The brevity of Olaf Scholz’s one-day visit to China, where he will meet President Xi Jinping on Friday, means that there will be little scope for the kind of colourful photo-ops that his predecessor, Angela Merkel, enjoyed during 12 visits to Germany’s most important trading partner. For Mr Scholz, who becomes the first G7 leader to visit Beijing since the beginning of the Covid pandemic, that is just as well. The optics of the German chancellor’s trip have already proved controversial enough.
Mr Scholz is travelling with the traditional bevy of CEOs from companies such as Volkswagen, BMW and the chemicals giant BASF. But the mood music accompanying a much-criticised visit bears little relation to the confident mercantilist rhythms of the Merkel era. Vladimir Putin’s invasion of Ukraine, and the Kremlin’s subsequent weaponisation of energy, have laid bare the potential cost of relying on politically hostile actors.
Germany’s Green foreign minster, Annalena Baerbock, has openly questioned the timing of the chancellor’s trip, as his coalition government works on a new strategy to deal with a country now defined as a “systemic rival”. Frank-Walter Steinmeier, Germany’s president, previewed the visit by saying that the lesson of Ukraine was: “We have to reduce our lopsided dependencies. That applies to China in particular.” There have also been rumblings of disquiet from Washington and Brussels.
Such sentiment is understandable, given Germany’s humiliating failure to see Mr Putin’s energy blackmail coming. China’s trade war with the US is ongoing. It has tacitly supported Mr Putin’s illegal war and has its own eye on taking control of Taiwan. Its increasingly authoritarian regime stands accused of “crimes against humanity” against Uyghur Muslims in the Xinjiang region. Yet Germany’s economic exposure is, if anything, greater than was the case with Russia pre-invasion.
In that context, Mr Scholz’s decision to push through a Chinese shipping company’s purchase of a stake in a Hamburg container terminal, against the advice of multiple ministries, has raised eyebrows. Nevertheless, there is some truth in his argument that to precipitate “decoupling” would be both impractical and wrong-headed. Diagnosing a dependency problem is one thing. Solving it in the short or even medium term is quite another: Chinese raw materials are crucial to Germany’s green transition; the EU’s largest economy provides close to half of Europe’s total investment in China, and millions of jobs depend on the economic relationship.
Ahead of a winter in which soaring energy costs and high inflation are already panicking industry, it is understandable that Mr Scholz does not want to go too far and too fast in an attempt to achieve greater strategic autonomy. And in a multipolar world, there is no better alternative to dialogue, however compromised and imperfect. But he should be robust in Friday’s meeting when discussing Ukraine, the climate emergency and human rights, on which western leaders have often proved notably muted.
Over the longer term, there are already signs that medium-sized companies, wary of rising geopolitical risks, are seeking alternatives to China for investment and trade. Berlin should seek to incentivise that direction of travel. The decision not to renew Volkswagen’s investment guarantees for China, made in May, sent the right message. Volkswagen faces growing questions from activists, the media, politicians and its own shareholders over its factory in the Xinjiang region. But overall, dismantling risky dependencies established during the years of high globalisation will be a long and complicated process.
On the eve of his visit, Mr Scholz argued that “it is precisely because ‘business as usual’ is no longer an option in these circumstances that I’m travelling to Beijing”. The question is whether he can really negotiate new terms of trade.
