Why Germany’s Newly Released China Strategy is More Than Just a China Strategy

Germany’s first ever China Strategy is a symbol of a Zeitenwende in the relations between Germany and China. In the roughly one-year-and-a-half process of shaping the Strategy, however, the coalition government struggled hard to find common ground and struck a rather pragmatic compromise in the end.

Germany’s traffic light coalition ambitiously stated the need for a “comprehensive China Strategy” in its coalition agreement published in December 2021. This kicked off the drafting of Germany’s first-ever China Strategy, which was finally released on July 13^th, 2023. It was a complex and difficult process.

Two drafts were leaked to the press over time, one from the German Foreign Ministry under Annalena Baerbock and one from the Ministry of Economic Affairs and Climate Action under Robert Habeck, which were much sharper and more confrontational in tone.

It became clear in the process, however, that the chancellery under Olaf Scholz was not on board with that approach. The release of the China Strategy was postponed until after the 7^th Sino-German intergovernmental consultations, which had aspects of “business as usual” in Germany’s dealings with China.

Now the Strategy is out, and of course, it is a compromise among chancellery, ministries involved and coalition parties. But it is still good to have it. Never has China been discussed as much by so many as during the process of drafting the Strategy. All democratic parties, or at least party factions, have taken this as an occasion to discuss China internally and to issue their own position papers on China. And so did interest groups, think tanks, research institutes and many other stakeholders.

This process was valuable in itself in recalibrating how Germany looks at and deals with China and bringing all issues at hand to the table. It became quickly clear that a China Strategy is not only about China but also, for example, about the “homework” that Germany and the European Union have to do to strengthen their capacity to act independently and more assertively with regard to China. I would therefore frame the topical areas included in the China Strategy as such: “with China”, “about China”, “beyond China”, and “about ourselves”.

With China

Very importantly, from a European perspective, right after the introduction, a whole chapter is dedicated to “Germany’s Strategy on China as part of the joint EU policy on China”. It contains a clear commitment to an EU-wide coordinated approach towards China and for Germany to “align its policy on China with that of Europe’s”.

Regarding Germany’s bilateral relations with China, the Strategy is very clear on the challenges arising from China’s civil, political and human rights violations, lack of reciprocity and its attempts “to reshape the existing rules-based international order”.

The Strategy acknowledges that China will remain an important economic partner and also “is an essential partner as regards global challenges”, such as tackling the climate crisis or preventing pandemics. The EU’s triad “partner, competitor and systemic rival” is mentioned as an equal dimension, even though the focus has shifted towards rivalry, especially since Russia’s war against Ukraine.

About ourselves

The chapter on “Strengthening Germany and the EU” is about ourselves (internal dimension) on the one hand and about China (external dimension) on the other. A clear focus is on “the integration and resilience of the EU internal market” as the key to Europe’s competitiveness and sovereignty.

Measures about ourselves, i.e. doing our homework on the internal market, include: fostering innovation and production capacities (especially with regards to the green and digital transformation), advancing the capital markets and banking union, and creating an internationally attractive research and development landscape.

The last part of the Strategy, which deals with building expertise on China, contains further measures about ourselves on the German level: it acknowledges the lack of sufficient China competence in Germany and the need to create and enhance competencies in all areas and on all levels of politics, the economy and society.

About China

Measures about China are framed alongside the concept of de-risking economic relations, put forward by Ursula von der Leyen in March, and deal with the question of how to reduce critical dependencies that make the EU and its member states susceptible to economic coercion.

These measures include diversifying supply chains away from China, applying and enhancing the EU trade defence toolbox, an updated and separate German investment screening law, closer scrutiny of investment and export credit guarantees by the German government and a – rather weakly framed – appeal to companies to “take geopolitical risks sufficiently into account in their decision-making”. It is at least cautiously mentioned that firms should internalise “cluster risks” to prevent the need for state-funded bailouts in the case of a crisis.

Beyond China

The last part of the Strategy deals with “International cooperation” and thus goes beyond China. It manages to mention all five continents and makes clear that Germany and the EU have to substantially increase global engagement, especially with like-minded partners like the US and G7, but also with countries in the so-called Global South, to counter China’s political initiatives that aim at reshaping the international order to be more aligned with China’s goals and interests.

Stronger regional cooperation, such as with the Indo-Pacific, free trade agreements, such as ASEAN, MERCOSUR and also with the US are on the table again. Other measures to diversify German foreign relations away from China include a strong push for implementing the EU’s Global Gateway Initiative and achieving a substantial reform of the WTO.

What got “lost” in the process

As can be seen from the above, the released Strategy contains some promising aspects and offers a comprehensive picture of relations with China and beyond. Compared with the leaked draft from the Foreign Office, however, some interesting aspects seem to have gotten lost in the compromise.

Two of them are especially eye-catching from my point of view: First and probably most importantly from a European perspective, the language of an envisioned Europeanization of Sino-German intergovernmental consultations got toned down far too much: While the draft clearly states that participation by EU institutions should be made possible, the Strategy itself only mentions that case-by-case participation will be explored.

This is deplorable in so far as it somewhat counteracts the strong pledge for an EU-wide approach to China and risks a back to “business as usual” in the consultations. The last round of talks, as stated above, certainly left this impression.

The second aspect is the fact that the Strategy does not refer to China or its political system as authoritarian even once, while the older draft did so several times. In times of clearly acknowledged systemic rivalry (which certainly includes different political systems), it is difficult to understand why the direct language on this was dropped in the end. Empirical evidence is abundant.

The Bertelsmann Transformation Index, for example, which analyses transformation processes towards democracy and a market economy in 137 countries, clearly puts China in the category of “hard-line autocracy”. The Strategy could have been candid about this important and defining difference that impacts German relations with China.

Outlook: After the Strategy, the real work at home and abroad begins

Germany’s first-ever China Strategy certainly is a Zeitenwende in its approach towards its largest trade partner. Despite being a compromise, the Strategy takes a more sober and realistic view of mutual relations than Germany did in the past and makes clear that China is not only a foreign policy challenge but also a domestic one. Now that it has been released, the real work, i.e. concretisation of measures and their implementation, is just about to start.

Stakeholders on all levels should be involved here. Implementation across all administrative levels – from federal states to districts and municipalities – is key, but it also poses great challenges as the awareness of China-related issues and closely linked China competence varies greatly in public administration.

The Strategy promises to build more expertise on China, but will require that a substantial budget be allocated to this task. However, the Strategy also states that “given the considerable demands on our public finances at present, we will strive to implement this Strategy at no additional cost to the overall federal budget.” This raises concerns about whether the goal of increasing China competence in Germany to the extent needed will be achieved in time.

A next important step for Germany is to really Europeanize the Strategy and take on a key role in shaping the EU’s future policy on China. That also means striving more assertively for a coordinated European approach and prioritising EU interests over national and corporate interests, if necessary, to achieve this.

However, given how the last round of intergovernmental consultations went and how the attempt to Europeanize the consultations was watered down, in the end, it leaves one wondering how serious Germany will really be about better coordinating China policy at the European level.

To end on a more optimistic note, the Strategy is not carved in stone. Its evaluation and further development are already planned, and this is key to dealing with the dynamic, unstable and fast-changing international environment we are facing now and in the foreseeable future.

About the author

Cora Jungbluth is a senior expert in the Europe’s Future Program at the Bertelsmann Stiftung. Her research focus is on China, foreign direct investment and international trade (especially the role of emerging economies).

Germany is Less Dependent on Profits From China Than Assumed (globaleurope.eu)

Asia Pacific: The Test Case for a Geopolitical EU Trade Strategy (globaleurope.eu)