The limits of the China-Germany special relationship
A key objective for Xi Jinping’s inaugural official trip to Europe was bolstering China’s ‘special relationship’ with Germany. However amid the smiles, handshakes and deals, limits to the relationship are apparent.
Trade between China and Germany jumped a startling 54 percent across the previous two years to 161.6 billion US dollars in 2013. Frankfurt will become a clearing hub for the Chinese Renminbi and since and there has, especially since the global economic crisis, been a striking alignment of the two on some international issues.
The basis for such a relationship has been China’s need for new, high-end technology, with Germany seeking new opportunities within China’s markets.
Hans Kundnani, of the European Council on Foreign Relations and co-author of a 2012 policy brief that first described China and German as having a special relationship, points out that Berlin’s approach of putting ideology to one side when dealing with Beijing has created the possibility for Germany and China to work together on a range of issues that goes beyond markets and technology.
Since 2011 the two have annually held what is in effect a joint cabinet meeting between the Chinese and German cabinets - an arrangement China has with no other country, Kundnani points out.
“Strategically, there is no conflict to speak of, so the Chinese see Germany as a kind of safer partner,” says Prof. Lu Xiaobo, who teaches political science at Columbia University, noting that is quite a contrast to the China-Us and China-Japan relationships. And there is plenty of scope for building on this state of affairs.
“Cooperation between Germany and China has room to grow,” Prof. Lu says, citing China’s great need for technology and know-how in areas such as environmental technology, urban development and manufacturing.
But amid the deepening ties and surging trade expansion and despite and currently complimentary Chinese and German objectives, there are fears and conflicts on the horizon, as cooperation gives way to fierce competition and dependence on Chinese markets creates concerns.
From cooperation to competition
“Obviously, there are strong complementarities and broad cooperation prospects between China’s and the German’s economy,” notes Dr Li Gang, from Institute of European Studies at the Chinese Academy of Social Sciences’, before explaining that the situation will become more complex.
“But with the escalation of China's industrial structure, together with the slowing pace of innovation in European countries , Chinese products get more and more competitive in the world market.”
On top of this, Li says that as respective industrial structures become more similar, the competition between them will become much fiercer. “For German manufacturers, China will be more than just a market, but also a competitor in the future.”
Another factor that will weigh on the minds of decision-makers and business leaders is the threat of China gaining capabilities and becoming the global hub for some tecnologies.
Centers of innovation
Gert Bruche, a Professor of International management at the Berlin School of Economics and Law, underlines the threat of a trend of very gradual transfer of innovation activities from Germany to China, which can be seen in the automotive sector.
“If this goes on over time I'm concerned that, given the skills shortage in Germany, there will gradually shift more and more of this important high-end activities to China, and there is a kind of danger of hollowing out German industrial or innovation capability.”
A Reuters article published on Friday suggested the Sino-German economic honeymoon may be over, claiming that German officials and companies are becoming bit worried about their dependence on China.
Dependence on China
This growing dependence that European countries have on China for economic growth is also creating concerns that it will constrain the EU’s foreign policy.
“I think the danger is that we all become so dependent on China for economic growth that it constrains our foreign policy,” Kundnani says, citing human rights issues as illustrative.
“Look at the way at how Britain used to be quite tough and outspoken about human rights issues has shifted in the last year or so as it essentially tries to compete with Germany to increase its exports to China”.
Kundnani projects that Europe could be put on the spot diplomatically over crises in East Asia, such as Taiwan, South China Sea or the Diaoyu Islands, with China hoping to see Europe remain at least neutral should such an issue hot up.
Xi Jinping’s refusal to take a side over Russia’s actions in Crimea could also be an example of the limits of cooperation, with China’s foreign policy dilemma over the issue meaning it cannot react positively to European concerns.
For now however, the complimentary nature of Sino-German engagement will likely persist for a while yet.
End of an era?
“The Chinese market is of life-and-death importance for German auto and machinery manufacturers,” Li Gang believes. At the same time, China is committed to transforming its mode of economic growth, and so is in need of advanced science and technology from Europe.
“Considering Germany’s developed manufacturing industry and advanced science, technology and management, it will take some time for China to surpass Germany,” Li says. “So the cooperation potential and space between the two countries is still huge.”
How long the era of mutual benefit through trade will persist is open to debate, but we are looking at a number of years.
“There is a huge urbanization drive in China and there is still huge demand for industrial goods coming for the next, I would say 5 to 10 years,” says Gert Bruche.
Is Germany part of China's great game?
China's President Xi Jinping arrived in Germany on Thursday aiming to bolster what has come to be described as a special relationship with by far its largest trading partner within the European Union.
Mr Xi’s short visit saw the completion of a number of deals, including a one billion euro deal involving Dailmer and another to make Frankfurt a European hub for renminbi transactions.
Sino-German trade in 2013 amounted to 161.6 billion US dollars in 2013 following a 54 percent jump across the previous two years. This burgeoning relationship has grown due to complimentary goals, with China keen for new, high-end technology and Germany seeking the opportunities within China’s markets.
But as well as rapidly expanding economic ties, there are other dimensions that make relations between the two parties ‘special’.
Hans Kundnani of the European Council on Foreign Relations and co-author of an initially-controversial policy brief describing Sino-German relations as a ‘special relationship’ says that the basis for describing ties as such comes from strong economic ties but also an increasingly deep political relationship.
One key expression of this is government-to-government consultation - in effect a joint cabinet meeting between the Chinese and German cabinets – that has been running since 2011.
“China doesn’t have this arrangement with any other country, including the US, so this is a very striking illustration of the importance of the relationship to China,” Kundnani says.
Another is the notable alignment of China and Germany on different issues that go beyond the markets and technology slot, he adds.
From the Chinese perspective, Dr Li Gang, at the Chinese Academy of Social Sciences’ Institute of European Studies, emphasized the importance of Sino-German ties, stating that, “Germany will become the engine of China-EU relations, and Sino-German relations will also become the weathervane of Sino-EU relations.”
“Both sides will continue to deepen political mutual trust and cooperation, maintain close consultation and coordination in the United Nations, the G20 and other international organizations,” Li told gbtimes.
Thus for such reasons, Dr Li says Germany and China are “not only economic partners, but also political partners and strategic partners”.
Given that ideological differences between Beijing and Western counties usually cloud ties, it can be considered remarkable that such a relationship between China and Germany exists. And it is Berlin’s foreign policy towards China that is a key factor in development of such a bond.
Ideology to one side
While the US and China ties are defined by mistrust and ideological differences which are frequently aired in respective medias, Kundnani says the strong realist streak in Germany foreign policy has seen, since the leadership of Gerhard Schröder, Berlin put ideology to one side when dealing with China.
He cites the 2010 example of the two coming together – as a pair of countries with major trade surpluses - to oppose the idea the Obama administration had of putting a cap on surpluses, while they also opposed the US policy of quantitative easing.
However the understanding of what it means to be ‘strategic partners’ may not be shared, and there are some dangers in Germany’s increasing dependence on Chinese markets, with concerns that China is looking to leverage its influence on Berlin for wider goals