Germany’s unveiling of a 64-page strategy document on China was dampened by a lack of concrete measures to de-risk from it. It is reminiscent of classic paradoxes that have gripped the German state since the actualisation of its current being.
What is the value of this symbolic document for Germany, if any? What does it contribute to European de-risking discourse on China? And what direction does it give to Europe’s overarching concerns in a post-Ukraine world?
At its heart, it is more about German Chancellor Olaf Scholz’s promise to deliver on forming a coalition consensus on China, than to convert it into a genuine economic policy performative. With this vantage point, it disappoints less. This rather interesting document is also a harbinger of the end of the golden era of Germany-China relations.
The fact that a Chancellor from the Social Democratic Party (SPD) could put business considerations on a second priority was itself a surprise to many.
The optimists saw it as a balancing act reconciling the pro-China business lobbies with a China-skeptic economic affairs ministry. The pessimists sighed at the ambiguity of a document that identifies the problem areas but offers no mechanisms to redeem them.
While analysis cannot reduce the enmeshed uncertainty around this global dynamic, it can reduce the complexity of seemingly flabbergasting events and decisions that follow.
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A coalition antic
The ruling coalition in Berlin is an unusual mix of China supporters like the SPD and China sceptics like the Greens. The latter for most of their young political career have been in the opposition. They look at German politics and foreign policy with an idealistic lens — whether it’s China or the nuclear energy debate.
But the SPD has been on the other side of the table. They take pride as a stabilising force in Germany with good reason. It was SPD that formed the remarkable but tragic Weimar Republic in the inter-war years. It was an SPD leader Friedrich Ebert who became the first German elected president before the Nazis made the ascent to the German political landscape capitalising on the Great Depression. They eventually choked off all democratic spaces, sealing Germany’s fate.
The point to reckon here is that the Centre-Left SPD’s long participation in the making of the modern German state has given it a characteristic pragmatism to fine-tune to moderate realities.
The SPD, then in opposition, had carefully witnessed the German economic miracle—Wirtschaftswunder. This combination of a free market with a strong welfare state, encapsulated by the concept of “socialist market economy” was developed by Walter Eucken. It was his protégé, Ludwig Erhard who later became the federal minister of economic affairs and also the father of the Wirtschaftswunder. The lesson in pragmatism, aided by the Marshall Plan, was undeniably the writing on the wall. It has remained with the SPD ever since.
The promise of a new China strategy was indeed a part of the coalition agreement when it came to power exactly two months before the war in Ukraine began. What was meant as catering to in-house divisions on perceptions and approaches on China got a completely different spin as Russia locked horns with the West over a strategic blunder in Ukraine, complicating Germany’s and the rest of Europe’s strategic calculus. Germany, along with the EU, embarked on a ‘next to impossible feat’ of diversifying from the most fundamental driver of German economic planning — Russian energy. This came at the cost of perpetrating harsh industrial pain on itself which made China all the more indispensable economically.
The variables in the European geoeconomic matrix, however, got more complicated with China’s indirect but steady support to Russia and its palpable preparedness for a war in the straits. The continent today seems caught in the web of its normative order and perceptions of its identity vs. survival interests.
The Greens, still gripped in opposition idealism, have been pushing for a tougher stance on China. The statements made during foreign minister Annalena Baerbock’s visit to China can only be explained by her party, the Greens’ ideology.
But the Chancellor, being from SPD, operates pragmatically, keeping the economy first when dealing with authoritarian regimes such as China. SPD’s proclivity towards risk-aversion in a very uncertain world is enthusiastically lapped on by the industrialist block such as the heads of Volkswagen and BASF whose engagement with China has radically deepened after the war in Ukraine.
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Between the first and the final draft
What the world saw earlier this month as the first-ever Strategy on China was not how the strategy was envisioned in the first place. The first draft accessed by the press in November 2022 stunned many with its sheer hawkish overtones on China. There were more than two dozen mentions of NATO and an unusual number of mentions of India as well. However, the version that was released by the government on 13 July 2023 was significantly watered down. It was far more diplomatic and had far lesser teeth to make any genuine impact on the ground. What explains these changes? The most baffling edit, however, was an abject removal of instruments ensuring economic security with regard to China that would have made Germany’s economy more resilient.
No matter how watered down, the Chinese embassy in Germany issued a 4-point rebuttal that expectedly played up the cost of de-risking from China.
The German business lobby heaved a sigh of relief welcoming the toned-down document. It did not mention binding measures such as cutting down targets for the German industries functioning in China which are already impacted by the Ukraine war.
But no one can deny the fundamental reset in Germany and Europe’s perceptions of China that will play out in times to come.
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A journey into estrangement
The world in 2023 seems oblivious to China and Germany’s shared economic growth that gave post-cold-war trade globalisation its characteristic hue. As China opened up and Henry Kissinger made history with the US’s re-orientation towards Beijing, Germany joined the enthusiasm of Wandel durch Handel, change through trade approach.
It wasn’t long before the fundamentally incorrect assumptions in the rather naïve liberal aspiration of changing China politically by integrating it into the world economy started to falter. Before China’s astounding pace of development led to a tangibly more confrontational order with the West in the Indo-Pacific, the flavour of the Chinese-German economic relationship had begun to change with Xi Jinping’s ascent to power in 2012.
Not many would know that despite being a part of the Asia Development Bank, Germany steered clear of China’s Belt and Road Initiative. In 2021, Germany developed its Indo-Pacific Strategy, which outlined a plan for ensuring its economic security in the region and supporting a rules-based order. Russia’s war in Ukraine made the Europeans concert efforts to link economics with strategic considerations in the Indo-Pacific. Germany and other European powers have been looking afresh at the region, with a commitment to empower their friends and allies like India and Indonesia, mindful of their disdain to pick sides in the Great-Power rivalry.
But again, it has been easier said than done. In the years that followed the fall of the Berlin Wall Beijing has learnt the art of driving wedges between the transatlantic allies by the sheer weight of economic dependence that the Europeans, in particular Germany, started to have on China.
In the larger tussle between geopolitics and geoeconomics, Germany’s China strategy is a necessary but not a sufficient condition to de-risk from China in line with the broader European approach to economic security.
Where it makes an indelible contribution is that it does mark a rather irreversible shift in European and German relations with China. As global trade leaves the smug neo-liberal haven and as economic resilience hinges more on friend-shoring and trusted connections, Germany has made a choice. Things from here will only get more pronounced. CCP’s continued support of Russia’s war in Ukraine and its eventual decision on Taiwan will determine exactly how catastrophic the disruption of global supply chains gets.
These developments acquaint the world and India with the ensuing debate on how to manage China. What makes it even more interesting for India is the tilt of German public opinion towards New Delhi, moving away from Beijing.
The writer is an Associate Fellow, Europe and Eurasia Center, at the Manohar Parrikar Institute for Defence Studies and Analyses. She tweets @swasrao. Views are personal.
(Edited by Theres Sudeep)