Germany’s New Skepticism About China

Over the last decade, China and Germany have developed what Jonas Parello-Plesner and I called a “special relationship.” The basis for it was the growth of German exports, in particular automobiles and machinery, to China. This economic symbiosis led to an increasingly close political relationship – in particular, between Chancellor Angela Merkel and the former premier Wen Jiabao. They institutionalized the “special relationship” in the form of annual government-to-government consultations – in effect, joint cabinet meetings – which took place for the first time in 2011. The relationship between the two countries tightened against the background of the euro crisis – what we called a “post-crisis alignment.”

The danger we saw was that Germany’s economic dependence on China as an export market might make Berlin unwilling to challenge Beijing on key strategic issues. For example, Germany undermined the European Commission in a dispute with China over solar panels – apparently because it was worried about retaliation against the German automobile industry in China. However, over the last year, Germans seem to be growing more and more skeptical about China – and consequently more willing to pursue a tougher approach to Beijing. In particular, three factors seem to have contributed to this shift.

First, the authoritarian turn in China under Xi Jinping has made Germans more skeptical of China’s political development. A few years ago, there was much discussion about whether China was slowly developing its own forms of “deliberative” democracy. But since Xi took over as General Secretary of the Communist Party and president of the People’s Republic of China in 2012, he has consolidated power. Since then, repression against lawyers, journalists, and human rights activists and their families has increased. German officials even speak of a Remaoisierung, or “re-Maoisation,” of China.

Second, and perhaps most importantly, there is a growing sense that Germany cannot depend on China as an export market as much as it has for the last decade. A few years ago, German exporters were confident (surprisingly so, in my view) that, even as they faced greater competition from Chinese companies, the Chinese market was growing fast enough that they would continue to expand. Now they are less optimistic. In part, this is because of a slowdown in demand – partly a result of lower overall growth in China, partly a result of the Chinese government’s efforts to shift the economy towards more indigenous innovation, which will squeeze out foreign imports. Xi’s anti-corruption campaign has also hit imports of goods such as luxury automobiles in which Germany specializes.

Over the past five years, Chinese companies Germany have also increasingly invested in German companies – particularly in the Mittelstand companies that form the backbone of the German economy. But it was the takeover of Augsburg-based robotics company KUKA by China’s Midea Group Co. – the biggest Chinese takeover of a German company so far – that really concentrated minds in Germany. The German government sought to thwart the takeover by finding an alternative buyer and in particular sought to persuade Siemens to step in. Sigmar Gabriel, the Vice Chancellor, Economics and Energy Minister, and chairman of the Social Democratic Party, spoke out against the purchase of German companies. In particular, the fear is that Chinese takeovers could hollow out Germany’s “Industrie 4.0” strategy – in which, until recently, Germany had seen China as a partner rather than a rival.

Takeovers such as that of KUKA have also made German policymakers and business people increasingly conscious of the asymmetry in economic relations between China and Germany. Not only would German companies be unable to acquire Chinese companies in the same way, they are also excluded from public procurement and investment in other areas protected by “negative lists.” Many in Germany are starting to think that an approach based on the idea of “reciprocity” is now needed – something that they previously rejected as a form of protectionism. They may now be more support in Germany for a tougher approach to China on trade issues.

Third, there is an increasing perception in Germany that Chinese revisionism in East Asia is a problem. In part, this is a consequence of the Ukraine crisis, which led to an increasing emphasis on the importance of international rule of law as a German national interest. German policymakers are now much more likely to see the relevance of Chinese revisionism in East Asia to European security. China’s island building in the South China Sea has also made Chinese revisionism tangible – German newspapers have printed pictures of islands and military installations on them. The recent unanimous ruling by the UN’s Permanent Court of Arbitration that China’s claims and actions in the South China Sea violated international law has made it harder to deny that China is to blame for increasing tensions in East Asia.

It is not yet clear whether any of this will translate into a significant shift in German policy towards China. Some in Germany still think China will democratize – or think its increasing authoritarianism should not affect German policy. Some in the business community see Chinese takeovers of Germany companies as a way to gain greater access to the Chinese market – and even contrast takeovers by Chinese companies positively with Anglo-Saxon “locusts” (that is, hedge funds). Meanwhile many Germans remain skeptical of playing a more active role in Asian security and remain tempted by the idea of European “neutrality” in Asia. But there is at least now much more debate about the strategic implications of Germany’s “special relationship” with China.

^{Photo Credit: Pexels}