavily exposed to China also did not make it into the strategy document.<\/p>\n

Scholz himself has played down the need for the government to enforce requirements, arguing that many firms were already diversifying their supply chains, investments and exports.<\/p>\n

In this sense, the China strategy fails to offer incentives for German companies to actively diversify their supply chains. And there is no indication that they are discontinuing investments in China.<\/p>\n

In June, Roland Busch, CEO of German engineering conglomerate Siemens, announced that the firm will invest \u20ac140 million in China as part of its plans to invest \u20ac2 billion in overseas manufacturing expansion this year.<\/p>\n

German chemicals giant BASF has launched a \u20ac10 billion project to construct an integrated production base in Zhanjiang, Guangdong Province, to be up and running in 2025.<\/p>\n

Saori Dubourg, a member of BASF’s board of executive directors who had been considered a contender for the top job at the company, quit the firm in February, reportedly because she did not support its commitment to China advocated by CEO Martin Brudermuller, who is expected to leave the company next year.<\/p>\n

At a shareholders meeting, concerns were raised about the firm’s excessive focus on China when Stephan Kothrade, responsible for its China business project, was appointed to the board to succeed Dubourg.<\/p>\n

Meanwhile, German automakers are trying to insulate their Chinese factories from rising global risks, prioritizing making their production and supply chains more local in China.<\/p>\n

German carmakers shipped 254,607 vehicles to China in 2022, the figure being very small compared to the number of cars they produced in China.<\/p>\n

Volkswagen alone produced 3.2 million vehicles in China in 2022, almost the same as the number it manufactured in Europe.<\/p>\n

Germany\u2019s China strategy is facing mixed evaluation.<\/p>\n

Lily McElwee and Ilaria Mazzocco at the Center for Strategic and International Studies in Washington wrote in a commentary that the strategy \u201creflects the emergence of a new geoeconomic mindset in Berlin, something many in Washington and Brussels have long awaited.\u201d<\/p>\n

On the other hand, a more critical approach was taken by Liana Fix and Zongyuan Zoe Liu at the Council on Foreign Relations in Foreign Affairs magazine: The strategy \u201cdoes not represent a radical departure from the government\u2019s previous approach. Instead, it aims to sustain prosperity through trade with China while cautiously hedging against geopolitical risks.\u201d<\/p>\n

As David Merkle and Leon Mosbacher of the Konrad Adenauer Foundation in Germany wrote, Berlin\u2019s China strategy can be described as \u201cmore of a compass than a strategy.\u201d<\/p>\n

Although it shows the destination of de-risking, it does not really describe specifically what kind of measures should be taken to reach the goal and what actions will be taken by the government.<\/p>\n

In that sense, the future of Germany\u2019s China strategy remains uncertain.<\/p>\n

Still, the German government is beginning to make active moves such as strengthening screening of foreign companies\u2019 investments in German firms.<\/p>\n

In May, despite the adoption of new restrictions aimed at protecting critical infrastructure, the German government gave approval to a controversial deal that will see Chinese shipping giant Cosco acquire a 24.9% stake in a container terminal owned by logistics company HHLA at the Port of Hamburg.<\/p>\n

However, the government is changing its attitude after the Scholz administration\u2019s decision on the port was met with criticism.<\/p>\n

As for the case of Berlin-based satellite communications provider startup Kleo Connect, for instance, the German government blocked a move by Shanghai Spacecom Satellite Technology, a Chinese firm that already owns a majority stake of 53% in Kleo Connect, to acquire more shares from German company EightyLeo.<\/p>\n

The government is also scrutinizing the sale of Volkswagen subsidiary ship engine maker Man Energy Solutions’ gas turbine division to Chinese state-owned firm CSIC Longjiang GH Gas Turbine, which was announced in June.<\/p>\n

The cover image of the China strategy document is a picture of the Chinese strategy game weiqi, known as go in Japan.<\/p>\n

The description for the cover image says, \u201cUnlike in chess, the aim of weiqi is not to checkmate the other player but to acquire advantageous positions and defend what are known as \u2018liberties.\u2019\u201d<\/p>\n

If that is the case, it is difficult to say that Berlin is meticulously considering each move in its weiqi game against Beijing.<\/p>\n

Weiqi is basically played one on one, but there are variants played by pairs or teams consulting among themselves.<\/p>\n

Germany can come up with the next move by cooperating with the EU \u2014 as emphasized in the strategy document \u2014 and also with Japan.<\/p>\n

Obviously, Japan should also work proactively to become Germany\u2019s consulting partner.
\n <\/p>\n

 
\n[Note] This article was posted to the Japan Times on November 14, 2023:
\nhttps:\/\/www.japantimes.co.jp\/commentary\/2023\/11\/14\/world\/germany-china-strategy\/<\/u><\/a><\/p>\n

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