After decades as China’s closest ally in the European Union, Germany finally appears to be having second thoughts.
On July 13, Germany issued its first “China strategy” document to guide its political and business establishment on their China engagement going forward in an effort to balance the economic relationship along with the risks of the Chinese Communist Party’s (CCP) increasing belligerence abroad and domestic authoritarianism.
The document said China’s “growing prosperity and achievements ... contrast with setbacks concerning civil and political rights.”
“This has also had an impact on the exchange between Germany and China. China impedes contact with its civil society, media, research institutes and governmental agencies. Against this backdrop, China is simultaneously a partner, competitor and systemic rival for the Federal Government,” the document reads.
The strategy paper, which provides guidance to governments, businesses, educational institutions, and politicians in Germany in their China dealings, will now move to Germany’s Parliament, where lawmakers are expected to begin debating when officials return in September.
While the paper acknowledges the challenges the CCP and China pose to Germany going forward, it’s hardly a directional change for the biggest China cheerleader in continental Europe.
For one, the strategy doesn’t recommend reining in policy or stopping China from gaining access to critical technology, which would have a real bite given Germany’s advanced industrial sector. The United States has restricted Chinese access to essential semiconductor technologies.
And there is a level of conflict within the strategy paper itself. While it argues for smarter engagement with China, it also insists that German businesses must maintain beneficial economic relations with China and expresses the need to “work together on fighting climate change.”
There was real potential for a policy change in Germany after an early draft of the strategy document was leaked late last year that imposed significant changes to how companies must engage with China. Those changes included disclosing their exposure and extent of collaboration with Chinese entities and having to undergo periodic “stress tests” to demonstrate their ability to withstand geopolitical turmoil.
In the end, nothing notable was included. The 64-page document listed a slew of risks in doing business with Beijing—none of which are new and all of which could be gathered with a simple Google search or ChatGPT prompt—while outlining possible responses, including slowing outbound investment into China and imposing controls on exporting technology for military use.
But the document failed to specify any binding or quantifiable targets companies and institutions should abide by. It stopped far, far short of even having low hurdles for companies wanting to do business with China. No export restrictions were recommended.
It’s no wonder that the German business class welcomed the government’s China strategy—a strategy paper that is laughably weak yet took years to draft.
The Federation of German Industries (BDI) industry association acknowledged that more discussion on the concrete design of some measures was needed but was quick to point out that “there is a danger that entrepreneurial dynamism will be restricted too much,” BDI president Siegfried Russwurm told Reuters. Mr. Russwurm is chairman of the board at German engineering giant ThyssenKrupp AG and is also on the board of industrial conglomerate Siemens AG.
The CCP is no doubt in favor of Germany’s new strategic document.
To demonstrate Beijing’s solidarity with Germany, the CCP responded in typical fashion to appease the many German critics of its new China engagement strategy.
The Chinese Embassy to Germany put out a statement on the same day that China does not cause any “difficulties and challenges Germany is currently facing” and that treating China as a “competitor and systemic rival” is not based on reality and would not benefit Germany.
In the end, if China pretends to be offended by the paper, then it must be a good strategy. And merely acknowledging the risks of dealing with the CCP could buy China-addicted German industrial giants more time against their critics.
For involved parties not intending to change the status quo, it must be a win–win situation.
