German chancellor heads to Beijing amid efforts to balance trade, geopolitical concerns

TAIPEI, TAIWAN — German Chancellor Olaf Scholz will kick off a three-day visit to China Saturday, aiming to double down on Germany’s deep economic ties with China amid rising trade tension between Beijing and the European Union. 

Making his first trip to China since his government released its first China strategy in July, stressing the need to lower economic dependence on China, Scholz will be accompanied by executives from major German companies, such as Siemens, Volkswagen, and Bayer, and three Cabinet ministers.  

Some analysts say bilateral economic relations will be the main focus of Scholz’s trip. 

“He will try to focus on the positive things in the German-China relationship and try to foster more partnership and cooperation in critical areas relevant to key German industries,” Max Zenglein, chief economist at the Mercator Institute for China Studies in Berlin, told VOA in a video interview Wednesday.

The visit comes as some key German industries see falling revenues in China. According to automobile company data reported by Reuters Wednesday, several German premium carmakers have seen China sales fall significantly in the year’s first quarter, with Mercedes-Benz and Porsche showing double-digit percentage falls in their sales in China.  

In addition, a recent report by the New York-based research firm Rhodium Group found that Germany’s automotive industry faces fierce Chinese competition, with German companies’ market share in China falling 4% since 2018. 

“The losses have come mainly from volume producer Volkswagen, which sold fewer cars in China in 2023 than it did in 2013,” the report said, adding that the market share of Volkswagen’s Chinese venture fell to the lowest point in a decade even though the overall passenger vehicle market in China grew by 5.6%. 

Instead of reevaluating their approach to the Chinese market, Rhodium Group found that some of these companies have reinvested the profits they made in China in the country “in a push to remain competitive.”  

Zenglein said Scholz will likely focus on helping some German companies that rely heavily on China to maintain their economic interests in the country during his visit. 

Scholz may feel the need to “signal to the corporate sector that he is willing to give the appropriate political flanking for their economic interests,” he told VOA. 

Other experts say some German companies are struggling to adapt to changes taking place in the Chinese market because they have become too reliant on the benefits the market offers.

“At a time when the German economy is facing pressure from multiple fronts, including the country’s need to support Ukraine and the sluggish economic performance, the German government will try to maintain a close economic and trade relationship with China in the short term so German products can keep selling to the Chinese market,” said Zhang Junhua, a senior associate at the European Institute for Asian Studies in Brussels. 

However, he said he thinks these efforts will contradict the German government’s call for companies to reduce economic dependence on China. 

“Since Germany’s economic performance remains sluggish, the government has to give in to pressure from the business sector and make compromises on executing the China Strategy, which urges German companies to de-risk from China,” Zhang told VOA by phone. 

German companies ‘swim against the international trend’

Meanwhile, the EU has launched a series of antisubsidies investigations against green energy products imported from China, including electric vehicles and wind turbines. 

EU Commissioner Margrethe Vestager said the bloc needed a more systematic approach to handle the investigations. “We need to do it before it is too late, [and] we can’t afford to see what happened on solar panels happening again on electric vehicles, wind or essential chips,” she said Tuesday, referring to China’s dominance in the European solar panel market. 

In response, the Chinese Commerce Ministry said Thursday that it resolutely opposed the EU investigations, calling them “a protectionist act that harms the level playing field in the name of fair competition.” 

“China will closely monitor the European side’s subsequent movements and reserves the right to take all necessary measures,” the ministry said in a statement.  

While Scholz’s chief economic adviser, Joerg Kukies, said Berlin supports the EU’s antisubsidy probe into Chinese electric vehicles at a think tank event in Berlin last September, Scholz told German business weekly Wirtschaftswoche in an interview the same month that he is “not convinced” about the need for the EU to impose tariffs on Chinese EVs.

“Our economic model should not be based or rely on protectionism – but on the attractiveness of our products,” Scholz said in the interview.

In Zenglein’s view, some German companies’ growing investment in China is “swimming against the international trend. “The trend is driven by capital-intensive sectors like automotive and chemical,” Zenglein said. According to the Rhodium Group report, major German carmakers such as Volkswagen and German chemical group BASF continue to increase their investments in China.

Russia, green energy industries

While bilateral economic relations will dominate the agenda of the trip, Zenglein and Zhang both said they think Scholz will still try to express German concern about China’s close partnership with Russia and their uneasiness about Chinese overcapacity in the green energy industries. 

“Germany’s concern about China’s partnership with Russia will be a main element of the discussion because Scholz has a strong opinion about this,” Zhang told VOA. “But since Germany doesn’t have effective measures to pressure Beijing, Scholz’s warning won’t have much influence on how China evaluates its partnership with Russia.” 

In Zenglein’s view, Scholz will try to “brush over” concerns about geopolitical risks quickly. “He will try not to get too hung up on the negative aspects of bilateral relations that might be counterproductive to positive developments in the bilateral economic relations,” he said.
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