Global Courant
MUNICH: Chinese Premier Li Qiang’s European tour last week made it clear that Europe is not about to separate from China. Sino-European cooperation will at least deepen on technology and, crucially, on development issues in the South
Li is not only China’s second official, but also Xi Jinping’s closest political associate since the two worked together in Zhejiang province more than two decades ago. As party leader of Shanghai, he oversaw Tesla Motors’ mega-factory that helped make China the world’s largest auto exporter.
His visit included meetings with Chancellor Olaf Scholz and top German industry leaders, as well as the emerging premier of the state of Bavaria, and ended with a speech at a conference in Paris on development finance convened by President Emmanuel Macron.
President Macron with Li Qiang. Photo: CGTN
Li called for a “global development partnership” to provide more resources to developing countries, and for “liberalization and facilitation of trade and investment” to “give new growth impetus to developing countries”, instead of “trade protectionism and decoupling and separation of supply and industrial chains in any form,” said one Chinese government statement.
The European Community’s 27 leaders, meanwhile, will “resort to a soft tone on China” at their June 28-29 EU Council summit in Brussels, according to a draft resolution leaked to Politics.
“Despite their different political and economic systems, the European Union and China have a shared interest in pursuing constructive and stable relations, anchored in respect for the rules-based international order, balanced engagement and reciprocity,” the draft reads, adding that Europe “does not intend to disengage or turn inward” or pursue policies “to harm China, nor to thwart China’s economic progress and development”.
The draft text reflects Scholz’s comments to the German Bundestag.
China’s exports to the South have doubled since 2020, surpassing total exports to developed markets for the first time. China is also the largest lender to developing countries. While central banks in developed markets are tightening credit conditions in response to inflation, bank lending in dollars and euros to developing countries has declined. Many countries in the South are turning to the Chinese renminbi for trade and development finance as a substitute.
China’s export of digital and physical infrastructure to developing countries has enabled the Global South to increase its exports to developed markets. China’s exports of semi-finished products to East Asia-Pacific countries have increased along with EAP countries’ exports to developed markets, according to an upcoming World Bank analysis. That is the virtuous circle of globalization that Li Qiang spoke about in his speech in Paris.
China’s role in building infrastructure in the South is important to European exporters, but European governments have a more pressing reason to work with China. Immigration from the world’s poorest economies, from Africa to South Asia, is Europe’s most sensitive political issue. Without stabilizing the economies of the poorest countries, Europe cannot prevent a tidal wave of migrants from taking refuge on its shores. China is the only economy with enough resources and technology – especially in digital infrastructure – to make a difference in the South.
After Li left for Paris, Scholz told the German Bundestag that he and French President Macron are striving for “a geopolitical Europe”, that is, a Europe that plays an independent geopolitical role.
Scholz also announced a November conference of the Group of 20 Compact with Africa in Berlin, to “strengthen economic cooperation with our neighboring continent”. In addition, the EU will hold a summit with the countries of Latin America and the Caribbean in July.
The German chancellor added that before Li Qiang’s visit, he had held intensive talks with other European leaders in preparation for the European Council’s discussion of EU-China policy next week. In this regard, he highlighted China’s role in food security, helping highly indebted states, investing in future technologies, fighting poverty and fighting climate change.
Li Qiang’s visit was the first formal government talks between Germany and China since 2018. Such talks are reserved for Germany’s closest partners, and the protocol of the visit was a clear indication that the German Chancellor appears to have little interest in dismantle relations with China.
Washington has urged Europe to “steer clear” of its economic relationship with China – a euphemism for decoupling – but the facts on the ground point to a deepening economic relationship with China
With the economy in recession, Germany’s economic relationship with China has become even more important. China is Germany’s most important trading partner. Much more than other European countries, Germany has built up trade relations with China over the past 20 years. The exchange of goods between China and Germany will reach nearly EUR 300 billion in 2022 – well above the EUR 249 billion volume exchanged with the United States. Conversely, Germany is also China’s most important trading partner in Europe.
Germany’s automakers, the country’s largest industry, sell nearly 40 percent of the 14.2 million cars they make annually in China.
Li Qiang with BMW boss Oliver Zipse. Photo: Xinhua
China also supplies vital intermediates on which German chemical and electronics manufacturers depend. In addition, China has a virtual monopoly on rare earths. These are needed for batteries, solar panels or electric cars.
German business has understandably expressed frustration at the hostility towards China from Green Party leaders and its ministers in the coalition government. Volker Treier, head of foreign trade at the German Chambers of Industry and Commerce (DIHK), recently said: “Business is very angry about this ambiguous communication about the China strategy, given the importance of China to our economy.”
Li Qiang’s visit marked a departure from the confrontational tone set by German Green Party Foreign Minister Annalena Baerbock in recent months. Baerbock’s trip to China in April sparked political debates in Germany, with her critical remarks on issues such as Russia, Taiwan and human rights eliciting strong reactions from Chinese officials. Foreign Minister Qin Gang replied, “We don’t need condescending lectures.” Baerbock characterized her journey as “partly shocking”, claiming that China had become more aggressive internationally and repressive domestically, viewing it as a rival rather than a partner.
As a senior cabinet member of the Green Party, the second-largest party in Berlin’s tri-party coalition, Baerbock’s influence has declined, along with support for the Greens, who won 22% of the national vote in the federal election of last year, but now vote for only 13.5% of voters.
Li Qiang’s meeting with Bavarian Prime Minister Markus Söder in Munich, on the other hand, underscores the political dynamism in Germany, where the ruling parties are under increasing pressure. A potential beneficiary of an early end to the governing coalition, Söder previously sought the chancellorship in 2021. He arranged a meeting for Li with the heads of Siemens and BMW, leading German firms based in Bavaria, and arranged a gala dinner at the Residence in Munich in honor of Li.
Li Qiang with Bavarian Prime Minister Söder, photo: bayern.de
Influential voices within Scholz’s Social Democratic Party are urging more cooperation with China. The Seeheimer Circle, an official think tank within the SPD, released a document last April on Germany’s relationship with China calling for a “multidimensional” – that is, open – policy towards the Asian giant.
Within the centre-left SPD, the Seeheimer group emphasizes industrial and labor interests; it is part of Chancellor Scholz’s personal rank and file. The Seeheimer Kreis has gained importance within the SPD in recent months. It is known within the centre-left SPD as a conservative group more interested in economic policy.
An “abrupt end to trade relations with China” would be “an economic disaster”, the paper argued, rejecting an “anti-China strategy”.
Before Li arrived, the German government de facto rejected a call from the European Commission to exclude Chinese companies such as Huawei and ZTE from the German telecommunications architecture.
In March, the German Ministry of Economic Affairs, controlled by the Green Party, warned of risks to the network from a future Chinese retrofit, but the Interior Ministry, under the auspices of the Social Democrats, only announced that it was assessing the situation in kept an eye out. Deutsche Telekom, Germany’s largest mobile phone provider, categorically rejected allegations that Chinese carriers represented a security prop, stating that it had rigorously tested its networks for such vulnerabilities.
Diego Fassnacht is an international economist and investment advisor to individual clients and institutions. Prior to working in finance, he was a member of the Board of Directors (Deutschlandrat) of the Youth Organization (JU) of Germany’s main opposition party, the CDU.
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