German Scholz flies under fire to meet Xi – POLITICO


BERLIN — Two pillars of Germany’s economic success — Russia’s cheap energy supply and low security spending — have crumbled this year.

As Chancellor Olaf Scholz flies out to meet Chinese President Xi Jinping in Beijing on Friday, he wants to ensure that the all-important third pillar – warm relations with China – remains stable for Germany Inc.

To his critics, he is making the exact same mistakes of overreliance on China that Berlin has made before with Russia.

Scholz, who will be accompanied by a high-ranking delegation of German business leaders, will arrive in the early hours of Friday and it is already clear that no major U-turns are to come on the day trip. .

Scholz is in no mood to rock the corporate boat as Europe’s biggest economy creaks under the weight of high energy prices and the shock of last week’s announcement that the chemicals giant BASF plans to relocate part of its business activities outside of Europe. Berlin still sees China as part of the answer: Germany has long used China as a massive manufacturing base, and its small and medium-sized specialist engineering firms are deeply locked into Chinese production.

In an op-ed for POLITICO and the German newspaper Frankfurter Allgemeine Zeitung, Scholz said Berlin’s goal was not to “decouple” its industry from China and also echoed warnings from his predecessor Angela Merkel that the United States should not start a new cold war against China.

“Germany of all countries, which had such a painful experience of division during the Cold War, has no interest in seeing new blocs emerge in the world,” Scholz wrote. In a thinly veiled critique of Washington, he noted that Beijing’s rise did not justify “calls by some to isolate China.”

Controversial schedule

The timing and circumstances of Scholz’s visit – who will be the first Western leader to meet Xi after his recent groundbreaking nomination for a third term as Chinese leader, and the first G7 leader to visit China since the outbreak of the COVID pandemic – sparked controversy between European partners but also within the Berlin government.

German Foreign Minister Annalena Baerbock made little effort to hide her scepticism.

“The Chancellor has decided when he will travel,” the Green politician told reporters this week, adding that “it is crucial” that Scholz raises key issues that his tripartite government agreed to in its coalition treaty, such as respect for human rights, equal business and investment opportunities as well as respect for international law, in his discussion with Xi.

On the European stage, allies like France fear Scholz is undermining efforts to achieve a common EU approach to China that is more assertive when it comes to confronting Beijing over unfair trade practices. or his support for Russia’s war against Ukraine.

French President Emmanuel Macron offered Scholz late last month to jointly travel to China with their respective trade delegations to not only show political unity, but also demonstrate that Xi cannot divide European countries by playing their economic interests against each other.

Thorsten Benner, the director of the Global Public Policy Institute in Berlin, criticized Scholz’s decision to reject Macron’s proposal and instead invite the chief executives of BASF, Volkswagen and Siemens on his plane.

“By bringing a business delegation made up of some of the most pro-Beijing CEOs, Scholz appears to be continuing Merkel’s ‘Business First’ approach to China. Much of the rest of Europe sees this as ‘the Germany of first,'” he said.

A French diplomat echoed this sentiment: “What is very clear, and what the president also reminded Olaf Scholz, is that the objectives that we can have economically with China and that everyone shares…should not take precedence over our security interests and over the values ​​we must uphold as members of the European Union and as G7 countries,” the diplomat said.

The woes of investing

In his op-ed for POLITICO and FAZ, Scholz pushed back against accusations that his trip was driven by national priorities.

“German China policy can only succeed if it is integrated into European China policy,” the Chancellor wrote. “Ahead of my visit, we have therefore forged close ties with our European partners, including President Macron, but also with our transatlantic friends.

Scholz said that “even under changed circumstances, China remains an important trade and business partner for Germany and Europe – we don’t want to part with it.” Still, he acknowledged that German companies needed to take steps to reduce “risky dependencies” in industrial supply chains, especially in terms of “advanced technologies”.

Scholz’s Chinese push has raised questions about whether the chancellor, and the CEOs traveling with him, have drawn the right conclusions from Germany’s troublesome reliance on Russian energy.

Scholz last week pushed through a controversial deal that sees Chinese shipping giant Cosco acquire a 24.9% stake in a logistics company operating the “Tollerort” container terminal in Hamburg, one of three such terminals in Germany’s largest port.

The sale, which was criticized as a gift to Xi ahead of Scholz’s trip to China, was shoved by the Social Democratic Chancellor amid protests from her two coalition partners, Foreign Minister Baerbock’s Greens and the Liberal Democratic Party (FDP) of Finance Minister Christian Lindner.

Green politicians are particularly concerned that the chancellor’s trip undermines the tougher line on Beijing that ministries have been working on for months as part of an upcoming China strategy.

“The Chancellor himself in a few weeks ruins what his coalition had agreed, sows distrust of Germany among our allies and helps China divide and conquer,” fumed Reinhard Bütikofer, Green MEP and chairman of the Chinese delegation. of the European Parliament.

The United States, which pursues a policy of decoupling from China, has also warned Germany against the Cosco deal, a senior US State Department official said on Wednesday, Reuters reported.

Last week it was also reported that the German government was considering whether to approve a Chinese takeover of chip production at Dortmund-based Elmos, a move that would defy advice from the intelligence agency. national.

It’s the economy, silly

On the corporate side, big companies like Siemens, BASF or Volkswagen seem undeterred by Germany’s fiasco in Russia and have been pushing Scholz not to abandon Merkel-era pro-business Chinese policies – especially now. , as they hope for a new investment boom. as the COVID pandemic recedes.

“I think there is an urgent need for us to move away from China-bashing and self-criticism a bit,” BASF chief Martin Brudermüller said last week as his company announced the relocation of part of its chemical production. from Germany to China.

Siemens is also planning ‘massive investment’ in China, particularly in the sensitive industrial software and factory automation sector, despite warnings that this is increasing dependence on the People’s Republic, the week reported. last German daily Handelsblatt.

While Russian business has collapsed, China – which has been Germany’s biggest trading partner for the past six years – remains a crucial economic partner.

Although the victory of leftist presidential candidate Luiz Inácio “Lula” da Silva in Brazil has raised hopes that the giant but stalled trade deal between the EU and Mercosur could finally be ratified next year, it would still take more time before the benefits of this agreement launch and open new alternative markets to German companies.

However, not all of Germany Inc. supports the China-friendly course. Crucially, Siegfried Russwurm of the trade association BDI warned this week that “cooperation, especially with powerful economies like China, needs to be redefined.”

Instead of just looking to Beijing, Russwurm urged the EU to “join forces to develop key technologies and industrial skills in which Europe wants to be a leader in the future”. Tellingly, the BDI leader will not be joining Scholz on his trip to China.

Scholz, for his part, stressed in his op-ed that he believes China’s sheer size necessitates close cooperation with the country, whether on tackling climate change or on economic issues. China, “with its 1.4 billion people and economic power, will of course play a key role on the world stage in the future,” he wrote.

Clea Caulcutt in Paris contributed reporting.


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