Germany’s China Policy Moves Past Merkel

Yixiang Xu

China Fellow; Program Officer, Geoeconomics

Yixiang Xu is the China Fellow and Program Officer, Geoeconomics at AGI, leading the Institute’s work on U.S. and German relations with China. He has written extensively on Sino-EU and Sino-German relations, transatlantic cooperation on China policy, Sino-U.S. great power competition, China's Belt-and-Road Initiative and its implications for Germany and the U.S., Chinese engagement in Central and Eastern Europe, foreign investment screening, EU and U.S. strategies for global infrastructure investment, 5G supply chain and infrastructure security, and the future of Artificial Intelligence. His written contributions have been published by institutes including The Chinese Academy of Social Sciences, The United States Institute of Peace, and The Asia Society's Center for U.S.-China Relations. He has spoken on China's role in transatlantic relations at various seminars and international conferences in China, Germany, and the U.S.

Mr. Xu received his MA in International Political Economy from The Josef Korbel School of International Studies at The University of Denver and his BA in Linguistics and Classics from The University of Pittsburgh. He is an alumnus of the Bucerius Summer School on Global Governance, the Global Bridges European-American Young Leaders Conference, and the Brussels Forum's Young Professionals Summit. Mr. Xu also studied in China, Germany, Israel, Italy, and the UK and speaks Mandarin Chinese, German, and Russian.

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As Germany’s Merkel era ended, her brand of engagement-driven China policy seems also to have been consigned to history. The writing was already on the wall after the China-EU Comprehensive Agreement on Investment, Merkel’s last major push for cooperation with China, drew intense criticism from many foreign policy experts and politicians in Germany and whose ratification was put on ice by the European Parliament.

In their coalition agreement, the Greens, the Social Democrats, and the Free Democrats made it clear that the German government’s China policy will be based on an updated, more critical understanding of Chinese power and emphasize value and strategic dimensions of the bilateral relationship. Xinjiang, Hong Kong, and Taiwan, sensitive topics which previously were discussed with Chinese government officials behind closed doors, are now prominently mentioned in the coalition agreement. Germany no longer seeks to pursue a strategic partnership with China but will work with like-minded countries to reduce strategic dependence on China.

Both the Green party and the Free Democratic Party have openly voiced criticism toward Beijing and want to see Germany’s grievances with China addressed clearly and more effectively. Key government ministries, including the Foreign Office, the Ministry of Finance, and the Ministry for Economic Affairs and Climate Action, are headed by top Green and FDP politicians who have demanded a course change in Germany’s dealing with Beijing. In particular, the Green Party Foreign Minister Annalena Baerbock has called for “toughness” in German foreign policy as well new sources of leverage leverages. Even though the pragmatic Chancellor Olaf Scholz has not publicly embraced a similar approach, it seems unlikely that the chancellery will dictate Germany’s future China policy without substantial input from relevant ministries.

This is welcome news. A China policy that reflects the new reality of the relationship between Berlin and Beijing, which the coalition agreement defines as partners, competitors, and systemic rivals, is not only crucial for addressing Germany’s present dependency on economic ties with China but also necessary for positioning Germany on global issues and in strategic theaters where China is increasingly an important but contentious partner.

The German government’s avowed support for more coordinated China policy at the EU level aligns with the bloc’s growing desire to push back against China’s coercive behaviors or remedy asymmetric advantages China enjoys. The development of the EU-wide foreign investment screening mechanism, an anti-foreign subsidies instrument, and an anti-coercion instrument is a trend that will continue as China is increasingly turning to coercion to achieve economic and political goals. Beijing’s decision to effectively stop trade with Lithuania and pressure companies to cut ties with Lithuanian suppliers as punishment for the country’s hosting of a new Taiwan representative office under the island’s own name will not go unnoticed in Berlin. While this ongoing conflict may not have immediate impact on the bilateral Sino-German relationship, it presents the kind of worst-case scenario many Germans have long resisted to contemplate and highlights the need for building collective European capacity to push back against Chinese coercive behaviors.

The coalition’s strong emphasis on transatlantic cooperation in dealing with China alleviates concerns about an equidistant Germany and offers some reassurance for the Biden administration’s efforts in strategic competition with China. Climate and human rights are among the issues that could see closer policy coordination between Berlin and Washington. Some topics including supply chain resilience, technology standards, foreign investment screening, and export control, are already under discussion at the U.S.-EU Trade and Technology Council and would benefit from direct U.S.-German consultations. However, factors such as extensive and, in some cases, deepening German corporate investments in Chinese technologies and manufacturing as well as the hardening U.S. bipartisan political stance to compete with and confront China, and to do so alone when deemed necessary, present challenges to any ambitious plan for transatlantic China policy alignment.

Furthermore, while the coalition government is clearly looking to broaden its strategic options vis-à-vis China by expanding engagements with important partners in the Indo-Pacific region, it will need to not only offer a positive vision, but also lay out specific and detailed objectives and be ready to provide requisite resources. At the same time, as multiple regional security partnerships, like the QUAD and AUKUS, develop and concerns over conflicts, such as mainland China’s threat to take Taiwan by force, intensify, Berlin will also have to find its voice in regional security discussions.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American-German Institute.