Germany’s leader and top CEOs are visiting Beijing. They need China more than ever & More Trending News


Hong Kong/London
CNN Business

German Chancellor Olaf Scholz arrived in China on Friday with a staff of top executives, sending a transparent message: enterprise with the world’s second-largest financial system should proceed.

Scholz met with Chinese leader Xi Jinping at Beijing’s Great Hall of the People after touchdown within the capital Friday morning and was obtained by Premier Li Keqiang within the afternoon.

Joining Scholz for the whirlwind one-day go to is a delegation of 12 German trade titans, together with the CEOs of Volkswagen

(VLKAF), Deutsche Bank

(DB), Siemens

(SIEGY) and chemical substances big BASF

(BASFY), in line with an individual aware of the matter. They have been anticipated to satisfy with Chinese corporations behind closed doorways.

The group entered China with out present process a compulsory seven-day lodge quarantine customary for many arrivals. Images confirmed hazmat-clad medical employees greeting Scholz’s jet at Beijing’s Capital International Airport to check the official delegation for Covid-19 upon their arrival.

During the Friday morning assembly between the 2 leaders, Xi known as for Germany and China to work collectively amid a “complex and volatile” worldwide scenario, and mentioned the go to would “enhance mutual understanding and trust, deepen pragmatic cooperation in various fields and plan for the next phase of Sino-German relations,” in line with a readout from state broadcaster CCTV.

Speaking at a press convention with Premier Li, Scholz mentioned that Germany’s financial relationship with China had just lately turn into “more difficult” as a result of Beijing was making entry to a few of its markets more tough.

“We are seeing discussions in China tending more towards autonomy and less economic ties. And these views are ones that need discussing,” Scholz mentioned.

German Chancellor Olaf Scholz arrives at Beijing Capital International Airport on November 4, 2022.

Scholz’s go to — the primary by a G7 leader to China in roughly three years — comes as Germany slides in direction of recession. But it has fired up considerations that the pursuits of Europe’s largest financial system are nonetheless too intently tied to these of Beijing.

Since Moscow’s invasion of Ukraine this 12 months, Germany has been compelled to ditch its lengthy dependence on Russian power. Beijing has declared its friendship with Moscow has “no limits,” whereas China’s relations with the United States are deteriorating.

Now, some in Scholz’s coalition authorities are rising nervous about Germany’s ties with China.

The rigidity was highlighted just lately by a fierce debate over a bid by Chinese state delivery big Cosco to purchase a 35% stake within the operator of one of many 4 terminals on the port of Hamburg. Under strain from some members of the federal government, the dimensions of the funding was restricted to 24.9%.

The potential deal has raised considerations in Germany that nearer ties with China will depart important infrastructure uncovered to political strain from Beijing, and disproportionately profit Chinese corporations.

But Germany is hardly ready to rock the boat with Beijing because it grapples with the problem of reviving its struggling financial system. Its customers and corporations have borne the brunt of Europe’s power disaster, and a deep recession is looming.

If the European Union and Germany have been to decouple from China, it might result in “large GDP losses” for the German financial system, Lisandra Flach, director of the ifo Center for International Economics, informed CNN Business.

The Kiel Institute for the World Economy estimates {that a} main discount in commerce between the European Union and China would shave 1% off of Germany’s GDP.

Germany must shore up its export markets as ties with Russia, as soon as its predominant provider of pure fuel, proceed to unravel.

When it involves China, Germany gained’t need to “lose also this market, this economic partner,” mentioned Rafal Ulatowski, an assistant professor of political science and worldwide research on the University of Warsaw.

“They [will] try to keep these relations as long as it’s possible.”

As Western nations have imposed swingeing financial sanctions on Russia, China has publicly maintained its “neutrality” within the conflict whereas ramping up its commerce with Moscow.

That has triggered a backlash in Europe, the place some corporations are already changing into cautious of doing enterprise in China due to its stringent “zero Covid” restrictions.

Pressure on Berlin can be mounting over China’s human rights report. In an open letter Wednesday, a coalition of 70 civil rights teams urged Scholz to “rethink” his journey to Beijing.

“The invitation of a German trade delegation to join your visit will be viewed as an indication that Germany is ready to deepen trade and economic links, at the cost of human rights and international law,” they wrote within the memo, printed by the World Uyghur Congress. Based in Germany, the group is run by Uyghurs elevating consciousness of allegations of genocide in China’s Xinjiang area.

It steered Berlin was “loosening economic dependence on one authoritarian power, only to deepen economic dependence on another.”

In an op-ed printed in a German newspaper on Wednesday, Scholz mentioned he would use his go to to “address difficult issues,” together with “respect for civil and political liberties and the rights of ethnic minorities in Xinjiang province.”

A spokesperson for the German authorities addressed wider criticism final week, saying at a press convention that it had no intention of “decoupling” from its most vital buying and selling accomplice.

“[The chancellor] has basically said again and again that he is not a friend of decoupling, or turning away, from China. But he also says: diversify and minimize risk,” the spokesperson mentioned.

Last 12 months, China was Germany’s largest buying and selling accomplice for the sixth 12 months in a row, with the worth of commerce up over 15% from 2020, in line with official statistics Chinese commerce with Germany was value a mixed €245 billion ($242 billion) in 2021.

Still, the furor surrounding the Hamburg port deal is a reminder of the tradeoffs Germany has to confront if it needs to take care of shut ties with such a significant export market and provider.

A spokesperson for Hamburger Hafen und Logistik (HHLA), the corporate working the port terminal, informed CNN Business on Thursday that it was nonetheless negotiating the cope with Cosco.

Flach, of the ifo Center for International Economics, mentioned the deal warranted scrutiny as a result of “there is no reciprocity: Germany cannot invest in Chinese ports, for instance.”

A container ship from Cosco Shipping moored at the Tollerort Container Terminal owned by HHLA, in the harbor of Hamburg, Germany on Oct. 26.

However, it’s simple to overstate the affect of the potential settlement, mentioned Alexander-Nikolai Sandkamp, assistant professor of economics on the Kiel Institute for the World Economy.

“We’re not talking about a 25% stake in the Hamburg harbor, or even the operator of the harbor, but a 25% stake in the operator of a terminal,” he informed CNN Business.

Jürgen Matthes, head of worldwide and regional markets on the German Economic Institute, informed CNN Business that critics have been now not merely weighing the enterprise advantages of Chinese funding within the nation.

“Politics and economics have to be looked at together and cannot be taken separately any longer,” he mentioned. “When geopolitics comes into play, the view of China has very much declined and become much more negative.”

China’s current therapy of Lithuania has additionally deepened considerations that Beijing “does not hesitate to simply break trade rules,” Matthes added. The small, Eastern European nation claimed final 12 months that Beijing had erected commerce boundaries in retaliation for its assist for Taiwan.

China has defended its downgrading of relations with Lithuania, saying it’s appearing in response to the European nation undermining its “sovereignty and territorial integrity.” This 12 months, after a Lithuanian official visited Taiwan, Beijing additionally introduced sanctions in opposition to her and vowed to “suspend all forms of exchange” along with her ministry.

As the German delegation touched down on Friday, they have been confronted with one other difficulty, which has turn into the only largest headache for corporations throughout China.

“The biggest challenge for German businesses remains China’s zero-Covid policy,” mentioned Maximilian Butek of the German Chamber of Commerce in China.

“The restrictions are suffocating economic growth and heavily impact China’s attractiveness as a destination for foreign direct investment,” he informed CNN Business.

An aerial view of the urban landscape in Shanghai on Sept. 25. The city underwent a months-long Covid lockdown earlier this year.

He mentioned the broader restrictions have been so stifling that some corporations had moved their regional headquarters to different areas, comparable to Singapore. “Managing the whole region without being able to travel freely is almost impossible,” he added.

In a short assertion, Volkswagen informed CNN Business that its CEO was attending the journey since “there have been no direct meetings for almost three years” because of the coronavirus pandemic.

“In view of the completely changed geopolitical and global economic situation, the trip to Beijing offers the opportunity for a personal exchange of views,” the automaker mentioned.

Despite Beijing’s Covid curbs and geopolitical tensions, Germany has each financial incentive to remain near China.

Its dependency on China may be seen throughout industries. While about 12% of whole imports got here from China final 12 months, the nation was chargeable for 80% of imported laptops and 70% of cell phones, Sandkamp mentioned.

The vehicle, chemical and electrical industries are additionally reliant on Chinese commerce.

“If we were to stop trading with China, we would run into trouble,” Sandkamp added.

China made up 40% of Volkswagen’s worldwide deliveries within the first three quarters of this 12 months, and it’s additionally the top marketplace for different automakers comparable to Mercedes.

Wariness amongst some German officers over the nation’s closeness with China might filter right into a more restrictive commerce coverage, although financial cooperation continues to be in each events’ pursuits.

In September, Germany’s financial system minister Robert Habeck informed Reuters that the federal government was engaged on a brand new commerce coverage with China to scale back dependence on Chinese uncooked supplies, batteries and semiconductors.

Unidentified sources additionally informed the information company that the ministry was weighing new guidelines that may make enterprise with China much less enticing. The ministry didn’t reply to a request for remark from CNN Business.

But “despite all odds and challenges, China remains unrivaled in terms of market size and market growth opportunities for many German companies,” mentioned Butek, of the German Chamber.

He predicted that “the large majority will stay committed to the Chinese market and is expecting to expand their business.”

Companies seem like toeing that line. Last week, BASF CEO Martin Brudermüller was quoted in Chinese state media as saying that Germans ought to “step away from China-bashing and look at ourselves a bit self-critically.”

“We benefit from China’s policies of widening market access,” he mentioned at an organization occasion, in line with state-run information company Xinhua, pointing to the development of a BASF chemical engineering web site in southern China.

— CNN’s Simone McCarthy, Chris Stern, Lauren Kent, Nadine Schmidt, Claudia Otto and Arnaud Siad contributed to this report.

Germany’s leader and top CEOs are visiting Beijing. They need China more than ever

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