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German Chancellor Olaf Scholz tried to strike a delicate balance on a trip to China this week, promoting trade ties with his country’s largest trading partner while criticizing its growth in exports to Europe and its support for Russia.
Scholz met with China’s top leader Xi Jinping at the Diaoyutai State Guest House in Beijing on Tuesday, the culmination of a three-day visit with a delegation of German officials and business leaders. He was also expected to meet Premier Li Qiang, 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.
During his trip, Scholz defended the interests of German companies, which are finding it increasingly difficult to compete in China. And he expressed growing concern in the European Union that the region’s market is becoming a dumping ground for Chinese products produced at a loss.
It was Scholz’s first visit to China since his government adopted a strategy last year that defined the Asian power as a “partner, competitor and systemic rival”, calling on Germany to reduce its dependence on Chinese products.
Germany’s economy he shrank last year, and its weaknesses have exposed its dependence 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 greater access to China and complained that they face unfair competition.
During his trip, which began in the sprawling industrial metropolis of Chongqing in southwestern China and continued in Shanghai and Beijing, the chancellor visited German companies with significant investments in China, met with business representatives and spoke with university students.
“The competition must be fair,” Scholz told a group of German-speaking students in Shanghai on Monday. “We want a level playing field,” he said.
Scholz’s trip was an example of the difficult dance Germany is trying to do: maintain economic ties with China while managing pressure from the United States to align more closely with Washington against Beijing. She was also expected to convey European leaders’ geopolitical and trade concerns to China.
In his meetings, Scholz highlighted Germany’s commitment to doing business with China, but also warned that Beijing had to stop the flood of Chinese goods into Europe. At the same time, he expressed reservations about the European Union’s investigations into China’s use of subsidies for green technology industries, saying any discussion on trade must be based on equity.
“This must be done from a position of secure competitiveness and not for protectionist reasons,” Scholz told reporters on Monday.
China’s manufacturing push in green sectors such as electric cars and solar panels has sparked trade disputes with Europe and the United States, where such industries have also received government support. But with 5,000 German companies active in the Chinese market, Germany could lose more than many of its European partners would if Beijing retaliated against the European Union.
“If the EU is too tough against China, we could expect countermeasures and this would be a catastrophe for us,” said Maximilian Butek, executive director of the German Chamber of Commerce in China.
“It is extremely important to us that the Chinese market remains open,” he said.
In his meetings with Chinese leaders, Scholz was also expected to raise concerns about Beijing’s support for Moscow’s wartime economy, especially its continued sale to Russia of goods with potential battlefield uses.
In his conversation with students in Shanghai, Mr. Scholz alluded to Russia’s war in Ukraine and said the world worked better when all nations adopted some shared basic principles.
“One of them is that you should not fear your neighbors,” 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 Scholz. State media reports described his visit as a demonstration of the strength of China’s relations with Europe, highlighting its economic ties with Germany.
Beijing will surely welcome the message that German companies are committed to China. The Asian giant is trying to attract foreign investment to revitalize its economy, which has faltered due to a real estate slowdown. Some Western companies and investors have also been taken aback by Xi’s emphasis on national security, which they believe makes it riskier to operate in the country.
From China’s perspective, Germany may be its best hope for delaying or easing any trade restrictions from Europe, said Noah Barkin, senior adviser in the China practice at Rhodium Group, a research firm.
German automakers have invested billions of dollars in China and much of their revenue comes from there. Many are concerned that if the European Commission imposes higher tariffs on Chinese exports and Beijing retaliates, German companies will be hit the hardest.
Chinese officials “know that German companies have large investments and use it politically to influence political decision-making in Berlin,” Barkin said.
Germany’s largest companies, including BMW, Mercedes-Benz and BASF, are heavily invested in China and have strong and effective lobby groups in Berlin, Barkin added. Executives from those companies, along with several others, traveled with 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, no one will make more money.”
Chinese officials, for their part, have downplayed European accusations of unfair trade practices, calling them unfounded and an act of “typical protectionism.” They have hinted that they could retaliate for any action taken by the EU, saying China was “very dissatisfied and strongly opposed” to their investigations.
Wang Wentao, China’s Commerce Minister, traveled to Europe last week to show Beijing’s support for Chinese companies and reject accusations that China was flooding the region with goods and posing a risk to global markets.
in a interview Speaking to German newspaper Handelsblatt, Wu Ken, China’s ambassador to Germany, said the competitiveness of Chinese electric vehicles “depends on innovation, not subsidies.”
“The challenge that developed countries face lies more in the fact that Chinese companies are more efficient,” said the ambassador.
Zixu Wang contributed reporting from Hong Kong.
