Opinion: A Need for A Clear-Eyed China Policy

This op-ed originally appeared in Handelsblatt on June 3, 2024. Read the original in German.

By Amb. Joachim Bitterlich (ret.) and Peter C.W. Flory

The partnership between Putin and Xi and China’s quest for technology dominance threaten the European Union and with it, German prosperity. But there are ways to defend our interests and values.

China’s President Xi Jinping and Russian President Vladimir Putin just celebrated their “no limits“ partnership that is fueling Russia’s war against Ukraine. But despite the geopolitical threat to Europe and an existential risk to German industry, there are no signs Berlin will change its China policy. This undercuts a united front against Beijing’s systemic economic challenge, rewards Xi’s support of Putin’s aggression, and threatens German prosperity.

China supplies Russia with technologies that bolster Moscow’s armaments industry and enormous advantage in artillery.

There were already many signs that for Germany, much of the “win-win” has gone out of the Chinese market. Meanwhile dependence on Chinese raw materials and components puts Germany’s energy transition and security at risk, and senior Berlin security officials have repeatedly warned of Beijing’s theft of German technology. But so far, there is no Zeitenwende in sight.

From 1995 to 2022, German industry’s global market share declined markedly – while China’s expanded massively – across critical sectors including chemicals, power generation and electrical equipment, industrial machinery and road vehicles, according to a recent study by the Rhodium Group.

These trends bear out the existential risks identified in Berlin’s own 2023 Strategy on China: “[Beijing] has made it clear that it seeks global market and technological dominance in sectors that are very important for Germany and the EU or in which Germany and the EU long enjoyed technological dominance.” Beijing further seeks to “create economic and technological dependencies with a view to using these to assert political objectives and interests.”

Further, as the Ukraine war becomes a contest of industrial bases, China is supplying Russia with microelectronics and machine tools, as well as nitrocellulose for production of artillery shells. “China says it wants good relations with the West,” NATO Secretary General Jens Stoltenberg said recently in Berlin. “At the same time, Beijing continues to fuel the largest armed conflict in Europe since WW II. They cannot have it both ways.”

The governing coalition in Berlin should steer German business more strongly toward “de-risking.”

The European Commission and many member states have moved toward convergence through the 2023 Economic Security Strategy and legislation on net zero technologies and critical materials. Brussels and other capitals are ready to deploy the EU’s trade toolbox in areas including China’s massive EV subsidies that threaten Germany’s auto industry.

Germany has several opportunities to raise its game.

First, the 2023 China strategy points to “risk reduction” but leaves business to deal with those risks. Business must take off the blinders and be more proactive, and if not, Berlin should be more affirmative in steering companies toward de-risking.

Second, Berlin should show more leadership against China’s role in Putin’s brutal and illegal war, especially as experts warn of a long-term military competition with Moscow.

Third, the German government pledged to align more closely with its EU partners. Stronger reciprocity and a global level playing field, including with the U.S. and including extraterritorial measures, are obvious steps and should be supported by business leaders. The same is true for a strategy to protect sensitive technologies and infrastructure.

“Energy technology plays a central role in today’s industrial competition. Berlin and its partners must develop an ambitious policy that takes this reality into account.” 

President Biden’s new tariffs highlight the central role in today’s industrial competition of energy technology, where China has seized the advantage. Berlin and its partners must develop an ambitious policy that takes this reality into account. This includes cooperating with the G7 and other allies to diversify supply chains and promote alternatives. Also needed are new trade arrangements to strengthen industry and ensure strategic autonomy in critical technologies.

Now is the time for Germany to draw the right conclusions and develop a true strategy in the European framework.

Amb. Bitterlich is a former diplomatic advisor to German Chancellor Helmut Kohl and member of EIES’ Energy Security Leadership Council. Mr. Flory is an EIES Senior Fellow and a former NATO Assistant Secretary General and U.S. Assistant Secretary of Defense with responsibility for Europe, NATO, and technology security.