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

Scholz’s coalition government has labeled China a “systemic rival,” and it recognizes the need for Germany to diversify politically (by focusing on relationships with other Indo-Pacific countries) as well as economically. It also aims to press Beijing to level the playing field for German and European companies doing business in China. Germany’s economic affairs ministry is working on reducing its dependency on China for raw materials, batteries, and semiconductors; it is also reassessing the investment and export guarantees it provides to German companies doing business in China.

What Are the Risks of This Dependency?
Despite diversification efforts so far, Germany’s asymmetric dependency on China is reminiscent of its previous dangerous energy dependency on Russia. In case of a geopolitical crisis over Taiwan, the fact that German corporations are entangled in the Chinese market raises the political and economic risks for Europe and for transatlantic ties. Germany’s reliance could inhibit its ability to respond together with Western allies to an attempt by China to retake Taiwan by force, for instance by imposing sanctions.

Meanwhile, Scholz’s trip to Beijing further complicated the prospects of a common European policy on China. Berlin rejected an offer by French President Emmanuel Macron to conduct a joint visit to Beijing, which aggravated bilateral tensions. Also, the timing of the trip—shortly after Xi’s confirmation as party leader for a third term—raised concerns with Europeans.

As long as Germany is unwilling to substantially adjust its China policy and to invest more in a European policy on China, other European countries will not follow Germany’s lead, and it will be easier for Beijing to play them off against each other.

Where Is Germany’s China Policy Headed?
The policy remains in flux, and it is subject to heavy infighting within the governing coalition. The Greens are more hawkish on China than the Social Democratic Chancellery; and they are advocating for more urgency in diversification efforts and a stronger stance on human rights. The foreign ministry, controlled by the Greens, oversees the drafting of Germany’s first national security strategy and its new China strategy, set to be published in the coming months. These will provide opportunities for Germany’s allies in Europe and across the pond to offer input. German-Chinese governmental talks planned for January 2023 will be another such opening.

What Should the United States Do?
U.S. diplomats should highlight the security dimension of the China relationship, and outline the potential costs to Germany if a conflict erupts over Taiwan. They should avoid discussion of “decoupling” and instead point to Germany’s need for faster diversification. They should also work closely with other European allies to ensure that Europe’s China policy is headed toward convergence with U.S. priorities. Regardless of the tensions around Scholz’s visit, the United States and Europe should coordinate closely to deliver joint messages to China.

Liana Fix is a Fellow for Europe at CFR. This article is published courtesy of the Council on Foreign Relations (CFR).