Signal for India of German Chancellor’s openness to China: step it up

German Chancellor Olaf Scholz was the first Western head of government to visit China after the conclusion of the 20th National Congress of the Communist Party of China (CPC).

While there seems to be an evolving opinion within German strategic circles that China is increasingly a threat to democracy, international law and fair trade, Scholz’s decision to visit China – heralded by the German side even before the start of the Congress – indicates at least two pressures facing German foreign policy.

The first is domestic pressure on the economic front. There are now concerns of an impending economic recession in Europe’s largest economy following the Russian invasion of Ukraine – “a severe energy crisis…is slowly turning into an economic and social crisis”, according to German Economy Minister. Germany’s top trading partner for goods with a 9.5% share and German investment in China between January and June this year reached a record 10 billion euros.

As China’s data protection threats and unfair or coercive technology acquisition strategies are increasingly exposed, German industry seems either unsure of how to deal with the issue or willing ignore them completely. The German automotive industry, for example, is deepening its integration into China’s innovation system by increasing investment in R&D in China, both as a means of retaining market share in the emerging electric vehicle (EV) market by China and to increase production for world markets. .

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Indeed, German companies are also pumping money into manufacturing new drugs and equipment, new materials, artificial intelligence and semiconductors. BMW recently announced the end of production of the electric Mini in the United Kingdom and its relocation to China. The German optical systems giant Zeiss and the chemical giant BASF are opening new factories in China, among others.

Beijing used the occasion to promote the narrative that the Germans seem to “clearly understand that China is their most reliable trading partner” and as a case of waning “decoupling hype”. Scholz reinforced that message by taking a dozen business leaders with him as he said he aimed to “dismantle one-sided dependencies” and threatened “consequences” for failing to reciprocate China.

The second pressure Scholz faces – or perhaps it is a motivation – is the German/European desire to chart a course in world politics independent of the United States. The German Chancellor, in an editorial on the eve of his visit, asserted that “the world [had] fundamentally changed” since his predecessor’s last visit to China. Referring to the COVID-19 pandemic and Russia’s war against Ukraine, he justified his trip to China by saying that “‘business as usual’ does not is no longer an option”.

Meanwhile and surprisingly, even as Scholz acknowledged that “the quest for national security – synonymous with the stability of the communist system – and China’s national autonomy would be more important in the future”, he also seemed to believe that he could somehow convince China Prior to Scholz’s visit, his government had even agreed to China’s state-owned shipping company COSCO taking a minority stake in a terminal in Hamburg, its largest port, sparking concerns protests from his own Foreign Office.

Clearly, Germany’s China policy is not yet in competent hands. And without a good Chinese policy, Berlin cannot hope to achieve true strategic autonomy either.

For India, the implications are twofold.

First, New Delhi must pay attention to differences in Western approaches to China. A divide between Americans and Europeans or within the EU itself on political, economic or security issues related to China presents opportunities for Beijing to play against each other and significantly complicates the EU’s own options. India as well as undermines the reality that India is trying to impress upon the rest of the world that China is an irresponsible and potentially dangerous international actor. The Foreign Office will therefore need to step up its efforts – while its role as a potential mediator between Russia and Ukraine has garnered attention, India’s ability to align European capitals with China will be equally important.

Second, the fact that industrial majors in Germany – and elsewhere – continue to find the Chinese economy attractive is a harbinger that India’s “ease of doing business” or market conditions are not sufficiently attractive to attract significant investment from developed economies. It is also a call for India – its central government, federal entities and entrepreneurs – to innovate in policy design rather than trying to simply replicate the Chinese industrial model.

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James R. Rhodes