2024-04-16 07:50:23
Olaf Scholz ends his visit to China this Tuesday with a meeting with Xi Jinping. To talk Ukraine, Middle East, but also business. Despite commercial and geopolitical tensions between the West and the Middle Kingdom, the German Chancellor intends to defend the economic ties that unite the two countries.
The links patiently built by German companies since the 1980s have taken on vital importance for the economy of Europe’s leading power. There Chine is its leading commercial partner with trade amounting to 250 billion euros in 2023. 5,000 German companies are present in the Middle Kingdom, which is five times more than the number of French companies.
The mass is considerable, but it is in the process of contracting, to the detriment of Germany. Trade between the two countries fell sharply between 2022 and 2023, by 8%, mainly due to the drop in imports from China, due to the slowdown of its economy. And also, because it has surpassed the master in exports.
Germany overtaken by China in exports
It is now able to manufacture and export what it previously purchased in Germany. In a note published last week, the insurer Allianz notes that China now exports more than Germany in its areas of excellence. This has been the case for a long time in electrical equipment and machine tools, and more recently in the chemical sector. Germany remains ahead in the automobile industry, but competition from China is increasingly fierce. Europe is the first to worry about the surge of low-cost Chinese electric cars and plans to tax them if the investigation launched by Brussels confirms the supposed subsidies. Olaf Scholz is much more cautious on this issue.
He is afraid of reprisals against German manufacturers. And he remains faithful to the position of his contemporary predecessors. Berlin has always considered trade to be conducive to peace. Despite the snub with Russia, its former gas supplier which invaded Ukraine, despite the total absence of democratic progress in China, this credo remains valid for the German government. In 2023, Berlin has announced a review of its strategy towards China. To distance itself from this partner who has since become a competitor and even a systemic rival, according to the formulation used in Berlin. But once the document was adopted, business resumed as if nothing had happened.
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A short-term bet
At a time when the German economy is faltering, there is no question of giving up this precious outlet. Essential for BMW, Mercedes or Volkswagen, which generate a third of their turnover in China. There is also no question of doing without Chinese suppliers, who have become essential over time, both for pharmaceuticals and rare earths. German manufacturers are reviewing their supply, but this will take time, around ten years. In the short term, from a German point of view, this special relationship should therefore be strengthened rather than neglected. Nor is there an immediate alternative to the world’s largest market.
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