China fears new German government EJINSIGHT


China has just lost its best friend in Europe, Angela Merkel, and fears the government that replaces her.

Merkel officially stepped down last Thursday (December 2) after 16 years as Chancellor of Germany. His replacement is Olaf Scholz, leader of the Social Democrats, who heads a three-party coalition made up of his party, the Greens and the Liberal Democrats.

Unveiled last month, his policy platform urged Beijing to loosen its grip on Hong Kong and said “any change in the status quo in the Taiwan Strait can only be resolved peacefully and by mutual agreement.”

Annalena Baerbock, the new foreign minister and leader of the Green Party, said last week (December 1) that she would not rule out a boycott of the Winter Olympics in Beijing in February.

“Eloquent silence is not a form of long-term diplomacy. A values-driven foreign policy is always an interaction of dialogue and firmness,” she said in a newspaper interview. She expressed concern about the treatment of Uyghurs in Xinjiang, the detention of journalist Zhang Zhen and the situation of tennis star Peng Shuai.

New Health Minister Jens Spahn said Germany and the European Union should reduce their overreliance on China by finalizing more trade deals with other countries and regions. It should diversify its export markets and import sources outside of China, he said.

The new German government is moving towards consensus in Europe. Beijing’s foreign policy, “wolf warriors” and false information campaigns have turned European public and political opinion against China.

His explanations have failed to convince Europeans of the legitimacy of what he is doing in Hong Kong, Xinjiang and the Taiwan Strait and his treatment of dissidents and religious groups.

But, Beijing believes, such criticism is offset by Europe’s huge economic interests in China, particularly those of Germany, the EU’s biggest investor in the country.

Since 2015, China has been Germany’s largest trading partner. In 2020, bilateral trade was worth €212 billion. Germany played the lead role in negotiating the EU-China Comprehensive Investment Agreement (CAI), signed in December 2020. The European Parliament refused to sign the deal, after Beijing sanctioned some of its members.

During Merkel’s 16 years, Germany elevated its relationship with China to that of a “comprehensive strategic partnership,” including talks on climate change and disarmament. For 10 years, the two countries have held regular intergovernmental consultations. The last one took place in April this year, practically instead of being in person, due to the coronavirus pandemic.

German economists estimate that over the next 10 years, China will account for 30% of global economic growth.

According to Chinese figures, Germany is the EU’s largest investor in China, with investments of over $90 billion, or 25% of total EU investment in the country. There are around 5,000 German companies in China. They are particularly strong in chemicals, automobiles, machinery, precision equipment, and new energy.

Volkswagen sells more cars in China than in Germany. In 2020, China accounted for 38% of global car sales from Germany’s biggest automakers Volkswagen, BMW and Daimler, according to a study by the German Automotive Research Center (CAR).

While most global markets shrunk in 2020 due to Covid, car sales from BMW and Daimler in China rose 7.4% and 11.7% respectively, two sales records.

“This huge investment strongly influenced Merkel’s policy towards China,” said a German business consultant in Hong Kong. “This limited his freedom to speak out on human rights and other contentious issues.

“Scholz’s politics will not be much different. He is pragmatic and well-informed and must take into account the economic interests of major car manufacturers, Siemens, Bayer, BASF and other large companies. But, within his coalition, there are different opinions, especially with the Greens,” he said.

Last June, Beijing angered the BDI, Germany’s powerful industry association, with its law against foreign sanctions.

“Instead of relying on de-escalation, the Chinese government is creating new uncertainties,” said BDI board member Wolfgang Niedermark. “This damages China’s reputation as an investment location and trading partner.

“The law is very different from similar laws in the EU,” he said. “This undermines legal clarity and creates a gray area that now weighs on any company doing business in China. Instead of reacting with threatening gestures, the Chinese government would be well advised to introduce more constructive elements into the dialogue with its trading partners.

The new government will have to find a way to balance its big business interests with the growing public and political hostility toward China.

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