When Olaf Scholz took office as Chancellor of Germany on December 8, President Xi Jinping made a note in his diary to call him as soon as possible. His reason? Persuade him to be China’s best ally in Europe.
The two had their conversation last Tuesday (December 21) and Xi partially met his goals.
“Germany is willing to strengthen practical cooperation with China in the areas of clean energy, digital economy and services,” Scholz told Xi. “I hope the EU-China Investment Pact will enter into force as soon as possible.”
For five consecutive years, China has been Germany’s largest trading partner, with bilateral volume reaching 212.1 billion euros in 2020, according to official German figures. China is also the most important market for the German automotive industry.
Volkswagen sells more cars in China than in Germany. In the first half of this year, its mainland and Hong Kong sales were 1.85 million units, up 16.2% from the same period in 2020.
In their conversation, Xi emphasized these points. “Cooperation between China and Germany has always been the ‘barometer’ of China-EU cooperation,” he said. He wants Scholz to continue the policies of his predecessor Angela Merkel.
But relations between China and the EU have fallen to their lowest level in 30 years, due to differences over Hong Kong, Xinjiang and Taiwan and the behavior of the Chinese “Wolf Warriors” in Europe.
An annual EU-China summit scheduled for this month has been postponed until next year due to the lack of prospect of a deal on human rights, economics and trade.
On December 15, EU member Lithuania withdrew all its diplomats from Beijing after asking them to apply for re-accreditation. China was furious when Taiwan opened a representative office in Vilnius, the capital of Lithuania. The EU supported Lithuania and said it had not violated the one-China policy.
Since Vilnius’ decision, its companies have not been able to export goods to China, and Chinese companies have canceled orders for Lithuanian products.
“The latest measures China has taken against Lithuania constitute a trade boycott that will impact the entire EU,” said BDI, Germany’s largest trade organization. “Imports from China, necessary for German manufacturing plants in Lithuania, are also affected, as are exports from Germany to China which contain Lithuanian components.”
Joerg Wuttke, president of the EU Chamber of Commerce in China, said Beijing’s treatment of Lithuania was “a stern warning to other EU countries not to follow Lithuanian example. The Czech and Slovak economies are deeply rooted in German supply chains.
While the economic impact of the dispute is limited, it has yet turned public and political opinion in Europe against China.
Scholz and other European leaders must decide how to balance their huge economic interests in China with what they see as Beijing’s negative human rights, trade and disinformation policies.
On the one hand, the European Parliament, which blocked the adoption of the EU-China investment treaty after Beijing imposed sanctions on four of its members. He says lifting of sanctions is a prerequisite for approval. Large segments of public opinion, politicians sympathetic to Taiwan, and human and civil rights organizations are also hostile to Beijing.
On the other side are powerful companies, like Volkswagen (VW), which have invested billions of dollars in China.
“It would be very damaging if Germany or the EU wanted to separate from China,” said Herbert Diess, CEO of VW. “We need more cooperation and presence in China, not less. Earlier this month, Diess participated in a virtual dialogue at a summit of the World CEO Council with Premier Li Keqiang and about 30 other global CEOs.
“Politically, we need cooperation, dialogue, international collaboration and an expansion of our economic relations,” he said.
“German companies, such as VW, Audi, BMW, Daimler, Siemens, Bosch and Adidas have become household names in China,” Chen Weihua, head of the China Daily’s European bureau, wrote in an article last week.
“Sino-German cooperation has benefited not only the two countries but also the world beyond, helping to create jobs, boost their economies and revive the global economy given the highly integrated global supply chains. . “
Germany and France are the engines of the European Union and have the strongest voices on Chinese politics. Olaf Scholz has a lot to do to resolve these competing interests.
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