Germany Inc.’s China syndrome

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BERLIN – The German economy is getting queasy about China.

For decades, German industry – a pioneer in the Chinese market – looked the other way amid human rights violations in Beijing, when managers and engineers from Siemens and Volkswagen helped make the country Germany’s largest trading partner. But while the Chinese head of state Xi Jinping is tightening the country’s surveillance state, threatening neighbors and adopting an increasingly bellicose tone towards the West, Germany’s China strategy, which is geared to the needs of the export industry, appears increasingly unsustainable.

So much so that leading German economic actors, together with prominent politicians, are calling for a rethink in how the country deals with China and other autocratic states.

“Human rights are not an internal matter for states,” said Siegfried Russwurm, head of the Federation of German Industries (BDI). their own governments to it.

If the Russwurm sounds more like an activist from Amnesty International than the head of the main lobbying arm of the German economy, that’s because Germany Inc. is more concerned than ever about the appearance and reality on the ground, in China and others autocratic states to do business. Like many foreign investors in China, German companies have long been convinced that they will at some point be on par with their local counterparts. But Xi, who put foreign companies on a leash, convinced them otherwise.

Now the German economy, which is more exposed to China than any of its European competitors, is faced with the impossible choice between maintaining an important trade relationship and upholding the liberal ideals that Germany cares about.

When asked how trade could be continued amid reports of human rights abuses in China, a Siemens spokesman said in an email statement that the company “categorically rejects any form of repression and involvement in human rights abuses.” USA, China and Europe to find political solutions based on … reliable and transparent rules of cooperation and open dialogue. “

To help companies square this circle, the BDI recently a paper entitled “Responsible Coexistence with Autocracies”. While the paper underscores how important it is for Western companies to “lead by example” on issues of human rights and environmental protection, it also makes it clear that separating trade relations with difficult regimes is not a viable option.

“The fact is that companies have to generate profits in order to remain competitive in the long term,” is the conclusion of the paper. “We cannot defend democratic values ​​better if we weaken ourselves economically.”

Still, it is difficult to argue in the face of Beijing’s suppression of the Uyghurs, the defeat of the Hong Kong democracy movement and its bellicose attitude towards long-standing partners like Australia.

VW, the world’s largest automaker, headquartered in Wolfsburg, was put to the test earlier this year for operating a factory in Xinjiang – the region where extensive inhumane treatments have been documented against China’s Muslim Uighur minority, which some countries are calling genocide . But Herbert Diess, the CEO of VW, defended his company’s commitment in the region, arguing that it upholds its “values ​​in Xinjiang, including employee representation, respect for minorities, and social and labor standards”.

Once the key to Germany’s long-term prosperity, China is now seen in Berlin as a long-term problem.

Something is different

Even China’s greatest defenders in Germany no longer claim that Asia’s economic prosperity will turn Moloch into a Western-style democracy, an idea called “transformation through trade” that has been promoted by German executives and politicians since the Cold War.

“The sober assessment is that the ‘transformation through trade’ has reached its limits,” the BDI concluded. “The expectation that global economic interdependence automatically facilitates the expansion and development of market economies and democratic structures has not been fulfilled.”

This reality check put the German economy in a quandary, and not just in China. Every fourth job in Germany depends on exports and, despite continued pressure from its partners, Germany has had one of the world’s largest trade surpluses for decades. Much of this trade is with autocratic states like China and Russia.

While Germany has always dealt with disgusting regimes, it has never relied on one to the extent it relies on China now. Although the USA is still Germany’s largest export market overall, China has driven a large part of the growth in demand for German machines and cars in recent decades and has been Germany’s largest trading partner (combined exports and imports) for five years in a row.

The question is how sustainable these trends are. It is beginning to dawn on many German industrialists that China, which has relied on its engineering skills to modernize its economy, may no longer need them. Over time, China has gotten pretty good at designing and building the specialized machines, tools, and other gadgets that Germany used to need it to do.

German industry’s China debate is taking place while the country’s political winds are turning. Both the Greens and the liberal Free Democrats, the two parties that are to form a new government together with the Social Democrats, are taking a much tougher approach towards China than the outgoing Chancellor Angela Merkel.

Merkel has been criticized for years as being too soft on China. In the midst of the democracy protests in Hong Kong last year, Merkel flew to China with a large trade delegation and met with Xi. She was also the driving force behind the EU’s investment deal with China. The agreement signed last December met strong opposition in Washington, where a bipartisan consensus has formed in recent years that the West must take a stronger position vis-à-vis China.

“Anyone who expects Europe to be neutral in the stalemate between China and the USA is missing out on reality,” said Bijan Djir-Sarai, the foreign policy spokesman for the Free Democrats in the German Bundestag. “Of course we are also fighting for European interests, but our place lies in a close partnership with the USA and we should not be under any illusions.”

In the guidelines of the BDI for a new European foreign trade policy, for example, a stronger euro is required against other currencies, which “would give Europe more weight in international payments and global financial markets”.

Nils Schmid, foreign policy spokesman for the SPD in the German Bundestag, demanded that Germany should push for a common stance on China within the EU – an stance that is not necessarily directed against that of the USA, but that prioritises European interests.

Germany’s new government must “strengthen the foundations for the ability to act – at national and European level,” he said. “Then there is no need to declare a new Cold War with China.”

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