Stephan-Götz Richter is editor-in-chief of the online magazine “The Globalist” and director of the Global Ideas Center Berlin.
(Photo: Imago, PR)
In the German debate about our economic relations with China, the premise that there is a broad consensus between the interests of German corporations in the People’s Republic and the national interests of the Federal Republic is now viewed critically. This is progress, because at least since Russia’s attack on Ukraine we have known that foreign trade policy often also has a geopolitical component.
What is worrying, however, is that we still do not fully understand the true dimensions of our China problem. The public mainstream points out like a mantra that the German car industry is dependent on the Chinese sales market.
There are also mantra-like warnings of an economic decoupling. Conversely, Chinese investments in Germany’s strategic infrastructure are still accepted, at least in the case of minority holdings. Anyone who leaves the mainstream like Foreign Minister Annalena Baerbock must expect pressure from the Chancellery.
Apparently, Germany continues to give the economic superpower and communist dictatorship of China a special role. It seems that anyone who questions our special “China Connection” is also questioning the viability of our economic model. The critical examination of the “China Connection” is a key strategic challenge for our country.
So far, the focus has primarily been on China’s importance as a sales market for German companies. According to the Federal Statistical Office, they exported goods worth 107 billion euros to the People’s Republic last year, which corresponds to 2.8 percent of the gross domestic product.
The German trade deficit
However, there is a new trend that is strategically worrying, as can be seen from the current figures on German imports from China. According to this, imports increased by a third from 2021 to 2022, from 143 billion to 191 billion euros. The German trade deficit with the People’s Republic suddenly grew to 84 billion euros. That’s four to five times more than the average since 2004. In the argument about the right China strategy, we should finally change our perspective – away from the focus on exports to China and towards imports.
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Because behind the figures, which go far beyond a post-corona catch-up effect, there is a fundamental trend reversal: If their energy costs are expected to double or triple compared to the USA or China, German companies face enormous problems on the cost side.
It is no longer just large companies that are relocating their production to China. Medium-sized companies do that too. But at least both of them are increasingly turning to Chinese suppliers for reasons of cost containment.
It may initially have a calming effect when Karl Haeusgen, President of the Association of German Machine and Plant Manufacturers, warns of China’s “aggressive economic policy” and calls for concentration on the markets “beyond China”. However, what he does not sufficiently take into account is the fact that our companies see themselves exposed to a significant loss of competitiveness due to the narrow-minded national energy policy.
Federal government shoots ecological own goal
In order to cushion this challenge, the German economy, with its heavy emphasis on industry and exports and the associated energy intensity, is clearly finding itself in a precarious position. Because after the discontinuation of Russian natural gas as a “bridging technology”, there will henceforth be a stronger “liaison dangereuse” with China due to costs and, in part, also due to capacity. But that is the exact opposite of the geopolitically indicated diversification strategy.
Under such omens, German industry threatens to become the final production facility for Chinese suppliers – a kind of Foxconn, just not for iPhones. This is particularly true for the wind and solar energy sectors, for heat pumps and electric car batteries. Chancellor Olaf Scholz’s promotion of a diversification strategy, as observed during his visits to Chile, Argentina and Brazil, does little to change that.
In addition, the gradual deindustrialization of our country will inevitably be associated with an increase in emissions on a global level. The undiminished massive output of CO2 emissions associated with production in China is currently at least three times higher for each product than would be the case with comparable production in Germany. In this respect, the expansion of the German trade deficit with China means one thing above all at world level: a massive ecological own goal by our government.
The author:
Stephan-Götz Richter is editor-in-chief of the online magazine “The Globalist” and director of the Global Ideas Center Berlin.
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