In Germany, debate on trade with China grows as Merkel nears exit

Since 2015, China has been Germany’s largest trading partner, but close economic ties are under increasing scrutiny.

The star class container ship CSCL Mars, owned by state-backed Chinese shipping giant Cosco, docks in Hamburg port [Ruairi Casey/Al Jazeera]

Hamburg, Germany – On a bright afternoon at Hamburg port, gargantuan Chinese-built cranes load and unload cargo from the hold of CSCL Mars, a container ship measuring more than three football fields in length – and is owned by China’s Cosco Shipping.

It is not an unusual sight.

Hamburg’s strong rail connections to the European hinterland have made it a key link between the land and maritime arms of China’s ever-expanding Belt and Road Initiative (BRI).

China accounts for about one-third of Hamburg’s cargo throughput and the German city is the home to Cosco’s European headquarters.

The state-backed firm now wants to buy a minority stake in one of the port’s terminals – which would mark the first time any share of ownership would be held from outside the former Hanseatic city-state.

“Wherever the Chinese companies are shareholders, they’re trying more and more to route their supply chain,” the port’s marketing CEO, Axel Mattern, told Al Jazeera, surveying the Mars’ vast steel hull from the deck of a nearby skiff.

“There needs to be a certain share of Chinese interest involved, even a small one. If not, we’re running the risk that cargo in the long-run would be rerouted,” he added.

Axel Mattern, CEO of Hamburg port’s marketing board [Ruairi Casey/Al Jazeera]

The goods that travel from Hamburg to Shenzhen and Ningbo tell a story of close German-Chinese economic relations.

Cars, chemicals and precision machinery are shipped away. Mobile phones, computers, household appliances and clothing return.

The balance of exports and imports at Hamburg is presently even, but concerns have grown that the China-Germany relationship as a whole has grown lopsided.

The United States’ increasingly confrontational pose, criticism of China’s human rights record and interference in Hong Kong, and fears of unequal competition among its powerhouse manufacturing sector are pressuring Germany to steer a new course.

‘Change through trade’

In the years preceding Angela Merkel’s ascension to the German chancellery in 2005, China joined the World Trade Organization (WTO) and penned a partnership agreement with the European Union that envisioned its “successful transition to a stable, prosperous and open country that fully embraces democracy, free-market principles and the rule of law”.

German firms, many of which set up shop in China in the 1970s, profited enormously during its rise to economic superpower.

Since 2015, China has been Germany’s largest trading partner.

The pair exchanged goods worth $258bn in 2020, a three percent increase despite the COVID-19 pandemic.

“Merkel and China kind of grew up together,” said Theresa Fallon, director of the Centre for Russia Europe Asia Studies. “It was a very different world.”

Now, as Merkel prepares to depart politics, this “wandel durch handel”, or “change through trade” strategy finds few remaining supporters.

Under President Xi Jinping, China’s economy remains under tight state control, its foreign policy has become more assertive, and alleged human rights abuses against Uighurs in Xinjiang and political dissidents have reportedly intensified.

Germany is likewise at odds with the United States, where President Joe Biden has continued Donald Trump’s hardline stance with Beijing over trade, human rights, the South China Sea and other divisive issues.

‘Unbalanced China policy’

Reinhard Bütikofer, a Green Party MEP and one of Germany’s fiercest critics of China, told Al Jazeera: “Germany’s unbalanced China policy [is] heavily skewed towards the interests of a few multinational corporations at the expense of other sectors of our economy, and certainly at the expense of our values and security concerns.”

Earlier this year, the Chinese foreign ministry placed sanctions on Bütikofer – and other European officials critical of Beijing.

The ensuing diplomatic furore put a long-awaited EU trade deal with China on ice. The agreement had been a priority of Germany’s EU council presidency in 2020.

Containers owned by Chinese shipping company Cosco wait for unloading at Hamburg port [Ruairi Casey/Al Jazeera]

Officials from some countries, including Spain, Poland and Italy, complained that their concerns had been sidelined as Germany attempted to push it over the finish line.

“There seems to be clear obliviousness of how much anger there is in other EU member states against how China favours German interests,” Fallon told Al Jazeera.

‘Systemic competitor’

Germany’s automotive sector, which wields huge political influence, remains bullish towards China, on which it has become highly dependent for sales.

It is the largest market for BMW, Audi and Mercedes.

However, Germany’s smaller specialist manufacturers, which make up the backbone of its productive economy, have grown concerned that key technology could fall into the hands of Chinese rivals and be used to compete against them.

Germany introduced new laws to protect sensitive industries in 2017, after robotics firm Kuka was snapped up by China’s Midea Group.

Since then dozens of prospective deals have been examined and a number of takeovers by Chinese state-backed companies were blocked, including Leifeld Metal Spinning in 2018 and satellite manufacturer IMST in 2020.

In 2019 the Federation of German Industries issued a stark report describing China as a “systemic competitor”, and calling for EU legislation to tackle China’s state-subsidised industries and protect European technology companies.

Rules have also been introduced to make Huawei’s operation of 5G mobile networks more difficult, but Merkel has pushed back against calls for an outright ban from intelligence agencies and figures within her own party, who worry it would make critical infrastructure vulnerable to the influence of the Chinese Communist Party.

The German parliament passed a law in June that will require German firms, as well as their foreign subsidiaries, to ensure that their supply chains are free from environmental or forced labour abuses.

The legislation, which comes into force in 2023, could affect German companies like Volkswagen, which operates in Xinjiang, and provoke retaliation from Beijing.

Public opinion shifts

Speaking at the World Economic Forum at Davos in January, Merkel said she hoped to avoid the bifurcation of global politics into pro-US and pro-China camps.

“I would very much wish to avoid the building of blocs,” she said.

Yet public opinion in Germany has steadily turned against China.

A poll published by Forsa in August found that 58 percent of respondents wanted the government to take a harder line against Beijing and defend its own interests.

Analysts have predicted Merkel’s exit from office will lead to a turning point in Germany’s relations with China [File: Jason Lee/Reuters]

Nils Schmid, foreign affairs spokesperson for the Social Democratic Party, which leads the polls, has said the status quo with China will have to shift.

The Green Party, which is likely to form a part of the next coalition government, has been particularly hawkish on China. It has demanded tariffs on state-subsidised imports and the protection of digital and physical infrastructure from Chinese influence.

“After the election, we’ll change towards a more European approach,” said Bütikofer. “A more critical approach, which is in line with Germany’s public opinion and the attitude displayed by major industrial associations.”

Merkel’s successor Armin Laschet has nonetheless continued her dovish approach.

In a television interview on Monday, the Christian Democrat leader praised China’s development of Duisberg as a rail hub for the BRI, defended continued trade relations and warned against a new Cold War.

“Traditionally Germans care deeply about [human rights], so I think it’s very hard now to be a politician and pretend that everything will remain the same,” said Fallon.

“The million-dollar question is how are they going to do that? And will they have the will to do that? Because it’s going to cost people; it’s going to hurt.”

Cosco deal expected to be clinched

In Hamburg, competition authorities are expected to confirm Cosco’s purchase in the coming months.

The deal is supported by Hamburg’s SDP and Green government against concerns by local opposition parties that it would create dependence on China, and union Ver.di that working conditions could deteriorate.

“What makes business sense must also be practically possible and done,” said SDP mayor Peter Tschentscher in July, arguing that the investment would be mutually beneficial and necessary to keep the port competitive.

Cosco is presently the world’s third biggest shipping company by fleet capacity, and Mattern, the port’s marketing CEO, is confident it will clinch first place in the coming years as China’s economy continues to grow.

He is under no illusions that Germany can change China into a model of itself, but separating business from politics has had its benefits.

“It’s a very Hanseatic way to deal with these things … It’s better to be on the same level and trustful than being enemies.”

Source: Al Jazeera