ANALYSIS - Germany-China ties facing uncertain future amid mounting tensions

By Oliver Towfigh Nia

*The writer is a veteran journalist based in Berlin covering German politics and foreign affairs.

BERLIN (AA) – The relationship between Germany and China is currently more tense than it has been for quite some time.

Chancellor Olaf Scholz's Social Democratic Party (SPD) has openly warned of a breakdown of German relationship with China.

According to SPD leader Lars Klingbeil, Germany could be forced to make a similar break with China as with Russia.

"We have to realize that tomorrow, the day after tomorrow or in 10-year time, the time may come when China crosses borders," Klingbeil told weekly newspaper Die Zeit.

"If China attacks Taiwan, our relationship with China will also change fundamentally, as is the case with Russia now," he added.

- Scholz's party urges country to be more independent of China

Klingbeil called on his country to become more independent of China, open up other markets, and find other partners for trading in raw materials.

"That is the great lesson from our relationship with Russia," Klingbeil said.

Germany-China ties have soured over the recent visit of a German parliamentary delegation to Taiwan.

Beijing has criticized the MPs' trip to Taiwan and urged them "not to send wrong signals" to "separatist forces."

"The German side is not allowed to have any official contacts with Taiwan, and that also applies to German parliamentarians. This principle is part of the one-China policy," said a statement by the Chinese Embassy in Berlin.

The embassy criticized remarks by the Free Democratic Party (FDP) lawmakers ahead of their visit to Taiwan and stressed that China will continue to oppose efforts to undermine its sovereignty and territorial integrity.

Beijing views Taiwan "an inseparable part of Chinese territory" and has strongly urged other nations to avoid direct relations with Taipei.

Last November, the German chancellor announced a change of strategy towards China, only hours before his first-ever visit to Beijing since taking office a year ago.

In an article for the Frankfurt-based Frankfurter Allgemeine Zeitung newspaper, Scholz said the recent outcome of the Chinese Communist Party congress had convinced him that a change of policy toward China was necessary.

- Berlin views Beijing as 'systemic rival'

Scholz's center-left coalition government has branded China a "systemic rival" and highlighted the need for Germany to diversify politically and especially economically by focusing on relationships with other Indo-Pacific countries like India, Japan, South Korea, Indonesia, and Vietnam.

It also aims to press Beijing to level the playing field for German and European companies doing business in China.

Germany's Economic Affairs and Energy Ministry is working on reducing its dependency on China for raw material, batteries and semiconductors.

Furthermore, it is also reassessing the investment and export guarantees it provides to German firms doing business in China.

According to a recent study, German foreign trade with China is getting more and more out of balance. On the one hand, China is becoming less important as a destination for German exports, according to an analysis by the Germany Trade and Invest (GTAI) agency, which supports German companies abroad and foreign companies settling in Germany.

On the other hand, imports from the second largest economy in the world are increasing rapidly. "This increases dependence on China and the trade deficit is heading for a negative record," it said.

- China is Germany's top trading partner for 7th year in a row

China will remain Germany's most important trading partner in 2022 for the seventh time in a row, the study said.

Among the most important buyers of German goods, China slipped from second to fourth place, according to the analysis, which is based on figures from the Federal Statistical Office (Destatis) up to November.

The increase in exports to China was below average at 3.7%. The value of goods imported from China, on the other hand, increased by almost 37%. The trade deficit is likely to have peaked in 2022, according to GTAI.

The prospects for trade with China therefore remain mixed in the new year. On the one hand, China's turning away from the zero-Covid strategy is a good signal for export. On the other hand, the mood among German companies in China remains subdued.

- Taiwan crisis sparks further uncertainty among German firms

Meanwhile, the dispute over the future of Taiwan is creating additional uncertainty among German companies.

"China used to be a safe anchor," said Dana Heide of Handelsblatt, a Dusseldorf-based business daily.

In the eyes of some companies, that has now changed. Concerns about the consequences of an escalation in the Taiwan conflict are causing more and more companies to reconsider their economic dependence on China, the long-time China correspondent added.

- What are the risks of this dependency?

Despite diversification efforts so far, Germany's asymmetric dependency on China is reminiscent of its previous dangerous energy dependency on Russia, according to the Council on Foreign Relations (CFR), a New York-based think tank.

In case of a geopolitical crisis over Taiwan, the fact that German corporations are entangled in the Chinese market raises the political and economic risks for Europe and for transatlantic ties. Germany's reliance could inhibit its ability to respond together with Western allies to an attempt by China to retake Taiwan by force, for instance by imposing sanctions.

Meanwhile, the CFR argued that Scholz's trip to Beijing in early November further complicated the prospects of a common European policy on China. Berlin rejected an offer by French President Emmanuel Macron to conduct a joint visit to Beijing, which aggravated bilateral tensions. Also, the timing of the trip – shortly after Xi Jinping's confirmation as party leader for a third term – raised concerns with Europeans.

The CFR pointed out that as long as Germany is unwilling to substantially adjust its China policy and to invest more in a European policy on China, other European countries will not follow Germany's lead, and it will be easier for Beijing to play them off against each other.

*Opinions expressed in this article are the author's own and do not necessarily reflect the editorial policy of Anadolu.