Reducing risks without decoupling, Germany’s new strategy in the face of a “more aggressive” China

First modification: 07/13/2023 – 20:03

4 min

Germany further shields its economic security. After the lesson represented by Russia’s energy dependence, Berlin turns its attention to one of its main trading partners, China. And it is that, this Thursday, the German Government presented a document that outlines the guidelines for the relationship with the Asian giant in various aspects, mainly in commercial exchange.

The letter was released a few weeks after the presentation of the comprehensive national security strategy in which Berlin focuses on Moscow as the biggest security threat in the “foreseeable future” and calls for maintaining a balanced attitude towards Beijing, according to the AP news agency. A balancing act on a tightrope that cautiously moves forward with the most important economy in Europe in terms of developing its ties with China, burying the illusions of comprehensive strategic cooperation promoted by former Chancellor Angela Merkel.

“Anyone who listens to China knows with what self-confidence it will decisively influence the development of our world: more repressive at home and more aggressive abroad,” German Foreign Minister Annalena Baerbock said. Despite the harshness of her words, the minister acknowledged that for her country “China continues to be a partner, a competitor and a systemic rival”, although this last aspect has come to the fore.

In this context, the Reuters agency highlights China as a central market for a significant number of German companies such as BMW, Volkswagen and BASF. The exchange in imports and exports is around 300,000 million euros, so Berlin wants to adopt a strategy that, in practice, does not limit too much the business of German firms in the Asian giant.

While Europe is steadily reducing its dependencies on the Asian nation, relations with China have “acquired greater importance in recent years,” according to the document. Therefore, the “elimination of risks” is urgent, but not the “decoupling” of the economies of both nations, reads in a media tone similar to that adopted by the other six most industrialized nations grouped in the G7.

At another time you can read that “it is not our intention to impede China’s economic progress and development”, while calling for exchanges to become more “fair”, “sustainable” and “reciprocal”, with a pinch of suspicion. The government expects local companies to “closely monitor relevant China-related developments, data and risks” and will hold “confidential discussions” with those who are “exposed” to identify embedded dangers.

Loud but “small stick” in the new Berlin strategy

“Companies that become highly dependent on the Chinese market will have to bear financial risk in the future,” warned Chancellor Baerbock.

“We simply cannot afford to do a second time what we had to do as a result of the Russian war of aggression, that is, spend more than 200 billion euros (…) to free ourselves from a dependency“, he emphasized.

The strategy did not leave Taiwan off the table. According to the diplomatic chief, this is an issue on which they cannot remain “indifferent.” In an interesting move, the strategy attempts to shield the country from any deterrence by the Chinese central government to do business with what Beijing views as a breakaway province. Berlin made it clear that it has good relations with Taiwan and that it wants to “expand” them.

This issue is a red line that the Chinese leadership has drawn to deal with most of its diplomatic topics, so the German ambiguity is evident. “The status quo of the Taiwan Strait can only be changed by peaceful means and mutual consent (…) Military escalation would also affect German and European interests,” the Berlin document added.

Noah Barkin, an expert on Europe-China at the Rhodium Group, told Reuters that “Berlin is speaking loudly, but he is wielding a small club.” “Chancellor Scholz has made it clear that he sees a very limited role for government when it comes to reducing risk,” he stressed.

For its part, the Chinese embassy in Berlin responded to the document: “Removing risks by force based on ideological bias and competition anxiety will only counterproductive and artificially intensify risks.”“. In addition, he said he hopes that Germany will be objective and rational in the future.

With AP and Reuters