China-Germany ties are resilient despite EU push to ‘de-risk’, says Beijing envoy to Berlin

Despite being set against a backdrop of Brussels’ “unpopular” de-risking approach, China’s trade relations with Germany are resilient, Beijing’s envoy to Berlin said.

In an exclusive interview with the South China Morning Post, Wu Ken, Chinese ambassador to Germany, spoke highly of the business ties between the two countries, which he said reflected the “unpopularity” of the European Union’s “de-risking” policy against China.

“In the past year, German companies have actively embraced the Chinese market and taken practical steps in giving a ‘vote of confidence’ to the Chinese market, and that highlights the strong resilience of Sino-German economic and trade relations,” he said.

The EU proposed de-risking its relationship with China last year in response to what it called an “increasingly assertive” Beijing on the global stage and the bloc’s economic overdependence on China. The EU has a nearly €300 billion (US$325 billion) deficit with China, its second-largest trading partner.

In alignment with the EU, Germany released its first China strategy last year, urging its companies to de-risk from China – its biggest trading partner.

But many German businesses seem unmoved and continue to invest heavily in China. German carmaker Volkswagen and electronics giant Bosch each invested over US$1 billion last year in China’s electric vehicle market and Siemens spent €140 million (US$151 million) to expand a hi-tech manufacturing plant in China.

German direct investment in China rose 4.3 per cent to a record high €11.9 billion last year, according to a German Economic Institute (IW) think tank report obtained by Reuters.

According to Wu, both Berlin and Brussels have had an “increasing rational understanding of China” recently as more began to reflect on the “risks brought by de-risking”.

“Many entrepreneurs told me that they do not agree with the so-called ‘de-risking’ with China,” the envoy said.

“They are, as always, optimistic about the Chinese market and the prospects of cooperation with China. They frankly admit that China’s development is an opportunity rather than a challenge – giving up the Chinese market is tantamount to saying goodbye to opportunities and growth.”

A business confidence survey released by the German Chamber of Commerce in China in January showed that 91 per cent of 566 German companies intended to continue to do business in China, and more than half planned to increase investment in China. About 64 per cent believed China’s current economic slowdown was temporary and that the country could bounce back in one to three years.

But China’s slower-than-expected economic recovery, tightening regulations on foreign investments and increasing tensions with the US are driving a retreat of foreign investment away from China. While most German firms are still reinvesting their profits in China, they are hesitant to pour in new funds and are diversifying their supply chains to other Asian countries to mitigate risks.

Wu told the Post that many German firms he had been in contact with expressed worries about the growing trend of “anti-globalisation” encouraged under the EU’s de-risking strategy. Under the strategy, the bloc is weighing the application of punitive tariffs to cheap Chinese electric vehicles for what it says is the protection of local manufacturers.

China is rising as a global leader in the electric vehicle industry, with leading Chinese brands such as BYD, Nio and Geely expanding rapidly in Europe.

Wu urged the EU to have an “open and fair” mind towards Chinese enterprises, saying its protectionist measures would harm its own long-term development and hinder global prosperity.

“The success of China’s electric vehicles is the success of globalisation. China’s electric vehicles are widely popular around the world, not relying on subsidies but improving quality and controlling costs through innovation, which has also contributed to global green and low-carbon development,” he said.

“The world needs more cooperation, not estrangement and confrontation. A proper understanding of ‘de-risking’ should be about [countries] addressing challenges together through close cooperation.”

The EU’s anti-subsidy probe into Chinese EVs is expected to conclude by the end of the year. In Europe, there are mounting concerns over potential retaliatory measures from Beijing on imports of European vehicles, with Germany, the biggest vehicle contributor to China, expected to be hit the hardest.

German Chancellor Olaf Scholz, who has warned the EU against protectionism, is expected to travel to China with a large business delegation next month, according to a report by Reuters last month.

Scholz was the first European leader to visit China after Xi secured his third term at the 20th Communist Party congress in October 2022. His trip generated much scepticism from the EU as he was viewed as walking a delicate line amid the bloc’s tougher China policy.

China has not confirmed that Scholz will travel to Beijing in the coming weeks.

Wu said China had always attached great importance to relations with Germany, which he said had “global significance that transcended bilateral ties”.

“China is willing to work with Germany to maintain high-level exchanges, continuously enhance mutual trust and deepen practical cooperation,” he said.

“As all-round strategic partners, China and Germany move forwards together in the spirit of mutual benefit, win-win and mutual achievement. We grow together in the spirit of mutual exchanges and learning from each other’s strengths.”

“This is a valuable experience of the smooth development of China-Germany relations over the past few decades and is worthy for both sides to cherish and pass on,” he added.

The Ukraine crisis has cast a shadow over China’s relations with EU countries, with Brussels sceptical about Beijing’s neutral position and peace efforts because of its close ties with Moscow.

Li Hui, Chinese special envoy for Eurasian Affairs, wrapped up a second peace tour this month. He met officials from several European countries, including Germany, in an apparent attempt to seek a peaceful solution in the Ukraine war.

Without disclosing details, Wu said China and Germany had found much consensus on the crisis, possible next steps and the prospect of peace talks.

During his trip, Li was seen to be pushing for Russia’s participation in the coming Ukraine peace summit in Switzerland. Both Russia and Ukraine previously rejected the possibility of Moscow taking part in the summit.

Wu said: “China supports the timely convening of an international peace conference recognised by both Russia and Ukraine, with equal participation by all parties, and fair discussion of all peace plans, and is willing to continue to play a constructive role in the political settlement of the Ukrainian crisis”.

Quelle:SCMP