Berlin: The crime… has become a lesson with Russia – It wants to become economically independent from China

China is the most important partner for the port of Hamburg. In the first half of 2022, more than 1.3 million containers arrived there. And with Hamburg’s international port becoming increasingly important to the Chinese economy, Chinese shipping giant COSCO now wants to acquire a 35% stake in the Tolerort terminal. The managing company of the port is in favor of the sale.

But in mid-August it became known that the Ministry of Economy has reservations about COSCO’s investment in the port of Hamburg. According to the Reuters news agency, the co-ruling parties in Berlin are at odds over whether to give their approval. In other words, one of the pillars of the German economic model, which for decades has been based on economic relations with China, is at stake. Since the start of the war in Ukraine, Germany’s dependence on Russian gas was revealed, the particularly close economic ties between China and Germany are now under the microscope. What attitude should Berlin take towards China, which is currently Germany’s most important economic partner and in which around 5,000 German companies are active?

Investments 10 billion in the first half of 2022

At the end of May, Economy Minister Robert Hambeck refused to give the VW carmaker state guarantees for investments in China. It was an unprecedented decision. For decades the business activities of German companies in China were supported by the German state, which guaranteed investments and exports.

China expert Tim Rühlig from the German Foreign Policy Association DGAP says about the German government’s change of course towards China: “This method cannot be ruled out soon. In the near future, German companies that intend to invest in China will do so at their own risk and will no longer be able to rely on government guarantees.”

Berlin’s change of attitude, however, does not seem to deter German companies. According to a study by Jürgen Mattes from the German Economic Institute IW, German companies invested in China in the first half of 2022 about 10 billion euros. This is a record amount. Investments, however, come from only a few economic sectors. A Rhodium Group study published in mid-September shows that mainly automotive and chemical companies are still looking for access to the Chinese market. The four German industrial giants VW, BMW, Mercedes and BASF account for a third of European direct investment in China, the report’s authors note.

Berlin is turning to other Asian countries

According to information from Reuters, the German Ministry of Economy is considering how to convince German companies to turn to other Asian countries, instead of China. However, Berlin is not only questioning state guarantees for investments and exports. Germany’s public restructuring bank KfW is being asked to consider boosting the flow of credit to German companies with operations in countries such as Indonesia, while limiting loans to businesses focused on the Chinese market.

For many managers, the change of course sought by the Ministry of Economy is too much. “Government financing and the granting of guarantees to German companies with activity in China should remain the same,” Friedolin Strack, managing director of the APA Asia-Pacific Committee of the German Economy, told Reuters. According to the APA, Chinese investment should also continue to be welcome in Germany and Europe. Friedolin Strack, however, avoided taking a position on COSCO’s intention to proceed with a large investment in the port of Hamburg.

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