By Tom Fowdy
German Chancellor Friedrich Merz is currently visiting Beijing, China, on an official trip, accompanied by a large delegation of business chiefs. Merz's trip comes amidst a geopolitical fudge for Europe, whereby leaders tilted towards the United States amidst Russia's war in Ukraine, but were abruptly reminded of the importance of relations with China following Trump's global-scale trade war. Indeed, Merz has been quick to warn that there are no benefits from "decoupling" with China, even as he calls for a "balanced" partnership, or how issues such as Ukraine continue to hover over it.
However, even despite the gesture of such a trip, can we hope things go back to the way they were before? No chance. Why? Because even as German businesses press the government to engage and seek out the Chinese market, the reality is that in practical terms, China's economy has grown in a myriad of ways that is increasingly rendering German industry obsolete, and it now resembles a larger competitor as opposed to an opportunity, which is precisely why Merz has arrived talking about "agreed rules" and a level playing field, than a bonanza of deals.
From 2005 to 2021, Angela Merkel pioneered a golden age of relations between Beijing and Berlin. Merkel was a geopolitical pragmatist who believed that Germany's national interest was meted out on a balanced relationship with multiple powers, including Russia, and China. In those years, Moscow provided cheap energy to power German industry, while Beijing, a rapidly developing country, bought German cars and machinery at a huge scale. This model worked out quite well until the world changed in ways that completely shattered it.
First, the 1991 Post-Cold War, liberal international order, fragmented into renewed great power competition. Tensions between the United States against China and Russia began to rise. As US foreign policy strategy pivoted towards conflict, the US began funding and supporting think-tanks and China hawks in Berlin that rejected Merkel's "Mercantile" foreign policy and pushing for a harder stance. More abruptly and consequentially, however, was that four years ago this week Russia invaded Ukraine and simply invalidated the entire structure itself, forcing Germany into security alignment with the US and a complete strategic recalibration of its entire economy. "Ostpolitik" as it were sometimes called, was other.
But even setting that factor aside, from the 2020s onwards China's industrial and technological capabilities began to surge in ways that displaced the need for German goods. For example, China gained rapid ascendency in the production of automobiles, becoming the world's largest exporter by 2023, and thus displacing domestic demand for German imports or products dramatically. This is an industrial shift that has undermined countries thriving off high-tech exports to China, across the board. For example, South Korea once enjoyed a massive trade surplus with Beijing due to its high-tech products. In a decade we have seen Samsung get shoed out of the Chinese market and then replace most of its semiconductor exports with its own, wiping out that surplus.
Thus, while Germany has enjoyed years of benefitting from China's market as a bonanza, it now can only demand that China "level the playing field" to let it in more, as the European Union now takes a more protectionist stance against Beijing, as its own high-tech imports are more so coming the other way. As China's own growth model is built on export-led development, it has subsequently been unwilling to cede ground in these areas lest it threaten its own industrial base. This means Merz's trip to China is more of a "cap in hand" beginning exercise, than a triumph of German business, yet it is also one that is too large, and too consequential to ignore, hence even as returns diminish, the Chancellor brings up "shooting yourself in the feet" rhetoric.
At the same time however, Beijing recognises that it is absolutely important to keep courting European countries, recognising that this is a critical window of opportunity amidst American protectionism and unreliability. Beijing needs Germany's export market, its geopolitical cushioning, and to undermine the collective harder approaches against it in the EU itself. Thus, the uneasy relationship of mutual interest between China and Germany continues unabated, even as the romanticism and optimism of that past relationship ceases to burn brightly. The two countries have much need to work some things out to make it worthwhile, and here's hoping they will.
The views do not necessarily reflect those of DotDotNews.
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