Germany inching closer to China unsettles Europe

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German Chancellor, Olaf Scholz, post his visit to China, rolled out a series of surprises, becoming the only European leader to visit the country after the COVID-19 pandemic. The exfoliating unity among the European nations is laid bare by Russia’s attack on Ukraine. Germany’s stance to extend its ties on the economic and political front with China has left Europe in splits. It also goes without saying that China is yet to condemn Russian aggression in Ukraine, but a lot can be discussed on how Europe is falling apart, exposing its weakening sense of unity, but still counting on China to safeguard its economic interests.

According to a report by Reuters on October 26, 2022, Germany approved China’s COSCO (Chinese Ocean Shipping Company Organisation) to buy a 24.9% stake — turning back from the earlier promised stake of 35% in the Hamburg port deal — the country’s largest port. The decision to allow the COSCO to invest in the deal left the Green party and Free Democrats fumed as Social Democrats led by Olaf Scholz pushed the button to approve the deal.

In fact, six German ministries had rejected the idea of approving the stake as it claimed that the shipping company was already enjoying a vast leverage in the port. In a statement released on October 25, the economic affairs ministry, said, “The reason for the partial prohibition is the existence of a threat to public order and safety.” The decision attracted massive criticism from Germany’s president, Frank-Walter Steinmeier, who opined to Public Broadcaster ARD on extending relations with China during his visit to Ukraine: “We have to learn lessons, and learning the lesson means we have to reduce unilateral dependencies wherever possible, and that applies to China in particular.”

The Chinese company has claimed its stake but will be obstructed from having its official say in any formal strategic developments of the port owing to a stake that is below 25 % — short of veto power.

Why did Olaf Scholz press ahead with the Hamburg Port deal? 

Despite the political pressure from coalition parties, Olaf Scholz pushed for the Hamburg Port deal. A pragmatic solution was designed to limit the stake below 25 % — cutting through the earlier promise of 35%. In a report published by POLITICO, Svenja Hahn, who is a member of the European Parliament’s Renew Europe group and the German Free Democrats, was quoted, “Viewed as a whole, it remains a serious strategic mistake to place parts of critical infrastructure in Chinese hands. After all, China has successively bought into European ports, but excludes foreign ownership of ports in its own country,” she said. “This shows that cooperation with China is not a partnership of equals.”

Furthermore, on 31st October 2019, in a report published by CSEBA (Chinese South-East European Business Association), COSCO invested in building an inland rail terminal in the Western part of Germany, Duisberg. The undue involvement of Chinese investment in Europe is making it a hard pill to swallow as Europe hasn’t ever been laid bare like now. When Europe is finding its ties being challenged by Russia in Ukraine, Germany shook hands with China which is officially yet to condemn the military operation in Ukraine by Russia. China has expressed its displeasure over the nuclear threat erupting out of the war but hasn’t been a staunch opposition to Russia’s aggression neither at United Nations nor in its bilateral diplomacy with Russia.

China’s state news agency, Xinhua, in its report, published that China’s president, Xi Jinping, opined: “The international community should jointly oppose the use of or threats to use nuclear weapons.’ Xi stopped short of asking Russia to end its special military operation, seemingly a full-scale war, in Ukraine.

But there is far less written on the Sino-German relations as economical fronts still remain undiscussed. To corroborate, according to a report by Bloomberg, the German chancellor was accompanied by 12 German companies to China which comprised Adidas, Deutsche Bank, Siemens, vaccine maker BioNTech, Volkswagen, BMW, BASF, Wacker Chemie, Bayer, and Merck. It hints at how Germany would choose to extend its economical boundaries with China while reaping security from the Umbrella of NATO.

In fact, China has been Germany’s biggest trade partner in the last six years. In a report published by the Rhodium Group, BMW, a German automobile giant, had increased its stake in the China JV from 60% to 75%, which also talks at length about the doors kept wide open by China for the European market to reap benefits in the Chinese market. It also suggests that in the last four years, Germany along with the Netherlands, the UK, and France contributed nearly 87 % of the total investment value in China from the EU region. Germany among the four nations has topped the chart for investing 43 % of total investment by the four nations.

The statistics solely back the economic developments between Germany and China. The USA will play a crucial role when Germany further reaches out to China for bilateral ties and trade, keeping the gates open for Chinese market to lock horns in Europe amidst resistance by the second world countries. The USA might beat the drums to wake up Europe to see China’s aggressive intent via German route but it will still fall short of stopping the dragon from breathing fire. The US President, Joe Biden and Xi Jinping are all set to face each other in their first in-person talks on November 14, 2022, in Bali, Indonesia. The two leaders are expected to discuss trade policies, Russia-Ukraine conflict, and Taiwan conflict.

China is already having its fancy time while enjoying its ties with Russia but Germany’s decision to allow China to claim stake in its most critical port, in terms of security and business, will only add salt to the wounds of economically weakened Europe.

(The views expressed in the article are of the author’s own and not of the publication’s or any employee affiliated with Business Upturn)