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22-02-2025
- Business
- Yahoo
Why a post-election shift in Germany's China policy is no longer a sure bet
When Ulrich Ackermann started working for the German machinery industry in 1986, the country's watchmaking sector had been eaten up by Japanese competition. Advanced equipment makers were sure they were next. "The watch industry almost completely disappeared from Germany, and there was a fear that this could also happen to the machinery industry. That hasn't happened but now we have a new situation - China Shock 2.0. "I think China is a different story. You can't compare China to Japan," said Ackermann, who will retire from the Machinery and Equipment Manufacturers Association in April. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. Over the past few years, the association - which represents 3,600 of Germany's famed small and medium-sized German engineering companies, also known as the Mittelstand - has been raising the alarm about Chinese competitors, which are outstripping German companies in China, Europe and third markets around the world. "We have many complaints from member companies about unfair competition on the European markets. Unfair competition means, on the one hand, subsidisation and prices which are much below our possibilities. "Many members say for [that] the price the Chinese sell here on the European market, they cannot buy the materials to produce the machine," Ackermann, the VDMA's head of foreign trade, told the Post. "On the other hand, unfair competition also means that Chinese companies sell machines in Europe that do not comply with our regulations and are therefore cheaper." Those complaints have largely fallen on deaf ears in Berlin, with the China policy of Chancellor Olaf Scholz prioritising the interests of the biggest companies, which continue to make significant amounts of money in the world's second economy, Ackermann said. Policy-wise, Scholz's government voted against European Union tariffs on Chinese electric vehicles, overruled his cabinet in selling a stake in a Hamburg Port terminal to Chinese conglomerate Cosco and ignored pleas by Brussels to remove telecoms giant Huawei Technologies from the German 5G network. "We had a problem with the last government, they listened, but drew no conclusions. So we hope that the new government will concentrate more on the real developments and have a closer look at what is really happening with and around China," Ackermann said. Scholz's likely successor following Sunday's election, Friedrich Merz, head of the conservative CDU/CSU alliance, is expected to take a tougher stance on China. On the campaign trail, Merz has warned businesses of the "great risk" that comes with investing in China and grouped Beijing in an "axis of autocracies" with Russia, North Korea and Iran. "Political coldness and economic warmth" is obviously the core of the [Christian Democrats'] China policy. So, if Merz becomes chancellor as expected, the current China strategy of the 'traffic light' [coalition] government will be buried without suspense, I believe," said Gu Xuewu, director of the Centre for Global Studies at the University of Bonn. In recent weeks, however, there are growing questions about whether there will be a shift towards a more hawkish stance. Although the return of Donald Trump as US President was always expected to wreak havoc in Europe, many have been surprised by the speed and depth of the collapse in transatlantic ties. Various tariffs will hit European goods in the coming weeks, from steel to cars, with Germany positioned to suffer. Trump has blamed Ukraine for starting the war with Russia, even though Vladimir Putin invaded, and has dismissed European claims for a seat at the negotiating table. In Germany and around Europe, the ultimate fear is that Trump will remove the US security guarantee, leaving it vulnerable to military attack and forcing enormous amounts of money to be funnelled towards defence budgets at the expense of everything else. China "will miss" Olaf Scholz if he loses. Photo: EPA-EFE alt=China "will miss" Olaf Scholz if he loses. Photo: EPA-EFE> "The country's old model of 'cheap energy from Russia, trade orders from China, security from the US' no longer works," wrote analysts from the European Council on Foreign Relations in a recent paper. Amid such pressures, the discussion about de-risking ties with China has slipped down the agenda in Berlin, Brussels and across Europe. "Nobody is talking about China any more," said one diplomatic source, who added that Europe has noticed a "charm offensive" from China, as it attempts to capitalise on the growing friction between the EU and US. The new geopolitical reality is "pitting different parts of the CDU universe against each other", said Jeremy Cliffe, a senior policy fellow at the European council. In this internal battle, Atlanticists such as Merz - who favour "more China hawkishness and [are in tune with the idea of] systems competition" - will be faced with the "Germany First" faction that says that "we've already made life difficult for our for our companies, because of energy policy and now, and it is in the interest of these companies for us to keep good relations with China", Cliffe said. Another restraining factor could be the nature of the coalition Merz is likely to be leading. Final polling by YouGov released on Friday suggested a coalition between the CDU/CSU alliance and the Green party, which observers said would represent the most China-hawkish outcome, would not have enough seats. A grand coalition with the conservatives and Scholz's Social Democrats is seen as more likely, and would represent continuity and a government that China would probably be content to deal with. "Beijing would be very happy to see the Greens be ousted out of the government," said Gu at the University of Bonn. "They are pragmatic people, even though Merz is not the best man for Beijing, they seem to prefer him as chancellor than anyone from the Greens. They would miss Scholz who still enjoys a high reputation in China for his pragmatism." In more than a decade as chancellor, Angela Merkel pursued close ties with China at a time when the two economies showed more complementarity than rivalry. Scholz, meanwhile, frequently overruled his coalition partners and ministries on issues of critical importance to ensure a less confrontational stance towards Beijing. Merz's CDU is split over its approach to China. Photo: dpa alt=Merz's CDU is split over its approach to China. Photo: dpa> Broader events, however, suggest that Merz is likely to have more pressing priorities should he come to power. "Merz has demonstrated that he is willing to criticise China publicly in a way that Scholz never did. So we can expect a more hawkish tone at the top of the German government. But when it comes to the substance of policy, it would be wrong to expect profound change," said Noah Barkin, an analyst of Sino-German relations at the Rhodium Group. "The Trump administration, with its tariffs, cosiness toward Russia and assault on European liberal democracy is going to suck up a lot of Berlin's bandwidth. The question is how much will be left over for China." This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
South China Morning Post
22-02-2025
- Business
- South China Morning Post
Why a post-election shift in Germany's China policy is no longer a sure bet
When Ulrich Ackermann started working for the German machinery industry in 1986, the country's watchmaking sector had been eaten up by Japanese competition. Advanced equipment makers were sure they were next. 'The watch industry almost completely disappeared from Germany, and there was a fear that this could also happen to the machinery industry. That hasn't happened but now we have a new situation – China Shock 2.0. 'I think China is a different story. You can't compare China to Japan,' said Ackermann, who will retire from the Machinery and Equipment Manufacturers Association in April. Over the past few years, the association – which represents 3,600 of Germany's famed small and medium-sized German engineering companies, also known as the Mittelstand – has been raising the alarm about Chinese competitors, which are outstripping German companies in China, Europe and third markets around the world. 'We have many complaints from member companies about unfair competition on the European markets. Unfair competition means, on the one hand, subsidisation and prices which are much below our possibilities. 'Many members say for [that] the price the Chinese sell here on the European market, they cannot buy the materials to produce the machine,' Ackermann, the VDMA's head of foreign trade, told the Post.
