A high altitude balloon floats over Billings, Mont., on Wednesday, Feb. 1, 2023.
MERICS Europe China 360°
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US-China relations + German debates on China


German dependency, diversification and decoupling debates on China

Ahead of the publication of Germany’s new China strategy, debate intensifies Berlin’s approach to China. Policymakers seem to agree on one thing: Diversification yes, decoupling no.

What you need to know:

  • China-strategy leak and update on the drafting process: A draft of the German China strategy and a China strategy paper of the Economy Ministry were leaked late last year, triggering a flurry of reactions. Chinese ambassador Wu Ken criticized the draft of the German China strategy that circulated on Chinese social media platform WeChat as being “guided by ideology,” causing each of the coalition parties to push back. Industry associations such as APA or BDI called for “a balanced approach.” Publicly the government tries to convey unity on issues related to the China strategy. Commentators have noted, however, that the Chancellor's Office would prefer less policy detail, perhaps to give greater leeway, whereas the Ministry of Foreign Affairs (MFA) pushed for a thorough and policy-oriented document.  
  • Debate on China strategy fuels debate on economic dependence: Economically speaking, Germany is the most China-dependent nation in Europe. However, studies that distinguish Germany’s vulnerabilities from its dependencies reveal a diverse picture, and the case for decoupling remains underwhelming. The debate gained momentum early last year when Russia's invasion of Ukraine raised urgent questions about structural energy dependence. The debate has evolved from a stage of mere recognition of dependence to the current stage where measures are being taken. The focus of government action currently lies on reducing import dependence of raw materials used in the automotive or solar industry. More actions are set to follow for imports in the pharmaceutical, electronic and textile industries.
  • German actors on economic dependence: The Chancellor, Vice Chancellor, and Foreign Minister are busy traveling Latin America, Africa, and India to find alternative exporters for specific goods that are currently majorly sourced from China. The government is calling on companies to diversify and is attempting to eliminate incentives, possibly by being more restrictive on providing investment guarantees for China. Medium-sized companies appear to be more active in this respect. Despite heightened geopolitical tensions and a potential cut in business ties due to a Taiwan conflict, larger German firms still look to strengthen their investments in China.

What to watch:

Germany is hurrying to diversify imports in certain vulnerable areas, such as raw material imports, but taking its time in others, for example, to assess companies' dependency levels. Disclosure requirements for companies are one way discussed to get a clearer picture of the situation.

Important divisions between the MFA and Chancellery remain and will shape the final strategy. Traditionally the Chancellery tends to have the final say when it comes to major decisions on foreign policy and China. The Liberals (FDP) and main opposition party CDU/CSU have called for the establishment of a national security council which could serve as a platform for more coordinated foreign policymaking and better representation of viewpoints when it comes to decisions on China.

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