Scholz visit a turning point in EU-China ties
China Daily

The first China-Europe freight train from Yinchuan, Ningxia Hui autonomous region, departs for Budapest, Hungary. [Photo provided to]

German Chancellor Olaf Scholz’s visit to China on Friday has been welcomed as well as criticized, as the visit comes amid worsening China-European Union relations due to the EU’s response to reports of Beijing’s “unfair” trade practices and “human rights abuses”.

On the other hand, China has been Germany’s biggest trading partner over the past years, with the bilateral trade volume surpassing €245 billion ($243.43 billion) last year. Also, China-EU trade hit $800 billion for the first time in 2021, with accumulated two-way investment crossing $270 billion.

Scholz’s visit, at the invitation of Premier Li Keqiang, will be the first by a European leader since the COVID-19 pandemic broke out.

The economic turbulences in Europe, including in Germany, as a result of the Russia-Ukraine conflict-induced energy crisis, suggests Germany is looking for rapid solutions to the problems faced by German automakers, chemical industry and services sector, and trying to ensure the supply of rare metals, intermediate goods to keep the German industry going.

A survey of eurozone companies in October 2022 has added to the fears of an impending economic recession and slump in investment, with the business activity in Germany contracting at the fastest rate in almost two years.

“Companies are nervous about the economic outlook, margins are under pressure and borrowing costs have risen,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. This is making them “more cautious” about investment spending, he said and added that the strongest pressure on investment was in the chemical, plastics and basic resources sectors.

Especially, the German machinery makers want to maintain close trade ties with China. The industry is highly dependent on foreign trade, with exports accounting for about 80 percent of its requirements. In August, foreign orders for Germany’s machinery sector rose by 2 percent from the previous month, while domestic orders fell by 6 percent.

Some see Scholz’s visit as a threat to the unity of the EU. “Considering what’s going on in China … It’s in their interests to divide us. It should be in our interests to stay united,” said Estonian Prime Minister Kaja Kallas. “It is also important that we don’t have separate deals with China, because that would mean we are weak as a union,” Kallas added.

And according to Ricardo Borges de Castro, associate director and head of Europe in the World Programme at the European Policy Centre, the fact that Scholz is visiting China less than two weeks after the conclusion the 20th National Congress of the Communist Party of China sends the wrong message.

However, the opposite might be true, because Germany’s economic failures would threaten the unity of the EU, by having negative spillover effects on other EU member states, which in turn could provide fuel to ultranationalist, populist and extreme right or extreme left political forces. The EU has learned valuable lessons from Brexit, and before that from the fight against nationalist forces after the 2008-09 global financial crisis broke out.

This means the EU realizes it needs cooperation, not more tensions, especially at a time when the budgets of the bloc and its member states are getting depleted by the energy crisis and their support to Ukraine in its conflict with Russia. The EU wants the conflict to end and peace to return in Ukraine. In this regard, Scholz, during his visit, could convince China to play a more active role, together with other related parties, in helping end the conflict by urging both Russia and Ukraine to at least agree to a cease fire.

Given Germany’s influence on the European Commission, Scholz’s visit could have the silent backing of EU institutions. It could be seen as the first step to re-build the EU’s relations with Asia, with Germany leading the efforts, in order to course toward a multipolar world marked by cooperation and mutually beneficial relations. This will not mean the EU’s departure from transatlantic cooperation with the United States. Instead, it will mean strengthening trans-Eurasian cooperation without weakening transatlantic cooperation to promote multilateralism.

The future of the world will hopefully not be nasty competitions among different political systems. Rather it ought to be cooperation by shelving the differences and making efforts to resolve the disputes in a diplomatic way.

Earlier in October, at the 13th German Mechanical Engineering Summit, Scholz reiterated the importance of economic globalization for realizing prosperity and opposed decoupling from countries, including China. Besides building more comprehensive and stable trade relations with the EU and the US, Germany should also continue, rather strengthen, trade ties with other countries, including China and other emerging economies in Asia, Africa and Latin America.

Corroborating Scholz, EU Commissioner for Trade Valdis Dombrovskis said at the summit: “Decoupling from China is not an option for companies in the European Union. ” He also said China is an important growth market and a valuable source of affordable investment. “The EU should continue engaging with China with pragmatism and without naivety. Our trading relationship needs more balance and reciprocity, ” he added.

Last but not the least, Scholz’s visit could boost Germany’s role in economic and foreign policy fields.

The author is a former officer of the European Commission. The views don’t necessarily reflect those of China Daily.