Scholz urges fair competition as rifts weigh on trade ties
Germany welcomes made-in-China vehicles but will not tolerate dumping, visiting leader warns
A call for “open and fair” competition between European and Chinese carmakers, along with visits to clean-energy firms, during German Chancellor Olaf Scholz’s China trip reflect how there is room for improvement in the two countries’ US$207 billion annual trade relationship, even as threats mount from “de-risking” calls and political pressure.
In Chongqing on Sunday, the first leg of his three-day visit to China, Scholz visited a hydrogen-fuel-cell plant run by German auto supplier Bosch. And after arriving in Shanghai yesterday, he visited an innovation centre for Covestro, a German producer of high-performance plastics.
Also yesterday, Scholz was quoted by broadcaster CCTV as saying Germany welcomed China-made cars. However, he added, Europe would not tolerate dumping, overcapacity or violations of intellectual property rights. That prompted his insistence on open and fair competition with China’s carmakers.
Scholz is leading a delegation that includes environment, agriculture and transport ministers, as well as business executives of manufacturing giants such as Siemens, BMW and Benz.
Siemens CEO Roland Busch told state media CGTN on Sunday that he was confident in the potential of the Chinese market, and he pointed to years of “very strong” relations between the two countries.
“Germany has a lot of technologies to offer,” he told the broadcaster. “This is how we grow the economies. And going forward, I think we have the next level ahead of us to keep on going. We believe in the Chinese market, and we’ll be doubling down on our investment.”
China has been Germany’s largest trading partner for many years, and an estimated 5,000 German companies currently operate in China, according to Berlin’s figures.
But bilateral relations have somewhat soured amid conflicts concerning human rights and security, as well as alleged unfair competition and the pace at which Beijing has been opening up market access to foreign companies.
Last week, international insurance firm Allianz Trade said China had been making significant gains in the European market across sectors such as computers, metals, electronic and optical products and basic pharmaceuticals, with momentum getting “especially strong” in electrical equipment.
Dong Jinyue, a senior economist at Spanish financial services firm BBVA Research, said German investments in China largely targeted hydrogen, automobiles, chemicals, power-generation equipment, communications and steel. Both countries also cooperate in the education, cultural and technology sectors.
Scholz’s trip comes at a time the European Union is undertaking an anti-subsidy investigation into Chinese electric vehicles (EVs), and as criticism is growing from across the Atlantic on alleged overcapacity in the country, especially in the new-energy sector.
Chinese EVs, along with solar panels and lithium-ion batteries, have seen robust growth and exports since last year, but exports of these products are at risk of punitive tariffs and trade restrictions from Brussels and Washington.
“It’s quite futile for Europe to use trade as leverage against China,” said Andy Xie, a Shanghaibased independent economist. “If you leave China, then your economy is going to suffer, because China makes more cars than anywhere else.
“For Germany to compete, its technology needs to rise again; China is setting the pace for automotive technology. Best you can do is stay in China and try to compete.”
Germany relied heavily on China for new-energy products, as well as for pharmaceuticals and rare earths, said Mark Natkin, managing director with Hong Kong-based market research firm Marbridge Consulting.
“So, [Germany] must walk a tightrope between de-risking and maintaining access to key supplies,” he said.
At the same time, Natkin noted that China represented a critical market for BMW and Volkswagen, underscoring why Scholz would work hard to maintain relations with Beijing.
Although China remains Germany’s largest trading partner, figures from the former’s General Administration of Customs showed that the value of trade between the two countries in 2023 dropped by 8.7 per cent from a year earlier, falling to US$206.8 billion.
Meanwhile, analysts have pointed out how the German government is facing challenges in balancing its economic needs by working with China against the backdrop of internal and external political pressure.
Chinese leaders still valued Germany for the technological quality of its products, especially cars, said James Chin, a professor of Asian studies at the University of Tasmania.
Scholz was also in a unique position to raise concerns held by the EU and the United States about the level of China’s support given to Russia, Chin said.
Additionally, he touched on how German businesses still grapple with Chinese “red tape” and perceived uncertainty in the country’s business laws.
A survey conducted by the German Chamber of Commerce in China last week found that twothirds of German businesses in the country had observed “unfair competition” when operating there.
Dong said that the future of China-Germany relations would be influenced by Berlin’s policy priorities and require a balancing act between ideology and economic interests.
“The confrontations between China and Germany will be less severe than China-US tensions, as the German economy is going into a downward trend and they really need economic cooperation with China,” she added, while also noting that ideological confrontations were likely to persist.
Shen Dingli, an international relations scholar based in Shanghai, said that political differences also factored into the equation, with some German politicians wanting to reduce economic reliance on China.
We believe in the Chinese market, and we’ll be doubling down on our investment SIEMENS CEO ROLAND BUSCH