Scholz, German CEOs to visit China for bilateral trade

Editor's note: Gunter Schoech, a special commentator on current affairs for CGTN, is the director of German market research and consulting company Debrouillage. This article reflects the author's opinions and not necessarily the views of CGTN.

German Chancellor Olaf Scholz, three cabinet ministers and a top-level economic delegation will visit China from April 14 to 16. It is a balancing act of domestic and foreign political and economic interests, and comes after Scholz's meeting with U.S. President Joe Biden in Washington two months ago.

The aim for a global transformation towards a sustainable, green economy is the common ground between China and Germany that the dialogue over various more contested topics will be built upon. Reportedly, on April 14, Scholz will visit a German company's hydrogen engine factory in southwest China's Chongqing Municipality and a German green tech polymer manufacturer in Shanghai the next day. During the seventh China-Germany inter-governmental consultation in Berlin in June 2023, Scholz and Chinese Premier Li Qiang agreed to establish a climate and transformation dialogue around electrical and hydrogen mobility.

It's no wonder that Social Democrat Scholz will be accompanied by Environment Minister Steffi Lemke, Agriculture Minister Cem Özdemir, both from the Green Party, and Transport Minister Volker Wissing, member of the Free Democratic Party, representing all three coalition government partners.

The German coalition is in significant internal turmoil over many issues, including foreign policy. Foreign Minister Annalena Baerbock, as well as Robert Habeck, Minister for Economic Affairs and Climate Action, both from the Green Party, representing a historically tough political and economic stance on China, are both absent. 

Scholz is more moderate, China-friendly and economy-oriented, overruling resistance in his government against Chinese shipping giant Cosco to buy 24.99 percent of a Hamburg port terminal. In July 2023, for the first time ever, the German government published a China strategy after a year and a half of heated internal debate. Germany said no to de-coupling and a renewed formation of political blocks. At the same time, it aimed to reduce singular dependencies on China, freshly marked by the painful substitution of natural gas imports from Russia.

Russia is also the biggest political and public grievance, from the outset, unequivocal condemnation of Russia's special military operation was the demand, but the prolonged conflict now could in the mid-term open up a true mediator and peace broker role for China with its enormous global influence and weight. The German industry would certainly sigh in relief, but calling for peace today in public is still very sensitive in Germany.

Politics aside, the delegation will include top corporate leaders, such as the CEO of Siemens, Roland Busch, who is also the President of the Asia-Pacific Committee of German Business, the CEOs of Mercedes-Benz, BMW, Bayer, ThyssenKrupp, Merck and others.

In fact, German foreign direct investment (FDI) in China climbed by 4.3 percent and hit a record high of 11.9 billion euros ($12.76 billion) in 2023, official Bundesbank data shows, mainly driven by few large projects such as BASF, while the small and medium enterprises (SMEs), the backbone of the German industry, are scaling back: GlobalData's FDI Database shows that German businesses had 112 projects in China in 2019 before the COVID-19 pandemic, which dropped to 60 in 2020 and 50 in 2023.

As the German statistics office reported on February 14, with a foreign trade volume of 253.1 billion euros ($270 billion), China was Germany's most important trading partner in 2023 for the eighth year in a row, but trade declined by 15.5 percent, for economic and not political reasons.

Sebastian Heilmann, founding president of the Mercator Institute for China Studies, which provides China strategy consulting to the German government, said that large listed companies will simply ignore some policies as long as there is no mandatory regulation. SMEs, on the other hand, try to make their China operations more independent, producing "in China for China," while reducing the risks of interrupted intercontinental supply chains, including in the case of potential sanctions.

On April 9, Reuters reported that a study by the German Economic Institute showed the German economy remains highly dependent on China for a number of products and raw materials, despite efforts to diversify to other markets. The share of product groups for which Germany relies on China for more than half of its imports fell overall only from 213 to 200, with 73 groups removed, but 60 new added. Examples are chemicals, computers and solar cells, and in some areas such as pharmaceuticals and rare earths, Germany's dependence has even increased.

An ironic comment in EU circles is that "the German industry is de-coupling from its government" when it comes to China. In reality, businesses simply have a better sense of the pragmatic collaboration for the common good than ideological hardliners. The visit by Scholz's delegation will likely give them a boost.

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