Berlin, Germany – In a significant development for Sino-German economic relations, China’s Minister of Commerce, Wang Wentao, held meetings with top German business leaders to discuss the two countries’ trade cooperation and address concerns regarding the concept of “decoupling” from China. Wang emphasized China’s commitment to improving the domestic business environment for all international enterprises, while the German leaders expressed their opposition to decoupling, emphasizing that it would not be in the best interests of German enterprises.

During the meeting, Wang and Karl Haeusgen, president of Verband Deutscher Maschinen und Anlagenbau (VMDA), emphasized the importance of mechanical equipment manufacturing in Sino-German economic cooperation. They also discussed exploring potential collaborations in areas such as carbon emissions reduction, the digital economy, and sustainable development to further enhance bilateral economic relations.

Haeusgen stressed that maintaining the tradition of good cooperation between Germany and China is vital. He noted that around 80 percent of German mechanical products are manufactured for export, and decoupling from China would not serve the interests of German enterprises. Instead, he advocated for assessing risks independently on an enterprise level.

In addition to Haeusgen, Minister Wang also engaged in talks with Christian Klein, CEO of SAP, a prominent German software provider. Their discussions revolved around China-Europe cooperation, cross-border data transfer, and artificial intelligence. Wang acknowledged China’s vast market potential, abundant talent reserves, and competitive large-scale enterprises. He welcomed SAP to expand its investment in China and become a trustworthy cooperation partner for Chinese enterprises, leveraging its technological advantage.

SAP’s CEO, Christian Klein, echoed the sentiment against decoupling, expressing the company’s opposition to the idea. He emphasized the need for a resilient global supply chain and called for increased international cooperation. Klein announced SAP’s plans to enlarge its research investment in China and enhance services for clients in the region.

Experts have noted that the Chinese market continues to attract German enterprises due to the substantial profits they generate in the world’s largest market. Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, highlighted the significance of revenue and cost factors in the Chinese market and industry chain. The deep-rooted presence of German enterprises in sectors such as vehicles, manufacturing, and chemical engineering is expected to be a crucial driving force for fostering China-Germany cooperation.

The German Chamber of Commerce and Industry’s President, Peter Adrian, affirmed China’s continued importance as a major market for German and European enterprises, even as global supply chains diversify. Adrian emphasized that China remains Germany’s largest trade partner in Europe, making it a significant foreign investor and a vital investment destination.

These developments in Sino-German economic relations come on the heels of Germany presenting a long-awaited strategy for its relations with China. The strategy recognizes the “systemic rivalry” between Germany and China, highlighting the need to reduce risks of economic dependency while maintaining trade ties and collaborating on global challenges such as climate change.

The strategy emphasizes the importance of fair, sustainable, and reciprocal economic cooperation with China. While acknowledging China’s growing influence and assertiveness, Germany aims to avoid decoupling its economy from China, as it believes that would not be conducive to its long-term interests. Germany seeks to strike a balance between maintaining ties with China and mitigating risks, drawing lessons from its previous experience with Russia.

Foreign Minister Annalena Baerbock emphasized that China remains a partner, competitor, and systemic rival for Germany. She underscored the necessity of adapting Germany’s China policy to address the changing dynamics, highlighting China’s increased self-confidence and its impact on global developments. The strategy also emphasizes Germany’s commitment to counter both analog and digital espionage and sabotage activities by Chinese intelligence services and state-controlled groups.

German business associations widely welcomed the government’s China strategy, praising its focus on risk reduction rather than cutting economic ties. However, some industry leaders expressed the need for further discussions on the concrete measures proposed in the strategy to ensure that entrepreneurial dynamism is not overly restricted.

As Germany continues to navigate its relations with China, it seeks to strike a delicate balance that safeguards its economic security while fostering collaboration on global challenges. The long-standing economic ties between Germany and China, coupled with the shared recognition of the potential benefits of continued cooperation, provide a foundation for further engagement and mutual growth.

By: Montel Kamau
Serrari Financial Analyst
13th July,2023

Photo Credit: Economy Middle East