Chancellor Scholz balances trade and politics in China

• German Chancellor Olaf Scholz arrives in China to strengthen economic ties with Berlin’s largest trading partner.
• Scholz’s second trip to China since taking office is a three-day tour through Chongqing, Shanghai, and Beijing.
• Germany’s economy shrank by 0.3% last year due to inflation, high-interest rates, and cooling exports.

German Chancellor Olaf Scholz arrived in China on Sunday, commencing a trip in which he faces a tough balancing act as he aims to shore up economic ties with Berlin’s biggest trading partner. According to Chinese state broadcaster CCTV, Scholz touched down in the southwestern megacity of Chongqing on Sunday morning, accompanied by a large delegation of ministers and business executives. Amid increasing pressure from Western allies on Beijing, Scholz is expected to underline Germany’s commitment to conducting business with the world’s second-largest economy and to reject US-led calls for “decoupling.”

His friendly overtures toward China risk sparking ire among Washington and EU partners, which have been pushing back against Beijing’s heavy subsidies for industries. Scholz told journalists on Friday, “China remains a really important economic partner,” adding that he would try to level the playing field for German companies in China. On the geopolitical front, Scholz will also use his visit to persuade Chinese President Xi Jinping to exert his influence to rein in his Russian counterpart Vladimir Putin and help bring an end to the war in Ukraine.

“Given the close relations between China and Russia, Beijing can exert its influence on Russia,” said a German government source in Berlin.

Scholz’s second trip to China since he took office is a three-day tour through Chongqing, Shanghai, and Beijing. His first trip in November 2022 took place under intense scrutiny, as it came swiftly after Xi strengthened his grip on power, and marked the first post-pandemic visit by a G7 leader to China.

Western allies, stung by painful supply chain disruptions during the health crisis as well as by China’s refusal to distance itself from Russia despite Moscow’s invasion of Ukraine, had been scrambling to reduce their reliance on Beijing.

Scholz’s visit comes as many of Germany’s Western allies confront China on a range of trade issues. Brussels is conducting a slew of probes into state aid for Chinese solar panels, electric cars, and wind turbines. Meanwhile, the United States is investigating national security risks posed by Chinese technology in cars.

With tensions rumbling over Taiwan, US President Joe Biden made defense pledges to Japan and the Philippines this week, while describing behavior by Beijing in the South China Sea as “dangerous and aggressive.” Two days before his visit, Scholz held talks with France’s President Emmanuel Macron, whose office said the leaders “coordinated to defend a rebalancing of European-Chinese trade relations.” However, China is a vital market for Germany, where many jobs depend directly on demand from the Asian giant.

Last year, the German economy shrank by 0.3 percent, battered by inflation, high-interest rates, and cooling exports. The economy ministry expects just an anemic growth of 0.2 percent for this year.

Beijing has set an annual GDP growth target of around five percent for this year, but exports plunged more than expected last month.

German MPs and analysts urged Scholz to take a firm line.

The Green Party’s Deborah Duering warned Scholz against viewing China solely as an economic opportunity.

“Those who ignore long-term risks for short-term profits risk repeating the mistakes of the past, misguided Russia policy,” said Duering, about past dependency on Moscow for cheap energy supplies.

Max Zenglein of the Mercator Institute for China Studies said Germany should not hesitate to assert itself more.

“As countries such as the USA and Japan are positioning themselves much more sharply against China, Germany has an important role to play,” he said, adding that Germany was “in a position of strength.”

Also Read

German Chancellor Olaf Scholz to visit Israel, Egypt this week

Olaf Scholz to visit Israel, showing solidarity in addressing Middle East conflict....