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Scholz Bets on Xi


According to L.Fix

German Chancellor Olaf Scholz's trip to Beijing in early November - the first trip by a G7 leader since the start of the pandemic - appears to have defied his critics and proved to be more successful than originally expected. However, his visit did little to address the structural problems at the heart of the country's China policy, which carries significant risks for Germany, the European Union and the transatlantic relationship.

In meetings with Chinese President Xi Jinping and Premier Li Keqiang, Scholz reaffirmed that any change to Taiwan's status must be peaceful or by mutual consent, called for the protection of human rights in Xinjiang, and discussed measures to combat climate change and COVID-19. However, his most important achievement was the joint statement with Xi that both countries oppose the use or threat of use of nuclear weapons. While there is no certainty that China will influence Moscow’s decisions in one way or another, this is a valuable signal in our time of heightened nuclear tensions.

Scholz was accompanied by a business delegation from Germany's largest corporations, which are actively investing in the Chinese market. His trip with the delegation signaled the continuation of Germany's mercantilist and "business approach" to China. Before the trip, Scholz agreed to Chinese investment in the port of Hamburg, 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 policy changed, Germany's relationship with China must also change; so far, he has adopted a "prudence and pragmatism" approach aimed at gradually reducing Germany's trade dependence on China. The office argues that after the energy shock in Russia, the German economy cannot dramatically change its trade with China.

China has been Germany's most important trading partner since 2016, and German automakers are at the forefront of this relationship. For example, Volkswagen receives at least half of its profits from the Chinese market. The shares of the German economy in China continued to rise in 2022, with new investment reaching a record ten billion euros.

Scholz's coalition government called China a "systemic rival" and recognized the need for Germany to diversify both politically (focusing on relations with other Indo-Pacific countries) and economically. It also seeks to put pressure on Beijing to level the playing field for German and European companies doing business in China. The German Ministry of Economy is working to reduce its dependence on China for raw materials, batteries and semiconductors; it is also reviewing investment and export guarantees for German companies doing business in China.

However, despite efforts to diversify, Germany's asymmetric dependence on China is reminiscent of its former dangerous energy dependence on Russia. In the event of a geopolitical crisis around Taiwan, the involvement of German corporations in the Chinese market raises political and economic risks for Europe and transatlantic ties and could prevent Germany, along with its Western allies, from responding to a Chinese attempt to retake Taiwan by force, for example, through the imposition of sanctions.

Scholz's trip to Beijing further complicated the prospects for a common European policy toward China. Berlin has rejected French President Emmanuel Macron's offer to conduct a joint visit to Beijing, escalating bilateral tensions. In addition, the timing of the trip - shortly after Xi's confirmation as party leader for a third term - raised concern among Europeans.


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