China-German business relationship contributes to the world

The China trip by German Chancellor Olaf Scholz, accompanied by a large group of CEOs of top German business giants, including Siemens, Volkswagen, BMW, Mercedez Benz, Bayer, Merck, etc. will be the second China trip of this top-level in 17 months. It highlights the strong and enduring business relationship between the world's second and third largest economies.

According to German official statistics, two-way trade between the two countries reached 253.1 billion euros in 2023, although 15.5 percent down over 2022, still beat the US by a narrow 800 million euros and thus makes China the largest trading partner for Germany for 8 consecutive years. The direct investment in China by German companies hit 11.9 billion euros, up 4.3 percent over 2022 and hit a new high. The German Chamber of Commerce in China Business Environment Survey 2023-2024 shows that 37 percent of the member companies surveyed held China as attractive as a market of innovation, 46 percent of them want to enhance cooperation with China to keep their competitiveness, 50 percent plan investment increase over the next two years and 91 percent will continue to stay and grow in China. Volkswagen delivered 698,000 units of automobiles in January 2024, with China accounting for 291,000 units, or 41.7 of the total and 4.3 percent up year-on-year, while its delivery fell by 3 percent in West Europe and by 1 percent in North America. It has just announced a master additional investment plan of 2.5 billion euros in its manufacturing base in Hefei, Anhui Province. BMW announced in November 2023 a major investment in China to manufacture electric vehicles by 2026, with 50:50 ownership with a Chinese partner.

The strong trend in German business cooperation with China is based on, undoubtedly, the vast market potential and tremendous economic growth prospects in China. Nonetheless, it is not the only reason, as German businesses are more active in China than other leading economies while they all face the same vast China market potential. The more fundamental reason could be found in the deep-rooted supply chain connectivity between the two countries in global R&D, manufacturing and marketing, and both as key links in the global supply chain. For instance, Merck, the German pharmaceutical and electronic Giant, has its global R&D center in Beijing, a global center of materials R&D and life science lab in Shanghai, new material R&D center in Suzhou, and an integrated semiconductor base in Zhangjiagang, all serving its global supply chain. A further, more profound reason lies in the fact that China is already a world-leading player in the innovation and development of AI, big data and other emerging technologies and industries. The German industry needs to set up on China soil, become part of it, and grow stronger in the world market.

Against the backdrop of world geopolitical confrontation and geoeconomic fragmentation and the US-led "de-risk" against China keeps evolving, there have also been major changes in German strategy towards China. The German government released its China Strategy Paper in June 2023, the first of its kind in history, identifying China as a "partner, competitor and systemic rival", echoing the tone of the EU Commission. This umbrella strategy has cast dark clouds and uncertainties on China-German's overall relationship with profound economic impacts. During the China trip, leaders of the two countries will discuss in a candid, straight forward and constructive approach and increase strategic mutual trust. Chancellor Shultz will find that China is not the rival, but rather, the reliable partner of Germany. Unlike the US which bases its China strategy on the world hegemony purpose, Germany seeks a poly-pillar world, not world hegemony. Also, during the visit, the German business giants will reap good benefits in trade and investment in China, further proving that China is not a rival, but a partner.

Governments and business communities of both China and Germany, while joining hands for enduring cooperation, should also attach significant importance to checking the recent sharp fall in bilateral trade. According to the German official statistics, German trade with China in 2023 was 15.5 percent down over 2022, with its export to China off 8.8 percent while its import from China off 19.2 percent. During the first quarter of 2024, however, the pattern just reversed. According to China customs data, German imports from China fell by a marginal 2.9 percent year-on-year, while its exports to China fell drastically by 16.6 percent, making the two-way trade down 9.9 percent over a year ago. Both sides should examine the basic reasons behind the fall and work together for an early rebound. China, on its part, will adhere to the policy of reform and opening-up, to open its doors ever wider. China will continue to improve its business environment, cut down its negative list for more market access and open fair competition for foreign businesses. German products and technology, with long-standing world fame for its top quality and reliability will enjoy great interest in China market. On the other side, it is also highly anticipated that both governments and businesses will work together to stop any trade restrictive measures on Chinese products, especially electric vehicles.

A stable relationship and growing business cooperation between China and Germany will not only meet with the fundamental interests of peoples of both countries, but also render a significant contribution to peace, multilateralism and balanced economic growth of the whole world.

The author is senior fellow, Center for China and Globalization, CCG.

The views do not necessarily reflect those of China Daily.

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