Germany AG

Ichiro Suzuki In the first week of November, German Chancellor Olaf Scholtz visited Beijing to meet President Xi Jinping, who just won the unprecedented third five-year term to lead the People’s Republic. Since the outbreak of the pandemic, it was a G-7 leader’s first visit to China. The visit raised some eyebrows among the German public as well as in the diplomatic circle. COVID-19’s arrival has coincided with further escalation of tensions in the Sino-American relationship, which already fell precipitously under President Donald Trump. In 2022, the relationship has sunk into a deeper hole when China chose not to condemn Russia on its invasion into Ukraine. Within the EU, Lithuania had a row with China at the beginning of this year over Beijing’s coercive trade practices. The row was sparked when Lithuania allowed Taiwan to allow its name on a de facto embassy there. China a has reportedly blocked Lithuanian imports from other EU states, if they have components coming from Lithuania. China denies ordering a boycott of Lithuanian goods while downgrading diplomatic relationship with the country. The EU has taken the case to the World Trade Organization, while calling for solidarity of like-minded countries to stick with international trade rules. Given this background, Chancellor Sholz’s visit to Beijing was too unabashedly mercantilistic, especially because he brought a delegation of German business leaders with him. Chancellor Scholtz’s predecessor Angela Merkel made a dozen Beijing visits during her 16 years in office, immensely contributing to Germany’s export drive. It was an economic strategy embraced by a number of countries back then. China was admitted to the World Trade Organization at the beginning of the 21st century and the world’s most populous country made a strong push to modernize its economy. It was quite natural that Germany took advantage of the opportunities that opened up for them as well as everyone. In the 2010s, relations between China and the developed world, especially the United States began to turn sour, notably since Xi Jinping’s rise to Chima’s top position. While distance between China and the English speaking countries plus Japan began to widen, Germany did not go along with these countries, on which concerns on national security and human rights issues weighed increasingly heavily. It is understandable that Germany does not feel as threatened by China as the U.S., Australia or Japan do, due to the distance between the two countries. Then, wouldn’t Germany have to be more sensitive about China’s alleged human rights violations for a country with its history of the Holocaust? The same is true with Germany’s relationship with Russia. Since Ostpolitik in the 1970s, Germany believed that close economic ties between the two countries serve best to maintain peace on its eastern front. German businesses made a strong push for eastern expansions, into the Soviet Union and then Russia. While stability may have been achieved, Germany paid the price for it by ending up with over-dependence on Russian natural gas. When Russian tanks invaded Ukraine in February, Germany found itself uncomfortable to give support to the invaded country militarily, initially pledging to send them 5,000 helmets, and got mocked. Other NATO members offered President Zelensky loads of heavy military equipments. Since then, Germany has changed its mind digesting the meaning of geopolitical developments. Through October 3, Germany has pledged $1.2 billion of arms/ weapons to Ukraine. The German pledge compares to $1.8 billion from Poland that is a much smaller economy than Germany, $3.7 billion from the U.K., and $27.4 billion from the U.S. Even today, some Germany business leaders do not hesitate to hide how much they miss Russian gas. From the vantage point of the rest of the developed world, Germany looks an appeaser for whom economy/ business takes precedence over principles. The lure of the second largest economy is so strong that principles can be bent a little in order to deliver higher returns to shareholders, even if it implies walking into the hands of Xi Jinping. Even Elon Musk keeps his mouth shut against Xi Jin Ping‘s zero COVID policy while he was so furious at California Governor Gavin Newsom’s lockdown orders that he moved Tesla headquarters to Texas. So don’t blame BASF for their building a new state of the art chemical plant at a time when Western corporations in general are concerned about transfer of technology to China. In 2021, Volkswagen sold 2.4 million cars in Hong Kong/ China out of 4.9 million in total. Its Hong Kong/ China sales were more than twice as large as Western and Central/Eastern Europe combined. In 2020, Hong Kong/ China represented 53.5% of 5.3 million cars the company sold. For Toyota, on the other hand, China represents less than 20%. There is no doubt that China played a big role in Germany’s economic performance during Chancellor Merkel’s 16 years. Without China, Germany might not have recovered from a disease that let the country be called “The sick man of Europe”. While restoring its economic clout, Germany might have become overly ruthless to weaker EU members in the Mediterranean. Ten years ago, Greece had to endure brutal retrenchment of government spending in the process of shedding its excessively heavy debt burden. Germany showed little mercy to the ordeals suffered by Greek people, by refusing to debt restructuring, and labeling them as lazy and spendthrift. Ten years later, Germany is given a different look from either within the EU or in the rest of the developed world. Arrival of a winter without Russian gas is going to make life of Germans harsh, forcing them shorter shower time and lower room temperature. Greek people would be as sympathetic to Germans this winter as Germans were to Greeks a decade a go.

About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.