The awakening is difficult for Germany. The Russian war in Ukraine highlights the fragility of its economy. While the reliance on Russian coal, oil and gas has often been cited by Berlin as opposing a ban on importing gas from Russia into the European Union, another reliance, also linked to the export-based model, is raising fears. across the Rhine: that with regard to China. In an interview with Die Zeit newspaper this Wednesday, German Finance Minister Christian Lindner (also leader of the liberal FDP party) expressed concern about Germany’s “strong economic dependence” on China, calling for “diversification”. of the country’s trading partners, in a context of international tensions exacerbated by the war in Ukraine.
Very strong economic ties between China and Germany
“We need to diversify our international relations, including for our exports,” he said. war has raised the question of the trade relations that Germany, an exporting country, has with other countries accused of violating human rights, such as China.
As an exporting country, Germany is indeed China’s most important economic partner. In 2021, more than 245 billion euros was exchanged between the two countries, an increase of 15.1% compared to the previous year, which was marked by Covid-19. Many German industries have moved part of their production to China and are therefore massively importing elements essential to their activity from this country. In addition, China is one of the main customers of the German automotive sector.
“Perhaps now is the time to prefer doing business with people who are not only business partners, but also want to be partners from a values perspective,” said Christian Lindner. The war in Ukraine has raised questions about Berlin’s commercial ties with other countries accused of human rights violations, such as China.
German industrialists plan to reduce their presence in China
These comments come because, according to a study published in late March by the economic institute IFO, many manufacturers are already considering reducing their presence in China. According to this work, “nearly one in two companies” that claim to be dependent on Chinese inputs are planning to cut these imports. In the German manufacturing sector, “46% of companies say they source their manufacturing components from China” and of these, “almost one in two plans to reduce these imports in the future,” said Lisandra Flach, head of international economics at the IFO and co-author of the study.
The fall of the Iron Curtain in the late 1980s opened up important trade opportunities with China and the ability to relocate production there at a lower cost for many German companies. But against a backdrop of mounting geopolitical tensions, 41% of respondents now cited “political uncertainty” as a reason to reduce their purchases of Chinese inputs.
The war in Ukraine and sanctions against Russia “shed new light on the geopolitical importance of economic interdependence with China,” according to the IFO study conducted in February of 4,000 companies and published on the eve of a virtual summit. between the EU and China. leaders.
Already showered by the Covid-19
The enthusiasm of German bosses to obtain supplies from the Middle Kingdom has already been dampened since the Covid-19 pandemic, with the blockades of factories and ports in China and the increase in delays and freight costs being monitored. Added to this are the human rights violations in China, especially in the Xinjiang region, and the effects of state capitalism in China since Xi Jinping’s presidency, which are increasingly being discussed.
This is evidenced by Beijing’s recent blockage of imports from Lithuania against a backdrop of diplomatic tensions with Taiwan.
In fact, according to the research, the dependence on imports from China is mainly reflected in raw materials and less in industrial products. About 65% of the raw materials used in the manufacture of electric motors come from China, especially rare earth metals, which are also essential for the construction of wind turbines.
The “biggest challenge for Germany and Europe is the diversification of the countries from which the raw materials come, which is much more difficult than with finished products,” according to the IFO.
The study’s authors distance themselves from the “decoupling” calls that are “rising in Germany,” sharply cutting themselves off from the Chinese economy because it would “disrupt specific key supply chains.”
On the other hand, they are calling for “free trade agreements” with emerging countries to help companies diversify their supply chains, citing the case of stalled negotiations with India or Malaysia.