Habeck Ministry wants to tighten rules for China business

Berlin The Ministry of Economics is planning extensive requirements for German companies doing business in China and the exclusion of providers from authoritarian states from the critical infrastructure. In a 104-page paper classified as confidential by the Ministry of Economic Affairs and available to the Reuters news agency, the German government’s previous support for German companies in China is also questioned. In the “Internal China Policy Guidelines” of November 24, a significant reduction in dependency on China is required. At least a complete decoupling from the largest German trading partner is rejected.

The paper from the Ministry of Economic Affairs led by Robert Habeck (Greens) reads like a criticism of the recent trip by Chancellor Olaf Scholz (SPD) with company bosses to Beijing. As a recommendation for action, it is called for, for example, “to fundamentally (to) question the political flanking of projects in China by high-ranking representatives of the federal government vis-à-vis the Chinese side”. The support should only be granted if “a positive effect for Germany as a business location can be proven”.

For companies that are particularly active in China, extensive reporting obligations to the federal government about their business are required. It should also be checked “whether, based on this, regular self-obligatory or, if necessary, obligatory stress tests should be carried out,” it said. The reference scenario should be “the simulation of the loss of China business or supplies from China”. The consequences for companies remain unclear.

In the case of critical technologies and infrastructure, the paper proposes excluding “suppliers of end, intermediate and preliminary products from autocratically governed third countries”. This should even apply to providers from other countries who use such products. IT components are given as an example.

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Also examination of investments by German companies

In tenders for particularly important European projects, for example in the semiconductor sector, it should also be checked whether third-country companies or certain components can be excluded. The ministry also advocates a new review of investments by German companies in Chinese companies if they “belong to security-relevant areas or the military-industrial complex or are involved in human rights violations”.

China’s development is described as very problematic. Reference is made to human rights violations and a more restrictive domestic policy course. “The fact that the relationship with China is shifting further in the direction of systemic rivalry is demonstrated not least by China’s pro-Russian attitude to the war of aggression against Ukraine,” it says, alluding to the triad previously mentioned in Germany and the EU, according to which China is a partner, competitor and rival is.

“China refuses to condemn Russia for the attack on Ukraine, blames the West for the war and explicitly keeps open the option of annexing Taiwan,” the paper said. It is also pointed out that Chinese President Xi Jinping has indicated that he wants to incorporate democratic Taiwan, which is seen as a breakaway province, during his lifetime. He also did not rule out the use of force. The authors point out that the year 2027, the 100th year of the founding of the People’s Liberation Army, is repeatedly mentioned as a key date.

As a consequence of this development, the Ministry of Economic Affairs wants a partial solution from China. The reason for this is: “In a bilateral relationship characterized by growing system rivalry and increasing geopolitical tensions, close economic ties with and isolated dependencies on China pose growing risks for the political freedom of action of Germany and the EU.” Politicians should therefore be “timely and decisive” be adjusted.

Addiction warning

The great importance of China as a sales market for a number of German industrial sectors and critical dependencies in certain economic or technological areas is viewed critically. Reference is made to Chinese technology in the mobile communications sector. Germany could be blackmailed in the event of a conflict, which “could lead to a restriction of its political ability to act”.

Overall, the question arises to what extent and for how long the Chinese market will still be open to foreign companies. “Technologically no longer ‘needed’ foreign companies are threatened with market displacement in the short to medium term,” the company warns.

The Federal Foreign Office has already presented a China strategy that is characterized by a similarly critical view of the communist regime in Beijing. Within the federal government, the papers by Foreign Minister Annalena Baerbock and Habeck (both Green) have not yet been coordinated.

Above all, objections are expected from the Chancellery, even if Chancellor Scholz expressly supports diversification and efforts to become more independent from China. Most recently, however, there were differences between the Chancellery and the Green and FDP-led departments when the Chinese state shipping company Cosco entered an operating company at a terminal in the port of Hamburg.

More: The draft of the China strategy shows how critical the government is now regarding Beijing. Things are getting more difficult for the German economy.

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