German Chancellor Olaf Scholz tried to strike a delicate balance on a trip to China this week, promoting business ties with his country’s biggest trading partner while criticizing its increase in exports to Europe and its support for Russia.
Mr Scholz met China’s supreme leader Xi Jinping at the Diaoyutai State Hotel in Beijing on Tuesday, the culmination of a three-day visit by a delegation of German officials and businessmen. He was also expected to meet with Premier Li Chiang as the two countries navigate relations strained by Russia’s war in Ukraine and China’s rivalry with the United States, Germany’s most important ally.
Throughout his trip, Mr. Scholz promoted the interests of German companies that are finding it increasingly difficult to compete in China. And he conveyed growing concern to the European Union that the region’s market is becoming a dumping ground for Chinese goods made at a loss.
It was Mr Scholz’s first visit to China since his government adopted a strategy last year that defined the Asian powerhouse as a “partner, competitor and systemic adversary”, calling on Germany to reduce its reliance on Chinese goods.
Germany’s economy shrank last year and its weaknesses have exposed its reliance on China for growth. Energy prices have risen due to the war in Ukraine, which has been facilitated by Beijing’s support for the Kremlin. German companies have pushed for more access to China and complained they face unfair competition.
During his trip, which began in the sprawling industrial metropolis of Chongqing in southwestern China and continued to Shanghai and Beijing, the chancellor visited German companies with extensive investments in China, met with trade representatives and spoke with students.
“The competition must be fair,” Mr. Scholz told a group of German-speaking students in Shanghai on Monday. “We want a level playing field,” he said.
Mr Scholz’s trip was an example of the difficult dance Germany is trying to perform: maintaining economic ties with China while managing US pressure to align more closely with Washington against Beijing. He was also expected to bring to China the geopolitical and trade concerns of European leaders.
In his meetings, Mr Scholz stressed Germany’s commitment to trade with China, but also warned that Beijing needed to curb the flood of Chinese goods into Europe. At the same time, he expressed reservations about European Union investigations into China’s use of subsidies for green technology industries, saying any discussion on trade must be based on fairness.
“This has to be done from a position of confident competitiveness and not from protectionist motives,” Mr. Soltz told reporters on Monday.
China’s manufacturing push into green sectors such as electric cars and solar panels has touched off trade disputes with Europe and the United States, where such industries have also received government support. But with 5,000 German companies operating in the Chinese market, Germany stands to lose more than many of its European partners if Beijing were to retaliate against the European Union.
“If the EU goes too hard against China, we could expect countermeasures and that would be a disaster for us,” said Maximilian Butek, executive director of the German Chamber of Commerce in China.
“For us it is extremely important that the Chinese market remains open,” he said.
In his meetings with Chinese leaders, Mr. Scholz was also expected to raise concerns about Beijing’s support for Moscow’s wartime economy, particularly the continued sale to Russia of goods with potential battlefield uses.
In his discussion with students in Shanghai, Mr Scholz referred to Russia’s war in Ukraine, saying the world worked better when all nations embraced some basic shared principles.
“One of them is that one should not be afraid of one’s neighbors,” Mr. Scholz said, without naming any nations. “Borders cannot be changed by force.”
China hopes to drive a wedge between Europe and the United States by courting leaders like Mr. Scholz. State media reports portrayed his visit as a demonstration of the strength of China’s relations with Europe, strengthening its economic ties with Germany.
Beijing is sure to welcome the message that German businesses are committed to China. The Asian giant is trying to attract foreign investment to revive its economy, which has been reeling from a real estate slowdown. Some Western businesses and investors have also been alarmed by Mr Xi’s emphasis on national security, which they see as making it more dangerous to operate in the country.
From China’s perspective, Germany may be its best hope to delay or soften any trade restrictions from Europe, said Noah Barkin, senior adviser in the China practice at research firm Rhodium Group.
German automakers have invested billions of dollars in China and much of their revenue comes from there. Many worry that if the European Commission imposes higher tariffs on Chinese exports and Beijing retaliates, German businesses will suffer more.
Chinese officials “know that German companies have big investments, and they use that politically to influence political decision-making in Berlin,” Mr. Barkin said.
Germany’s biggest companies, including BMW, Mercedes-Benz and BASF, have invested heavily in China and have strong, effective lobbies in Berlin, Mr Barkin added. Executives from those companies, along with several others, traveled with Mr. Scholz to China.
“The supply chain in China is full of German products,” said Joerg Wuttke, former president of the EU Chamber of Commerce in China. “If China has a price war with Germany, then nobody will make money anymore.”
Chinese officials, for their part, rejected the European accusations of unfair trade practices, calling them baseless and an act of “typical protectionism”. They have hinted they could retaliate against any action taken by the EU, saying China was “strongly unhappy and strongly opposed” to its investigations.
Wang Wentao, China’s commerce minister, went to Europe last week to show Beijing’s support for Chinese companies and counter accusations that China has been dumping goods in the region and endangering global markets.
In an interview with the German newspaper Handelsblatt, Wu Ken, China’s ambassador to Germany, said the competition of Chinese electric vehicles “is based on innovation, not subsidies.”
“The challenge that developed countries face lies more in the fact that Chinese companies are more efficient,” the ambassador said.
Zixu Wang contributed reporting from Hong Kong.
