A Chinese case for a pragmatic German China policy
Over the last few weeks, various stakeholders in Germany have put forward their perspectives on China-related issues. , i.e. the VDMA, Germany’s mechanical engineering industry association called on policymakers to address China’s competition-distorting advantages. Meanwhile, a controversial political manifesto by prominent social democrats implies the necessity for a less confrontational stance vis-à-vis China.
Taking these developing discussions as a starting point, this issue will look at three articles discussing expectations for the new German government’s China policy. The articles center on the belief that the new government will seek a pragmatic relationship with China. Unsurprisingly, the experts cite Trump’s return and the weakness of the German economy as reasons why Berlin will prioritize this relationship. In their eyes, this weakness translates into a search for economic stability and growth, which they believe can be found with China. This is a rather peculiar understanding of the current economic dynamics of EU-China and Germany-China relations. It is as if China’s industrial policies do not threaten to hollow out Germany’s core industrial sectors (aka complementarity is gone). One of the experts also views the Green Party’s move to the opposition benches and the close business ties of many Christian Democrats as positive developments.
Nevertheless, expectations are not extremely high. For this, the writers mainly identify two factors. The first factor is Europe’s reliance on the US for security, which implies US pressure to conform to its policy. The second factor is the “unfriendly voices” in Germany and the EU, which will make it difficult for Chancellor Merz to design a better China policy.
A CHINESE CASE FOR A PRAGMATIC GERMAN CHINA POLICY
Huang Mengmeng, a Europe expert at the Chinese Academy of Social Sciences, wrote in May in World Affairs a magazine published by China’s MOFA, a short assessment about the future foreign policy under Friedrich Merz.
In the article titled “The New Foreign Minister Takes Office - How has German diplomacy changed?” the author believes that vis-a-vis the Trump administration, Germany will to a certain extend seek accommodation of the US, while at the same time seek to diversify its partnerships in order to balance Trump’s unilateralism. She writes that Germany’s
cooperative network spans European neighbors, Canada, China, India, Singapore, Mexico, Brazil, and ASEAN, aiming to diversify reliance on the US and enhance strategic autonomy through deepened economic ties, technological collaboration, and resource complementarity. //for some reason she does not mention Japan, Australia or South Korea.
Huang Mengmeng expects Germany to adopt a more pragmatic approach to its China policy. She points to several concerning developments, including Germany’s focus on trade and investment, its continued perception of China as a partner, competitor, and rival, Germany’s new foreign minister Johann Wadephul’s, emphasis on China as a systemic rival, Germany’s rules and reciprocity approach when facing Chinese competition, and legislation (Foreign Trade and Payments Act) aimed at preventing China from accessing critical infrastructure.
However, she also recognized that the new coalition treaty
deleted the narrative around human rights, Tibet, and Xinjiang, and the Supply Chain Due Diligence Act, which required German companies to scrutinize human rights and environmental standards in global supply chains, has been removed. This law had imposed stricter contractual obligations on Chinese suppliers. During a meeting with European Commission President von der Leyen, Merz also suggested that the EU abolish related legislation. These seemingly contradictory moves reflect the new German government's pragmatic considerations, prioritizing national business interests and economic competitiveness, leading to a more pragmatic approach in its China policy.
She emphasises the significance of the Chinese market for Germany in rather threatening terms: “If there is a significant change in Sino-German relations, the German business community would struggle to bear the losses.” And, she particularly applauds BASF’s de-risking strategy
They are advancing a "de-risking" strategy through localized production rather than exiting the Chinese market. Recent investment projects exceeding €10 billion, such as BASF’s integrated base in Zhanjiang, confirm German companies’ strategic view of the Chinese market as an innovation testing ground and a value chain hub.
The final paragraph is especially noteworthy:
The strengthening of political-business collaboration is shaping the fundamentals of (Germany’s) China policy. German companies in China have jointly called for Germany to emphasize partnership over competition with China. Many within the CDU/CSU have close ties to the business community and China, leveraging industrial connections and policy influence to continually shape the German government's China strategy. In this year's CDU/CSU parliamentary group list, representatives from leading industries such as automotive and machinery hold key positions, with their groups deriving a significant portion of revenue from China-related operations. This deep intertwining of interests grants them substantial influence in policy-making. Through industry lobbying and interest networks, they push the government to maintain flexibility in areas like export controls and supply chain adjustments. The business community's critical need to sustain market benefits drives the government to prioritize economic relations with China, making pragmatism a core pillar of its China strategy.
Despite increasing frictions in the relationship between Germany and the US, in the medium term, she expects, it will not be possible for Europe to reduce the reliance on the US when it comes to defense, and Germany will therefore try to convince the US to keep the alliance together. Against the backdrop of US-China tensions, Germany has some wiggle room in its China policy, in order to “to ease the domestic economic pressure, cope with the tariff war launched by the United States and the capital gap after the partial withdrawal of the United States from global governance.” But Huang Mengmeng expects that “facing European security challenges and extreme US pressure, the room for improvement in China-Germany relations is limited.“
Pragmatism with regard to Germany’s China policy, seems to be the overall expectation, for instance Li Chao, Deputy Director of the European Institute at the MSS-related think tank CICIR, wrote in early May:
The new German government will also bring some changes to China-Germany relations. Frankly speaking, China-Germany relations have faced challenges in recent years, a key reason being the significant internal divisions within the German government’s China policy, which lacked coherence. Due to Chancellor Scholz, the Foreign Minister, and the Economics Minister belonging to different parties, the Green Party, which oversees foreign affairs, has often been insufficiently pragmatic in addressing many issues involving China. In the new government, both ministries will be led by the Union parties (CDU/CSU), ensuring the implementation of the China policy set by the Chancellor’s Office. At the same time, we have reason to believe that the Union parties and the Social Democratic Party (SPD), with their mature experience in engaging with China, will be able to approach China with a relatively pragmatic attitude, promote engagement and cooperation, properly handle differences, and contribute to building a positive China-EU relationship.
With regard to policy implementation, he writes
On the issue of China, it is an undeniable fact that competition between China and Germany is increasing in multiple areas. Unfriendly voices towards China within Germany and the EU have always existed, which will undoubtedly exert significant pressure on the Merz government to formulate a comprehensive and balanced China policy.
Zheng Chunrong, Director of the German Research Center at Tongji University, also believes that “maintaining and expanding pragmatic economic and trade cooperation with China is in line with the economic development needs of Germany and Europe”, since Germany’s economy is not doing very well, since Germany’s economy is not doing very well (“especially in recent years, Germany's economic stagnation and declining competitiveness have left the public feeling confused and worried about the country's future development prospects”), among other reasons. Zheng rationalizes the need for pragmatic cooperation with China in an opinion piece in the Chinese issue of the Global Times in April.
In a world riddled by challenges, it is “the responsibility of China and Germany, as well as China and the EU, to jointly uphold an open free trade system, which is in the common interest of both sides”, but, unfortunately, Zheng notes,
The new German government has maintained the rhetoric of a "de-risking" policy towards China in its Coalition Agreement, emphasizing the need to reduce so-called unilateral dependencies. However, the greatest risk currently facing the global economy is precisely the risk of trade protectionism. The new German government's "de-risking" approach is clearly misdirected.
Under the pressure of the US’s tariff policy, the world must accelerate economic cooperation with countries beyond the US and diversify trade. He believes that Germany, the EU, and China, as “stabilizing forces” and “certainty factors” of the world economy, could jointly resist the onslaught of trade protectionism.
He ends by offering a final recommendation to the German government for achieving its economic objectives.
China and Europe should also consider restarting the Comprehensive Agreement on Investment (CAI) at an appropriate time to establish more favorable conditions for bilateral cooperation. Once such a favorable external environment is formed, it will undoubtedly help Germany emerge from its current economic difficulties and provide more confidence for the new German government to achieve its set economic growth targets.
Cross Purposes translates and contextualizes Chinese experts' views on EU-China relations. Opinions other than those referred to are my own and do not reflect those of any other individual or institution. Mistakes are my own.