German Chancellor Olaf Scholz is on a three-day visit to China, starting in Chongqing. “Unfair competition” was the main topic of his discussions with Chinese leaders. Scholz was accompanied by the federal ministers of environment, agriculture and transport, and a large business delegation – including BMW Chief Executive Oliver Zipse and executives from Mercedes-Benz and Siemens – as he tried to bolster economic relations. In Beijing he held talks with President Xi Jinping and Premier Li Qiang. This is Scholz’s second trip to China after he took office, following his first visit in November 2022. He is also the first leader of a major Western country to visit China this year.
Chancellor Scholz’s visit takes place amid growing concern across the EU that foreign companies do not face a level playing field citing factors such as market barriers and industrial overcapacity. Earlier this month, the German Chamber of Commerce in China released a survey in which two-thirds of the businesses questioned said they believed they faced “unfair competition”. “Chinese and German companies are increasingly becoming close competitors – both in China itself and in global markets,” the Chamber said. Meanwhile, the EU has been looking at ways to “de-risk” its relations with China and reduce critical dependencies in its supply chains.
Commenting on the visit, Maximilian Butek, Executive Director at the German Chamber of Commerce in China, told the Global Times that the most important outcome will be to establish a solid basis for cooperation and exchange. “We hope that by personal exchanges across a range of different topics, a mutual understanding on key issues can be achieved.” In July, the German government released a toughly worded China strategy that shifted the focus to de-risking, diversification, and a reduction of dependencies on China.
Despite internal pressure, the current German government remains pragmatic and is putting its own economic interests at the top of its priorities. Helga Zepp-LaRouche, Founder of Germany-based political and economic think tank the Schiller Institute, told the Global Times over the weekend that for an export economy like Germany, it would be “suicidal” to follow calls for de-risking. “Germany is presently experiencing a dramatic economic downfall. Meanwhile, the U.S. has been luring German enterprises to invest in the U.S. instead of Germany with incentives provided by the Inflation Reduction Act. In this adverse environment, the expansion of economic cooperation with China represents an anchor of stability for Germany,” she said.
Scholz’s visit to Chongqing began with a trip to a plant making hydrogen fuel cells set up by the German company Bosch – a field that the authorities in Chongqing and the neighboring province of Sichuan have been keen to develop in recent years. The German Federal Statistical Office said in February that China “was Germany’s most important trading partner in 2023 for the eighth year running”. Bilateral merchandise trade dropped by 8.7% from a year earlier to USD206.8 billion in 2023, according to the China's General Administration of Customs. China’s exports declined 13% year-on-year to USD100.6 billion. Last year, Germany's direct investment in China reached a record level of €11.9 billion, up 4.3% year-on-year, according to a report by the IW institute. German investment in China grew 19.8% year-on-year in the first two months of the year. It accounts for 30% of the European Union’s investment in China, according to the Ministry of Commerce (MOFCOM). More than 5,000 German companies are operating in China.
China is also the largest trading partner of Germany for eight consecutive years. A report released on April 10 by the German Chamber of Commerce in China revealed that 79% of the German companies surveyed in China plan to continue their investment, affirming their confidence in China's robust economic foundations.
This overview is based on reports by the South China Morning Post, the Global Times and the China Daily.
