Partner, Competitor, and Rival: Germany-China Relations After Scholz’s Visit

A week ago, German Chancellor Scholz wrapped up his second visit to China since taking office. The German government published its first ‘China strategy’ last year, siding with the European Commission’s hardline policy toward China. But is Chancellor Olaf Scholz’s heart really in it? 

For both economic and historical reasons, Germany cannot let go of China in the same way the US and some other European countries have. In fact, Scholz is caught in an unenviable cage of Germany’s own making: its continuing economic dependence on China. Scholz is therefore pursuing a rather cautious course toward China. This approach is in line with recent German politics, not least the legacy of Détente and Ostpolitik, and the needs of the German economy.

Scholz’s visit to China

To make up for his very short initial one-day visit to China as Chancellor in November 2023, Scholz spent a full three days in China, visiting a German factory in Chongqing, giving a talk at Tongji University in Shanghai, and meeting with President Xi and other officials. Scholz brought three other cabinet members along as well as the CEOs of twelve leading German companies, including the leaders of BMW, Mercedes, BASF, Merck, Thyssenkrupp, and many others.

Not surprisingly, the Chancellor’s visit to China was dominated by economic and business concerns, such as market access reciprocity, intellectual property issues, and the looming danger of Chinese overcapacity and dumping of products on the German and EU markets. Yet, climate change and several geopolitical concerns—notably the war in Ukraine, the increasingly close cooperation between China and Russia, and the threat of a widening regional conflict in the Middle East – were also on Scholz’s agenda. 

The first outcomes of Scholz’s trip have already emerged and have given us some idea about the Chancellor’s policy on China. The visit underlined Scholz’s tendency to prioritize German-Chinese economic cooperation rather than focusing on issues of disagreement.

Regarding the economy, and especially the automotive industry, “Germany and China have signed a joint declaration to cooperate on autonomous and connected driving which Germany hopes will enable carmakers to transfer data from China to Germany.” With regard to the envisaged Swiss plan to organize an international peace conference to resolve the Ukraine war, both Scholz and Xi have agreed to promote the holding of such a summit.

To ‘de-risk’ or not to ‘de-risk’?

After having bitterly learned from its energy dependencies on Russia, Scholz is wants to avoid making the same mistake again. Germany adopted its first Strategy on China in 2023 focusing on de-risking and diversifying. Berlin now views China as a “partner, competitor, and systemic rival.” However, initial studies show that while Chinese imports to Germany have decreased,  there remains a  high dependency on Chinese products, particularly in critical industries. 

Economic interests—both German and European ones—remain on Scholz’s mind even after his Beijing trip. Germany, as one of the world’s top car producers, has started becoming deeply concerned about the possibility of widespread imports of Chinese EVs. This is a concern echoed by the EU, which started a probe late last year to investigate EV imports and Chinese subsidies into car production. The number of EU probes into Chinese imports has multiplied since then, ranging from wind turbines to medical devices. Still, Scholz is aware that he needs to delicately balance his de-risking strategy. 

While diversifying away from China to some extent, the German Chancellor also needs to ensure the continued access of German companies and products to the tightly-ruled Chinese market. This explains why Scholz was accompanied by a large delegation of German CEOs in Beijing. In the case of Volkswagen for example, China has remained its biggest market. Overall, Scholz’s approach to China remains one of caution and continuation, rather than any abrupt change of course. 

Historical and domestic context of German China policy

Scholz’s China policy reflects the conciliatory strategies most of his predecessors pursued. In 1994, Helmut Kohl was the first Western leader to visit China following the 1989 disruption of ties between China and the Western world. Kohl brought German business leaders from top companies—such as Lufthansa—with him, which resulted in dozens of agreements being signed. Approximately $7 billion dollars worth of business deals were concluded during his trip. 

Kohl saw the potential of Chinese economic growth for the German economy. In fact, Kohl, the leader of the German conservative party (the Christian Democrats), continued the policy of ‘change through’ trade with China, which had first flourished under the social democratic chancellor Helmut Schmidt. 

Chancellors Gerhard Schroeder and Angela Merkel followed in Kohl’s footsteps and maintained a close partnership with China. While Angela Merkel pursued intensive trade relations with China—which eventually became Germany’s top trading partner in 2016—she also pursued a variety of initiatives, such as a dialogue on human rights in the later years of her chancellorship. Merkel was also one of the rare Western leaders who truly took the time to visit China and learn about the country, traveling not only to the capital and industrial hotspots, but also to Xi’an, Chengdu, Guangzhou, Tianjin, Nanjing, and Hefei, among others

Is Scholz carefully balancing or is he falling behind EU policy?

Since Scholz became German Chancellor in December 2021 he has carefully sought to re-define Germany’s China policy. As head of a three-party coalition government, this has proven rather difficult. While the geopolitical climate has drastically changed, Germany’s dependence on trade and investment relations with China is still as large as before, if not even more. 

Yet, as the term ‘systemic rivalry’ indicates, Germany, like the EU and the US, has woken up to the challenges China’s increasingly assertive economic and geopolitical policies present. Still, Scholz’s recent China visit did not reflect this. His visit was very much in the tradition of Angela Merkel’s regular polite visits to China. While this may boost the German economy in the short-term, it does little for Germany’s reputation as Europe’s foremost country.