Olaf Scholz is visiting China

The European Union, which has been soft-talking and holding a small stick for years, has tightened its economic grip on China, worried that an influx of cheap Chinese goods could wipe out domestic industries. I started to get nervous. The big question is whether Germany, the region’s largest economy, is fully on board with a more aggressive approach.

The European Union, which has been talking softly and holding a small stick for years, is now flexing its economic muscle against China, worried that an influx of cheap Chinese goods could wipe out its own industries. I started exercising. The big question is whether Germany, the region’s largest economy, is fully on board with a more aggressive approach.

This makes German Chancellor Olaf Scholz’s visit to China next week particularly interesting. Berlin’s policy toward China has hardened in recent years. Last July, the Scholz administration released a harshly worded China strategy, shifting the focus to risk aversion, diversification, and reducing dependence on China.

However, if it had been left to Scholz alone, this strategy might never have been made public in the first place. The driving force behind the new critical approach was one of Scholz’s coalition partners, the Green Party. Mr. Scholz himself remains cautious, reluctant to push China too far, partly out of concern that Beijing will retaliate against the few large German companies whose futures are tied to the Chinese market.

On one of his longest bilateral visits since taking office in 2021, Scholz spent three full days in China from April 14th to 16th, visiting German companies in Chongqing and Shanghai before meeting with the Xi Jinping State. He is scheduled to head to Beijing to meet with the President and Premier Li Qiang. . Both sides are keen to highlight areas of cooperation.

Mr. Scholz is under pressure at home due to Germany’s economic slump and a Ukraine policy that fails to satisfy both hawks and dovs, and is facing new negotiations with China in a year that could shock transatlantic relations. We want to avoid opening up a front. From the re-election of Donald Trump in the United States. Mr. Xi will want to send a signal that China and Germany will continue to work together as China’s economy faces a real estate crisis, a hangover from coronavirus restrictions and increased pressure from U.S. technology regulations.

However, lurking beneath the surface are various issues of conflict that are difficult for the two leaders to contain.

Top of Germany’s agenda is Russia’s war machine in Ukraine, amid growing concerns that China is crossing red lines with the West and providing Russia with supplies and technical assistance vital to military operations. This would be China’s support for

During a visit to China last week, US Treasury Secretary Janet Yellen warned that Chinese companies that provided material support to Russia’s war would face “significant consequences” in the form of sanctions. Expect Scholz to convey a similar message in a more subdued tone.

But perhaps the most important topic on the agenda is the deterioration of trade relations between the EU and China. Concerns are growing in Brussels that China will flood European markets with cheap, subsidized goods in an attempt to lift exports out of the economic slump. At the same time, European countries are debating how far to restrict sensitive technology exports to China amid growing pressure from the US government.

Last June, European Commission President Ursula von der Leyen announced an economic security strategy aimed at clarifying red lines in technological cooperation with China. A few months later, the commission launched a high-stakes investigation into electric vehicle imports from China. And in recent weeks, he has accused Chinese companies of gaining an unfair advantage in European markets thanks to the generous state aid they receive at home, and launched an investigation into subsidies related to wind turbines, solar panels and railways. Announced.

Taken together, this amounts to the strongest pushback against China Europe has ever seen, but it is just the beginning.

Margrethe Vestager, the European Commissioner for Competition, highlighted the new measures in an important speech at Princeton University this week, but warned that Europe’s “whack-a-mole” tactics may not be enough. Admitted.

“We need more than a case-by-case approach. We need a systematic approach. And we need it before it’s too late,” she said. “We can’t afford to see what happened with solar panels and see what happens again with electric cars or wind power or essential chips.”

Vestager proposed developing “trustworthiness” standards for critical clean technologies, mirroring the approach taken with “high-risk” 5G suppliers such as Huawei. Countries that fail to meet European standards in areas such as cybersecurity, data security, labor rights and environmental standards will see their companies restricted or excluded from the market. This represents a significant change in economic relations between Europe and China.

But for it to work, support from Germany is essential. And it is unclear whether Mr. Scholz is prepared to jeopardize Germany’s privileged economic relationship with China, even though it is increasingly strained. He will be visiting China with a delegation of German industry leaders, including the CEOs of three major automakers, BMW, Mercedes and Volkswagen, which have stepped up their efforts to enter the Chinese market in recent years. It’s planned. According to Rhodium Group statistics, German direct investment in China will reach a record high of 7.1 billion euros in 2022, accounting for 79% of the EU total.

In the weeks before his first visit to China as prime minister in November 2022, Scholz pushed through a deal that would give Chinese shipping giant Cosco a stake in one of the terminals at Germany’s largest port, Hamburg. He has also resisted pressure from coalition partners to take a decision to phase out Huawei from Germany’s telecommunications networks. The Chinese group has a 59% share in Germany’s 5G network, one of the highest in Europe.

Against this backdrop, European Commission officials will be closely monitoring Scholz’s message to China. Will he explain to his Chinese host country the seriousness of Europe’s concerns about trade relations and signal how the EU will respond? This comes at a time when China’s economy is struggling and leaders in Beijing are desperate to attract European investment and maintain access to European markets. This will show that you are ready to use it.

Or will Mr. Scholz downplay trade tensions and weaken Brussels in the process, as German companies want him to?

The answer will say a lot about how Europe stands together against China in a critical year that will culminate in November’s crucial US presidential election. A few weeks after Scholz’s visit, Xi will visit Europe for the first time in five years, via France, Hungary and Serbia. If Mr. Scholz and French President Emmanuel Macron conveyed the same message to Mr. Xi, it would send a powerful signal. Failure to do so will be fatal.