German Chancellor Olaf Scholz met with Chinese Communist Party (CCP) leader Xi Jinping and Premier Li Qiang in Beijing on April 16 to discuss trade and foreign policy.
Mr. Scholz said on April 16 that it is important to establish processes to tackle concerns about Chinese state subsidies affecting trade, adding that he discussed with Xi how the World Trade Organization could facilitate this.
“The World Trade Organization is a good organization here, which we have talked about, and with which all subsidies must always be registered,” Mr. Scholz told reporters in Beijing. “I believe that this is a necessary advance that we need to achieve.”
He urged better market access and a level playing field for German firms in talks with Xi.
Xi said earlier that German–Chinese cooperation is an opportunity, not a risk.
Mr. Scholz’s three-day visit to Germany’s largest trade partner comes as the European Union seeks to reduce strategic dependencies on Chinese goods—a policy dubbed “de-risking”—and probes whether Chinese manufacturers are dumping subsidized goods on its market.
Xi pushed back against complaints by European Commission President Ursula von der Leyen about China’s overproduction of green tech, such as electric vehicles (EVs), being unfairly supported by “massive” state subsidies.
Mr. Scholz has been cautious about pushing away China, an important market for Germany, saying the EU should not act out of protectionist self-interest. Still, competition between the two countries ought to be fair, he said in Shanghai.
During the meeting with Mr. Li, the German chancellor pressed the case for China to improve business conditions for German companies by guaranteeing equal market access, the protection of intellectual property, and a reliable legal system.
“I expressed my concern ... that unilateral economic policy decisions in China are creating major structural difficulties for companies in Germany and Europe,” Mr. Scholz said.
Auto Industry
Mr. Scholz traveled to China with senior German executives, such as Mercedes-Benz Chairman Ola Kallenius and BMW CEO Oliver Zipse, underlining the importance of the Chinese market to Europe’s largest economy.
Mr. Scholz also visited German auto supplier Bosch’s hydrogen fuel cell plant in the city of Chongqing in the southwest.
Sino–German economic ties should not only be cultivated but expanded, Mr. Kallenius told German broadcaster ARD in Beijing. “Withdrawing from such a large market is not an alternative, but rather strengthening our position,” he said about the company’s strategy in China.
Mr. Zipse expressed a similar view on China, Germany’s biggest trading partner.
“We actually see more opportunities than risks,” he told the ARD news program “Tagesschau.”
Xi told the chancellor that China and Germany have “huge potential” for cooperation in traditional fields such as machinery manufacturing and automobiles and emerging fields such as green transformation and digital artificial intelligence.
A positive outcome of Mr. Scholz’s visit was that China lifted restrictions on imports of beef and apples from Germany.
EU Probe of Chinese Subsidies
In March 2023, the European Commission president said that decoupling from China was neither viable nor in Europe’s interest and proposed diplomatic and economic de-risking instead.
While noticing that the CCP’s clear goal is to change the international order by making China its center, Ms. von der Leyen said the bloc’s relationship with China is “unbalanced and increasingly affected by distortions” created by China’s state-controlled economic system.
In 2023, China was the third largest partner for EU exports of goods, accounting for nearly 9 percent, and the largest partner for EU imports of goods, accounting for more than 20 percent, according to Eurostat.
Ms. von der Leyen stressed that economic coercion exerted by China on EU members when they expose human rights violations by the Chinese regime cannot be tolerated.
Examples of Chinese policy deliberately targeting other countries are “boycotts against clothing brands for speaking out on human rights or with sanctions against Members of the European Parliament, officials, and academic institutions for their take on China’s actions,” she said.
An instance of China’s “comply and conform” policy was retaliatory actions taken by the Chinese regime against Lithuania when the country opened a Taiwanese representative office in its capital, Ms. von der Leyen said.
Ms. von der Leyen tried to draw a line in the sand on policies toward China in her speech delivered to the Mercator Institute for China Studies (MERICS) in Germany.
“We need to ensure that our companies’ capital, expertise, and knowledge are not used to enhance the military and intelligence capabilities of those who are also systemic rivals,” she said.
“Where dual-use [civil-military use] purposes cannot be excluded, or human rights might be implicated, there will need to be a clear line on whether investments or exports are in our own security interests.”
In October 2023, the European Commission launched an anti-subsidy investigation into imports of electric cars from China.
Ms. von der Leyen said at her State of the Union address in September 2023 that the global market is being flooded with cheap EVs with prices kept artificially low because of “huge state subsidies.”
This probe started after the EU adopted a new “Foreign Subsidies Regulation” last year, which requires companies active in the EU to report financial contributions exceeding certain thresholds granted to them by non-EU governments in the past three years.
No Decoupling; De-risking Difficult
Mr. Scholz said during the visit that Germany does not want to “decouple” from China but called for progress on structural issues and improving the quality of cooperation.The Chinese side expressed a similar view. Chinese Foreign Ministry spokesperson Lin Jian said at a press conference the next day, “The two sides agreed that they oppose decoupling and severing of industrial and supply chains and will work together in response to global challenges and jointly inject greater stability and certainty into the world.”
Critical of the outcome of the German high-level visit to China was Katja Drinhausen, head of the politics and society program at MERICS, a German think tank that has been sanctioned by the Chinese regime for its research.
“Although Scholz did raise key points of concern for Germany and the EU, the visit highlighted China’s success in steering the conversation and limiting it to issues China can deflect or push back on,” she said on April 18. “But this strategic silence from both sides glosses over issues—from human rights to cybersecurity—that will eventually resurface and make smooth sailing for bilateral relations unlikely.”
German firms continued to invest in China in the past three years as much as in the previous six years, reaching a record-high direct investment of 11.9 billion euros ($12.7 billion) in 2023, according to the German Economic Institute (IW).
The Center for Eastern Studies, a Poland-based think tank, commented on April 17 that the IW’s analysis, the increasing trade volume with China, and “the willingness of major firms to expand their operations in China undermine the idea of de-risking, which has been the core of Germany’s strategy towards China since 2023.”
