CHINA WATCHGermany’s China Policy: Has It Learned from Its Dependency on Russia?

By Liana Fix

Published 22 November 2022

The German economy remains heavily dependent on China, its largest trading partner, despite mounting geopolitical tensions between the West and Beijing.

German Chancellor Olaf Scholz’s controversial trip to Beijing in early November—the first by a Group of Seven (G7) leader since the pandemic started—appeared to defy his critics and was more successful than initially expected. However, his visit did little to address the structural problems underlying the country’s China policy, which carries significant risks for Germany, the European Union, and the transatlantic relationship.

What Did Scholz Achieve in Beijing?
In his meetings with Chinese President Xi Jinping and Premier Li Keqiang, Scholz reaffirmed that any change in Taiwan’s status has to be peaceful or by mutual consent, called for protecting human rights in Xinjiang, and discussed climate action and COVID-19. However, his most important accomplishment was a joint statement with Xi that both countries oppose the use or threat of use of nuclear weapons. Although this statement cost Beijing little—and there is no certainty that China would dissuade or otherwise influence Moscow’s decision in case of an actual escalation—it is a valuable message in this time of heightened nuclear tension.

Scholz was accompanied by a business delegation from Germany’s major corporations, which are all heavily invested in the Chinese market. His traveling with the delegation signaled a continuation of Germany’s mercantilist and “business first” approach toward China. Ahead of his trip, Scholz agreed to Chinese investments in the Hamburg harbor, Germany’s largest seaport, against the advice of his ministers, the European Commission, and Germany’s partners in Europe.

Scholz articulated that if China’s policies change, Germany’s relations with it also have to change; thus far, he is sticking to an approach of “prudence and pragmatism” that aims to incrementally reduce Germany’s trade dependence on China. The Chancellery argues that after the Russia energy shock, the German economy cannot abruptly change its trade with China. To critics, this demonstrates a lack of urgency, as trade figures show that the German economy is actually becoming more dependent on the Chinese market.

What Are Germany’s Economic Ties to China?
China has been Germany’s most important trading partner since 2016, with German carmakers at the forefront of that relationship. For instance, Volkswagen relies on the Chinese market for at least half of its profits. The German economy’s stakes in China continued to increase in 2022, with a record ten billion euros in new investments.