The Port of Hamburg is Germany’s gateway to the world. Above all, it is a gateway to China. The economic giant from the Far East is the Port of Hamburg’s biggest customer. In the first half of this year alone, more than 1.3 million China containers arrived in the Hanseatic city. Many of them at the container terminal in Tollerort.
The Chinese shipping giant COSCO now wants to take a 35 percent stake in the terminal. Hamburger Hafen und Logistik AG (HHLA) would like that too: This would make the container terminal in Tollerort a preferred transshipment point in Europe for the largest shipping company in the world.
But in mid-August it became known that the Ministry of Economic Affairs in Berlin has reservations about COSCO’s entry into Hamburg. According to the Reuters news agency, the federal government is at odds as to whether it should approve the COSCO participation.
The dispute over the COSCO commitment is an example of how one of the pillars of the German business model is at stake in the form of economic relations with China. After Germany’s dependence on Russian gas after Russia’s attack on Ukraine proved to be a weak point, Germany is struggling for its relationship with China: how to deal with an autocracy that has been Germany’s largest trading partner for years, in which around 5,000 German companies are active ?
How to deal with the country that EU documents describe as a partner, competitor and strategic rival at the same time – with the emphasis shifting more and more towards rivalry?
Robert Habeck, Green Economics Minister and Vice Chancellor, has already announced a “more robust trade policy” towards China. At the end of the G7 conference of trade ministers, Habeck declared in mid-September that “the naivety towards China is over”.
At the end of May, Habeck had already refused the VW Group guarantees for investments in China. A shock: For decades, German companies’ business in China had been made easier with investment and export guarantees.
China expert Tim Rühlig from the German Council on Foreign Relations (DGAP) on the change of course: “That could soon be a method. In the near future, if German companies want to invest or trade with China, they will do so at their own risk and will no longer be able to rely on government guarantees and safeguards.”
The German state, Rühlig told DW, “no longer wants to provide incentives for German companies to expand their business in China.” They do it anyway.
According to a study by Jürgen Matthes from the German Economic Institute (IW), the German economy invested around ten billion euros in China in the first half of the year – a record amount by far.
However, this is concentrated in a few sectors: According to a study by the Rhodium Group published in mid-September, car manufacturers and chemical companies in particular are still looking for access to the Chinese market. The four German industrial giants VW, BMW, Mercedes and BASF alone account for a third of European direct investment in China, write the Rhodium authors.
Jörg Wuttke, President of the European Chamber of Commerce in China, confirms the findings of the Rhodium experts, according to which 80 percent of European investments are made by just ten large European companies.
Wuttke’s conclusion to DW: “This shows that the rest of the European commercial companies are not leaving China, but are currently interested in new investments in other countries and are also thinking about diversification.”
Wuttke, who is also BASF’s chief representative in China, admits that the top ten European companies are heavily dependent on China. And he sees the dependency on imports of rare earths, preliminary products for the pharmaceutical industry or for photovoltaic systems.
For the economy as a whole, however, he thinks the comparison with Russia is wrong: “We have a pipeline with oil and gas from Russia. We have a pipeline with toys, furniture, sports equipment, clothing and shoes from China. Most of these products – I would say 90 percent – are easily replicable elsewhere.”
How about exporting to China? According to IW expert Matthes, around three percent of German jobs depend on it. “That’s over a million jobs. That’s a significant number, but it’s in relation to the more than 45 million people in employment in Germany,” Matthes told DW. The IW expert concludes: “Dependence on China as an export market is relevant at the macroeconomic level, but it is not as great as the media often claims.”
Nevertheless, within the government, the Greens in particular are putting pressure on the China business. At the beginning of September, Foreign Minister Annalena Baerbock warned in a speech to company representatives: “We cannot afford to repeat the principle of hope ‘with these autocratic regimes it won’t be that bad’ a second time.”
The Greens politician announced the development of a China strategy as part of the national security strategy that is currently being worked on: “It is important to the German government and to me that what we have learned from our dependence on Russia is incorporated into the China strategy anchor.”
According to Reuters information, the Ministry of Economic Affairs is planning how to get companies to turn to other Asian countries instead of China. Not only the government investment and export guarantees are up for grabs.
The state-owned KfW bank is to check whether it can scale back its China program and instead offer more loans for business in countries like Indonesia. Smaller programs such as trade fair subsidies are also under scrutiny.
The German economy has long been sensitized. Last year, the Federation of German Industries (BDI) already considered foreign trade cooperation with autocracies. Result: A “discussion paper on the design of economic relations in international system competition”. The BDI authors advocate a “concept of responsible coexistence in foreign trade policy and cooperation with clear boundaries.”
At Industry Day in June, Janka Oertel, China expert at the think tank European Council on Foreign Relations, ECFR, had the opportunity to warn the managers present about domestic political developments in China: for a long time, the economy had been the focus of Chinese politics . But now it is very clear: political goals take precedence over economic goals.
For many managers, however, the course changes in the Ministry of Economics go too far. “The state funding and protection of German companies’ business in China must be maintained in principle,” said the chief executive of the Asia-Pacific Committee of German Business (APA), Fridolin Strack, to Reuters. According to the APA, Chinese investments should also be welcome in Germany and Europe. However, Strack did not want to comment on the specific case of the COSCO entry in the port of Hamburg.
Author: Matthias von Hein
According to the German Association of Pharmacists, medicines ranging from fever syrup to cancer therapy are becoming more and more common in Germany and are not available for longer. “More than 250 funds are currently reported as non-deliverable”.
The original of this article “Germany is fighting for a harder course” comes from Deutsche Welle.