Germany and China, despite ideological differences and increasingly negative public perceptions of China within Germany, continue to nurture their bilateral economic relationship. The two countries should continue to prioritise their shared economic interests and their roles as some of the world’s biggest economies. Though Germany should reduce dependency on China by diversifying its supply chains and investing in other emerging markets, their partnership can be strengthened by hosting economic dialogues, addressing cybersecurity issues, and combating trade protectionism and promoting an open world economy.
China’s ties with Germany are one of its stronger bilateral relationships within the European Union. This bilateral relationship, which began in 1972, has been marked by periods of cooperation as well as strained interactions. German Chancellor Olaf Scholz’s April 2024 visit to China indicates that the German government views their partnership with China as worth nurturing.
Tracing the history of China–Germany bilateral relations, there is a recurring pattern of ebbs and flows, but the relationship has proved to be robust. While the two countries have been ideologically opposed, their history proves that economic interests will triumph over these differences.
China and Germany are the second and third largest economies in the world respectively. Germany was among China’s top ten trading partners in 2021 and China was Germany’s most important trading partner in 2023 for the eighth consecutive year, with exports and imports of goods between the two countries valued at 254.4 billion euros (US$280 billion). Both Germany and China were latecomers to global economic interaction. As a result, economic stability for the two countries is seen as the utmost priority and ‘everything else is subordinate to economic relations’.
This can be seen in the way Germany has been manoeuvring amid negative international perceptions of China. While firm in its tenor with China, the European Union, where Germany has a prominent voice, pragmatically adopted a middle path where it was not as abrasive as its allies and focused on de-risking rather than decoupling. In November 2022, during Scholz’s previous visit to China, his tone was reported to be significantly more reconciliatory compared to the European Union’s broader sentiment at the time.
In July 2023 Germany published its first Strategy on China, four years after the publication of the European Union’s Strategic Outlook on China, which had created a buzz among analysts and scholars for labelling China as a strategic rival. The 2023 publication is largely a reflection of the European Union’s common policy on China.
But in October 2023, just three months after the publication of Germany’s China Strategy, China and Germany published a Joint Statement that focused on broadening market access and enhancing cooperation in capital market investments. The Joint Statement consists of twenty five points that represent a clear direction for their strategic partnership. The document outlines the way forward on issues such as the transition to carbon neutrality, a sustainable and transparent multilateral trading system with the World Trade Organization at its core and maintaining strong cooperation in the International Monetary Fund.
In the joint document, the two sides also commit to combating trade protectionism and promoting an open global economy, which addressed some crucial long-standing concerns such as China’s overproduction as a result of state subsidies.
But in Germany, opinions on how to best engage with China across sectors still vary. Public opinion in Germany is increasingly wary of China. Concerns about human rights abuses, particularly in Xinjiang and Hong Kong, and China’s growing global influence have led to a more critical view among the German public.
The strategic partners will have to manoeuvre around these issues to continue their partnership. This should include a multifaceted approach that covers economic, political and security dimensions. In order to address overproduction and state subsidies, the two sides could capitalise on their robust institutional architecture to hold economic dialogues annually. Germany and China can also leverage the World Trade Organization framework to address issues related to state subsidies and unfair trade practices.
While a bilateral effort is essential to overcome these challenges, German companies will still need to diversify their supply chains to reduce dependency on China. This can involve investing in other emerging markets and fostering innovation within Germany and the European Union.
To address other difficult issues, such as the war in Ukraine, Germany and the European Union’s intertwined economic partnership should be positively leveraged to urge China to encourage Russia to seek a resolution to the conflict. This could be part of broader geopolitical discussions that include economic and security interests.
As for the German public’s declining trust in China, the two sides should upgrade their strategic partnership to include cybersecurity dialogues that address mutual concerns. This could include agreements on cyber conduct and frameworks for handling cyber incidents, which could help create a unified approach to countering espionage and protecting critical infrastructure.
Both Germany and China will continue to work with one another — alongside these challenges — as long as their economies are intertwined. Despite growing mistrust towards China in Germany, the German business community still advocates for maintaining strong economic ties with China, given the significant trade relations and investments between the two countries. China–Germany bilateral trade has triumphed over political and diplomatic strains in the past and will do so again.