South China Morning Post

Scholz urges fair competitio­n as rifts weigh on trade ties

Germany welcomes made-in-China vehicles but will not tolerate dumping, visiting leader warns

- Kandy Wong and Ralph Jennings

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

 ?? Photo: DPA ?? Chancellor Olaf Scholz yesterday visits the Shanghai innovation centre of Covestro, a German maker of high-performanc­e plastics. Scholz arrived in Chongqing on Sunday for a three-day visit to China.
Photo: DPA Chancellor Olaf Scholz yesterday visits the Shanghai innovation centre of Covestro, a German maker of high-performanc­e plastics. Scholz arrived in Chongqing on Sunday for a three-day visit to China.

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