As Concerns About China Grow, Germany Loosens Its Embrace

livemint.com:

For decades, selling to China has been a key ingredient in Germany’s recipe for economic success. Now, Berlin wonders if its partner has gotten too close for comfort. On Thursday, Germany released its first-ever “China strategy," an attempt to balance the relationship’s huge economic benefits with the need to manage risks posed by Beijing’s increasing authoritarianism at home and assertiveness abroad.

The 64-page document says China should no longer be considered just an economic partner but also a competitor and systemic rival. Its main prescriptions aim to reduce the risks posed by German businesses’ vast exposure to the Chinese market. “In recent years, the systemic rivalry aspect has moved more to the foreground… China has changed, and therefore our China policy must change too." Foreign Minister Annalena Baerbock said as she presented the paper.

“We do not want to decouple from China but to reduce risks as much as we can." Working with European Union partners, Germany will beef up its scrutiny of Chinese investments and consider mechanisms to review German investments in China, according to the document. It will seek to increase incentives for companies to diversify away from China. Baerbock said Germany and its EU partner would respond together if China targets individual EU members with hostile measures, saying the region would use its vast internal market “as its most powerful instrument." This is a new approach for a country that has been the most China-friendly large economy in Europe.

But it isn’t a U-turn. The strategy doesn’t recommend stopping China from accessing specific technologies—as the U.S. has done with semiconductors—and it insists on the need to maintain good economic relations with the country