PRAGUE – When German Chancellor Angela Merkel declined US President Donald Trump’s invitation for a G7 summit in Washington in June, it was the latest indication of how far the two sides have drifted in recent years. With Merkel a likely no-show, the meeting has been pushed back until September.

That’s the same month when Chinese and European leaders will meet in the German city of Leipzig for their own special summit, at which the tone of future European Union-China relations will likely be set after a deterioration in recent months over the Covid-19 pandemic.  

Before the pandemic struck, the summit was expected to serve as venue for a major breakthrough in talks over an EU-China investment pact, which has been under discussion since 2013. The EU had also hoped to win Beijing’s agreement on various multilateral issues, not least climate change.   

For Germany’s long-ruling Merkel, who is expected to step down next year and who will chair the EU-China summit as Germany takes on the EU’s rotating presidency in July, the occasion was also expected to serve as a certain cap off on 15 years as national leader.  

As the dominant power in Europe and within the EU, Germany’s stance matters. But as Europe-China relations decline, Merkel’s government is “struggling to adjust its China policy,” says Bernhard Bartsch, senior Asia expert at the German foundation Bertelsmann Stiftung.

For starters, Germany is not a military power and, for some pundits, Berlin’s unwillingness to even consider itself as a security actor in global affairs needs to be re-examined, despite the historical reasons for Berlin’s hesitance.  

By comparison, its European partners France and the United Kingdom have recently taken part in freedom of navigation operations (FONOPs) in the South China Sea, a martime theater where Beijing controversially claims several disputed territories and waters.

But Berlin has been hesitant to even talk about the issue of China’s disputed claims and actions in those waters, even when debate arose last year following reports that Germany might join EU partners in South China Sea FONOPs.

As such, security issues relating to China haven’t featured much in Berlin’s relations with Beijing, says Noah Barkin, a senior visiting fellow at the German Marshall Fund in Berlin. Neither has human rights played a role in Germany’s relations with China over the years, according to critics of Merkel’s China policy.

German Chancellor Angela Merkel welcomes China’s President Xi Jinping to the G20 summit in Hamburg, Germany, July 7, 2017. Photo: AFP/Odd Anderson

That leaves largely business relations. “For years, China was seen in Berlin as a lucrative market and little else,” Barkin opined.

That’s for good reason. Since 2000, Germany has attracted the second largest share of Chinese investment in Europe, trailing only the UK. In 2018, bilateral trade was worth around €200 billion (US$222.7 billion).

Equally important for Germany’s export-driven economy is access to Chinese markets. In 2018, Germany accounted for just under half of all EU exports to China, according to data compiled by the Central European Institute of Asian Studies (CEIAS), an independent think tank.

Germany is also far more reliant economically than other European states on its exports to China, which accounted for 7.1% of all German exports in 2018, compared to 5.6% for the UK.

Given those close trade and business links, the German government “desperately wants to avoid any confrontation with the Chinese government, mostly for fear of retaliation against German businesses in China. This fear is not unfounded,” said Bartsch.

But some commentators have noticed a recent change in tone. According to Barkin, of the German Marshall Fund in Berlin, “Germany is only slowly coming around to the view that it needs to take a more strategic approach to Beijing.”

He added: “That pressure is only going to rise in the years ahead as the US-China competition accelerates. German politicians will not be able to avoid hard choices.”

Anti-China forces in the US, most prominently former Trump advisor Steve Bannon, are on a mission to get the EU more aligned with Washington’s hard stance on Beijing. Bannon has even suggested that the EU will become China’s vassal if it doesn’t change course.

Donald Trump congratulates Senior Counselor to the President Stephen Bannon during the swearing-in ceremony in the White House on Jan. 22, 2017. Photo: AFP / Mandel Ngan
Donald Trump and Steve Bannon during the swearing-in ceremony in the White House on Jan. 22, 2017. Photo: AFP/Mandel Ngan

Merkel’s Germany will be among the hardest to convince in Europe. Domestically, there is now greater political pressure on the governing CDU-CSU Union alliance, between the Christian Democratic Union of Germany (CDU) and the Christian Social Union in Bavaria (CSU), from other parties.

Nils Schmid, foreign affairs spokesperson of the Social Democratic Party of Germany, the second-largest party in coalition with Merkel’s Christian Democrats, in February criticized Merkel for being “stuck with an idea of China that is 10 years old.”

Annalena Baerbock, co-leader of the opposition Greens Party, more recently called on Merkel to suspend plans for the Leipzig conference in September, in protest over Beijing’s announcement last month that it wants to impose a new security law over Hong Kong.

Glacier Kwong and Joshua Wong, two prominent Hong Kong democracy activists, appealed to Chancellor Merkel in late May to come to the city-state’s defense.

In an interview with the Business Insider, Kwong said she hopes Merkel “doesn’t sacrifice Germany’s fundamental values to support the economy and appease China.” She added that “being dependent on China will sooner or later do Germany serious harm.”

So far, the German government has said little about Beijing’s controversial plans for Hong Kong. A government spokesperson said on May 27 that it expects Beijing to abide by Hong Kong’s rule of law and that the city should retain a high degree of autonomy.   

Last September, Berlin received a rare admonishment from Beijing after German foreign minister and SPD member Heiko Maas met with Wong in Berlin.

“Over the last two years, the China debate in German policy circles has shifted significantly, from the previous emphasis on partnership to a more nuanced understanding that China is at the same time a partner, a competitor and a systemic rival,”  Bartsch said.

Since 2017, the German government has been increasingly active in bidding to prevent strategic German firms, namely those in technology sectors, from being bought out by Chinese companies.

Robotics firm Kuka’s factory floor. Image: Facebook

This followed the buyout of Kuka, a German robotics manufacturer, by the Chinese Midea Group in 2016 after it failed to find any rival European bidders. Then, the German government lacked the legal means to cancel the deal.  

The following year, then-US president Barack Obama pressured Berlin to block the sale of German microchip equipment manufacturer Aixtron to a Chinese company, Fujian Grand Chip, even though the German government originally green lighted the deal.

Afterwards, though, Berlin moved to impose more stringent controls of takeovers and share purchases by non-EU firms. In April, rules were tightened so that a review can take place if there is “likely harm” to national security in the case of a foreign takeover. Previously, “actual danger” needed to be shown.

New restrictions also increase the number of sectors which can be reviewed, which now include artificial intelligence, robotics and semi-conductors.

German officials also pressured the EU, with French and Italian support, to introduce region-wide restrictions and screening mechanisms on outside investment and takeovers of European strategic firms by “non-EU investors”, a codeword for China. The European Commission passed such legislation last year.

Manfred Weber, a German conservative politician and Merkel ally who heads the European People’s Party, the largest grouping in the EU Parliament, said last month that there should be a 12-month ban on Chinese investors buying into European firms due to the pandemic.

“We have to see that Chinese companies, partly with the support of state funds, are increasingly trying to buy up European companies that are cheap to acquire or that got into economic difficulties due to the coronavirus crisis,” he told a German newspaper.

Germany isn’t alone in struggling how to respond to China.

Since the Covid-19 pandemic began in January, several European governments have voiced anger about Beijing’s actions, especially its “mask diplomacy” and the more confrontational rhetoric of China’s so-called “wolf warrior” diplomats, who have often publicly mocked European responses to the health crisis.

Chinese medical workers in face masks on a deployment overseas. Photo: Facebook

Britain’s Foreign Secretary Dominic Rabb has vowed that “we can’t have business as usual after this crisis,” while the French government has also vowed that relations won’t return to normal after the pandemic ends.

Reinhard Buetikofer, a German Green party lawmaker who chairs the European Parliament’s delegation for relations with China, went as far as to say that “over these months China has lost Europe” in an interview with Bloomberg last month.

The EU, however, has oscillated between sounding tough and conciliatory, and has been rebuked in recent weeks for allegedly toning down statements on China’s actions and for allowing Chinese diplomats to censor an op-ed written by European ambassadors.

Speaking to a group of German diplomats in May, the EU’s foreign chief Josep Borrell reportedly said that “analysts have long talked about the end of an American-led system and the arrival of an Asian century. This is now happening in front of our eyes.” He added that the EU faces rising “pressure to choose sides.”

Instead, the bloc “should follow our own interests and values and avoid being instrumentalized by one or the other,” Borrell said, according to news reports.

Like the EU, Germany also has no enthusiasm to pursue a Washington-like approach of confrontation with China, nor is it ready to align completely with the US in what some see as an emerging new Cold War. 

Indeed, as the major power within the EU, German politicians remain committed to the idea of Europe carving out its own position in the increasingly fraught US-China superpower rivalry. 

“We should not fall into a new bipolarity, but rather try to include a country like China and treat it at least equally, based on our results and experiences with multilateralism,” Merkel reportedly said at the American Academy in Berlin in January.

Berlin’s position on China has been complicated since 2017, after Trump took office and relations between the US and Europe – including with Germany – severely deteriorated.

Germany's Chancellor Angela Merkel gets a point across to US President Donald Trump at the G7 summit in Canada on June 10. Friction between the European Union and the Trump administration has since intensified. Photo: Jesco Denzel / Bundesregierung / dpa / for Reuters
Germany’s Chancellor Angela Merkel gets a point across to US President Donald Trump at the G7 summit in Canada on June 10, 2018. Photo: Jesco Denzel/ Bundesregierung/DPA

Trump regularly attacks European politicians, has imposed tariffs on European exports and has repeatedly claimed that either European states don’t pay enough into the NATO security alliance or that the US could leave the alliance altogether.

Even if there was a willingness in Berlin to choose sides between the US and China, the Trump administration’s policies have made that decision much harder for European governments.

Yet, as with much of German politics, the question also boils down to the personal desires of Merkel herself.

The chancellor plans to step down next year, at which time she would have spent 16 years on the job. Because of her long domination of German politics, her policy towards China is Germany’s policy. What happens when she leaves office, however, is another matter.

Of her four most likely replacements, two already advocate for a tougher line on China, while the other two are more in agreement with Merkel’s current more conciliatory position, pundits note.

From now until Merkel’s resignation, it is unlikely that Berlin will depart in a significant way from its current line, yet its stance may look increasingly out of step with a Europe that is hardening its attitude against China.

Europe’s divided opinion may be vocally apparent if leaders meet as scheduled in Leipzig in September. But tough decisions await the next German leader, whoever that might be.

“Going forward,” Barkin said, “it will be impossible for Germany to have its cake and eat it too.”