The high dependence of German industrial companies on the People's Republic of China is one of the lessons learned from the Covid pandemic. Companies like Philipp Kirsch, a producer of laboratory refrigerators, now want to spend more money on key components in its value chain and acquire them in Europe. The big question: Is the consumer also prepared to pay higher prices?
By Marcel Grzanna
Black ink on a red background. That is how Chinese business cards once looked like, back when they were presented by emissaries of the imperial court. Name cards were already used in China thousands of years ago. However, the gesture of handing them over – with both hands – was copied. Nowadays, however, all that is needed to exchange contacts is a tap on the smartphone.
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Germany is China's largest trading partner in Europe. But the German-Chinese relationship suffers from various conflicts. All current news from the Table.Media editorial team.
Germany and China have officially maintained diplomatic relations since 1972. In 2020, China was Germany's largest trading partner for the fifth year in a row. The trade volume between the two nations totaled 212.1 billion euros. Whereby Germany imported more (116.3 billion euros) than it exported (95.9 billion euros). For China, Germany plays a key role when it comes to cooperation with Europe. High-level dialogues are held regularly between Germany and China, in which investment, cultural and scientific cooperation, trade relations and environmental programs are negotiated. Nevertheless, there are some points of contention in the German-Chinese relationship. First and foremost is the human rights situation in China and concerns about not being an equal partner. The tenor is that Germany must strive for a reciprocal relationship, otherwise China would benefit disproportionately from this partnership.
Germany primarily purchases data processing equipment, electrical and optical products such as computers or consumer electronics, and batteries from China. From Germany's perspective, electric motors and household appliances also play an important role in the import business. In the other direction, Germany primarily exports machinery, automotive parts, electrical engineering and chemicals. If services are excluded and only trade in goods is considered, China is the European Union's largest trading partner. In 2020, the European Union imported goods worth 383.5 billion euros from China and exported goods worth 202.5 billion euros to the People's Republic in the same period. Including services, however, the USA is still the most important trading partner.
China is an important trading partner for Germany not only because of its abundant exports and imports. The Federal Republic hopes to solve problems that German companies face in China through close cooperation. In particular, market access, the need for technology transfer, and various market and investment barriers reduce the competitive opportunities of German companies and are to be eliminated in the long term. The EU-China Investment Agreement (CAI) is intended to help with this. It was concluded between the European Union and the People's Republic. The background to this is the unequal distribution of rights and obligations in the trade relationship. The agreement is intended to strengthen reciprocity. While Chinese companies benefit from the open market in Europe, European companies are still subject to massive restrictions in China. The steadily increasing trade volume and the EU-China investment agreement should help to change this state of affairs.
With 1.4 billion inhabitants, China is the most populous country in the world and has the second-largest gross domestic product (GDP) in the world after the USA. Germany follows in fourth place. Germany's GDP is about a quarter of China's. Measured in terms of GDP per capita adjusted for purchasing power, the picture is different. Here, China ranks only 80th with $16,709 per capita and year, below the global average of $17,673. Germany ranks 17th with 56,226 dollars per capita and year. With an area of 9.6 million square kilometers, China is about as large as the whole of Europe, or 27 times larger than Germany. On average, 136 people live per square kilometer in the People's Republic, compared to about 230 in Germany. However, regional differences are much greater in China than in Germany.
Politics in China is shaped by Xi Jinping. He has been General Secretary of the Communist Party of China since 2012 and President of the People's Republic since 2013. In China, the Communist Party has the sole claim to leadership. Media, religious groups or other political groups must bow to it. Censorship, constant control and drastic punishments for opposition members and dissidents are the result. China is thus an autocratic one-party state. Contrary to what the name of the ruling party suggests, China is not a communist country. The People's Republic has a socialist market economy with Chinese characteristics. There are neither fixed prices nor production quantities. The private sector is also the largest industry in China. Trade and society in the People's Republic are subordinated to the great goal of modernization. By 2050, China wants to be the undisputed economic and political world power.
Human rights violations are commonplace in China. The authoritarian regime prioritizes the country's development and the supposed good of the general public over the need to protect minorities. Freedom of the press, assembly, expression and communication do not exist. Opposition parties are threatened with draconian punishments, critics of the regime are arrested and the judiciary follows the dictates of politics. As a result, differences of opinion repeatedly arise between Germany and China. In particular, human rights, personal freedoms and the validity of international law are major points of contention between the countries. The German government sees bilateral dialogues as an important instrument for making progress on these points.
Germany also acts and negotiates with China in order to positively influence the development of the human rights situation in China. The Federal Foreign Office emphasizes that it is an important interest that minority issues in China be resolved peacefully. China also needs to increase the openness of its markets and develop rule-of-law structures and social systems. Precisely because the framework conditions are so difficult, relations between Germany and China are currently more intensive than ever before, report the economic sections of the embassy and consulates general. However, the central prerequisite for this bilateral cooperation is not the observance of human rights, but the opening of the Chinese market and the end of discrimination for foreign companies, emphasizes the Federal Ministry for Economic Affairs and Energy.
While economic relations between Germany and China are becoming increasingly profitable for both sides, political rifts are becoming more prominent. The persecution of Uyghur minorities in Xinjiang and their forced labor also for German car manufacturers, the suppression of the democracy movement in Hong Kong and the military threatening gestures towards Taiwan are unacceptable for the German government. This is also due to public pressure. On the "second law to increase the security of information technology systems", a dispute then flared up quite openly. This requirement raises the hurdle for participation in the expansion of the 5G network in Germany so much that Huawei's market access is made enormously difficult. An approach that companies are otherwise used to from China.
The economic rivalry and political disagreements are now so great that the EU Commission itself surprisingly undiplomatically called China a "systemic rival" in March 2019. In March 2021, the EU even imposed sanctions on China. In the hope that the situation of the Uyghurs would improve. Politically, Germany and China are now only pulling together, at least superficially, on the issue of climate and environmental protection. The People's Republic wants to be CO2-neutral by 2060. German Environment Minister Svenja Schulze and her counterpart Huang Runqui have signed an agreement to this effect. Whether the agreement is really of any value in view of the coal expansion in Germany and China remains to be seen.
Germany is also not as committed to China's New Silk Road as the Chinese government would like. The goal of the so-called Belt and Road Initiative (BRI) is to improve land and sea routes between Europe and the Asian region. One of the land routes is to lead to Germany via Kazakhstan, Russia, Ukraine/Belarus, Poland and Slovakia. Nearly 150 countries are now part of the New Silk Road and have signed so-called memorandums of understanding (MoU) with China - declarations of intent to cooperate. 18 of 27 countries in Europe have one, Germany does not. Many experts criticize the New Silk Road and see it as an instrument of China to make poorer countries politically compliant. By financing the large infrastructure measures, smaller countries would become dependent. The People's Republic would thus be able to put countries under pressure and secure raw materials for itself. Environmental or social standards would play only a subordinate role in the infrastructure measures of the Belt and Road Initiative.
Extensive economic cooperation on the one hand and incompatible political systems on the other make the German-Chinese relationship extremely complicated. The aggressive foreign policy of the People's Republic also complicates diplomatic relations. All news on the developments around the German-Chinese relationship are available from the Table.Media editorial team.
