The German government approved its first national strategy on China on Thursday, defining the Asian superpower as “a partner, competitor and systemic rival” and calling for a significant reduction of dependency on Chinese goods while still maintaining economic ties worth hundreds of billions of dollars.
The new policy calls for export controls and the screening of investments by German companies doing business in China to protect the flow of sensitive technology and know-how. But it fails to address exactly how Berlin plans to review Chinese investments in Germany, a point that has been a recent cause for concern.
Chancellor Olaf Scholz’s government adopted the 61-page document on Thursday, after months of discussions and delays stemming from disagreements within his three-party coalition over how tough their position should be. The strategy echoes themes from the European Union that urge “de-risking” ties with China.
The government said reducing reliance on Chinese producers and consumers would ultimately strengthen the German economy.
“We do not want to decouple from China, but minimize our risks. This includes strengthening our European economy as well as reducing dependencies,” said Annalena Baerbock, the foreign minister. “The more diverse trade and supply chains are set up, the more resilient our country is,” she added.
The strategy takes a tougher line toward China than the one embraced by governments led by Chancellor Angela Merkel, who viewed China as a huge growth market for German goods.
That push created a tight relationship with China, with more than a million German jobs that depend directly on China, and many more indirectly. Nearly half of all European investments in China are from Germany, and almost half of German manufacturing businesses rely on China for some part of their supply chain.
But supply chain issues prompted by the coronavirus pandemic laid bare the extent to which Germany, and Europe, had grown dependent on China for goods, ranging from medicines to processed minerals essential for green technology. Russian’s invasion of Ukraine last year also raised fears that Beijing could take advantage of economic dependencies in ways similar to how Moscow weaponized Germany’s dependence on its natural gas exports.
Under the strategy, companies are called on to “more strongly internalize” the geopolitical risks of doing business in China, to prevent the need to tap state funds in the event of a crisis. The government said it was working to provide incentives to encourage German companies to diversify their businesses beyond China.
The policy also called for reassessing export guarantees, to ensure the protection of sensitive technology, and it stressed Germany’s intent to draw up a list of technology used in fields including cybersecurity and surveillance that would be subject to export controls.
“We have understood that it is in our own national interest to take care of our economic security,” Ms. Baerbock said. She added that Germany could not afford to find itself needing to “pay more than 200 billion euros to get out of a dependency,” as happened when Russia cut off gas flows to Western Europe.
The Chinese government, through its embassy in Berlin, on Thursday pushed back against how it had been described in the policy, insisting that it was a partner with Germany, not a rival.
The embassy said in a statement that it “firmly opposes” efforts to “interfere in China’s internal affairs, distort and smear China, and even damage China’s core interests.”
Whether and how companies will support the policy remains a question. Some midsize and family-led businesses have said geopolitical risks have complicated their business in China, but leading industrial players, such as BASF and Volkswagen, have doubled down on Chinese investments in China.
“Volkswagen Group will continue to invest in China,” said Ralf Brandstätter, Volkswagen’s head of China and a member of the board.
“China is a dynamic growth market and a key technological innovation driver,” he said, adding that it is “ultimately crucial for the global competitiveness of Volkswagen and the entire German automotive industry.”
The strategy will now move to Parliament, where lawmakers are expected to begin debating it when they reconvene in September.
Last month, Germany unveiled its first national security strategy, calling for a “robust” defense and other policies. But the government had separated China from the overall strategy, given its importance as Germany’s largest trading partner, with bilateral trade volumes last year reaching nearly €300 billion, or about $334 billion.
The strategy makes clear that Berlin has no intention of changing its opposition to China’s claim of sovereignty over Taiwan. “The status quo of the Taiwan Strait may only be changed by peaceful means and mutual consent. Military escalation would also affect German and European interests.”
Coming more than a year after Mr. Scholz decided to take a more critical stance toward Russia after the invasion of Ukraine, the China strategy is the latest step in recalibrating Germany’s foreign policy, said Mikko Huotari, executive director of the Mercator Institute for China Studies.
“Looking at China from a risk-oriented perspective is a huge step in a different direction,” Mr. Huotari said. “It is a major shift for Germany.”
Keith Bradsher contributed reporting from Beijing.
