Olaf Scholz in China: “Reducing risks without offending Beijing”

by Andreas Rinke and Laurie Chen

BERLIN/BEIJING, April 12 (Reuters) – Trade tensions between Beijing and the West over public aid will be at the heart of German Chancellor Olaf Scholz’s visit to China on Saturday, with the aim of reducing risks without causing offense Beijing.

Companies from across the Rhine, hit by the recession, are demanding wider and more equitable access to the Chinese market, which is far too protective of national companies in their eyes, despite promises to the contrary.

For its part, China should encourage Berlin not to join the measures that the European Union is threatening to take against the “dumping” (low-price sales) imposed, according to it, by Beijing on automobiles, photovoltaic panels or even wind turbines.

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Flanked by ministers and a large employers’ delegation, Olaf Scholz should therefore engage in a delicate balancing act in accordance with what he recommends in the face of Beijing, “partner, competitor and systemic rival”: a policy of “de-risking” – reduce dependence on Berlin – without going as far as “decoupling” – renounce trade.

“Europeans must absolutely clarify how they position themselves as a pole between the United States and China, and not be crushed between their conflicts,” argues Maximilian Butek, president of the German Chamber of Commerce for the East from China.

“There is still no solution on how to protect our own market without risking losing our business in China at the same time.”

“ALL PARTIES ARE SUSPICIOUS”

Olaf Scholz is due to travel to Beijing, Shanghai and Chongqing and meet President Xi Jinping and Prime Minister Li Qiang during this visit scheduled until Tuesday. He will be accompanied by three ministers and leaders of some of the largest German groups, such as Siemens and Mercedes.

Berlin said the visit was coordinated with the United States, the EU and France. On the international side, the German Chancellor should once again raise the question of Chinese support for Russia.

“The EU is preparing restrictions against Chinese exports in renewable energy, with France apparently at the forefront,” notes Shi Yinhong, professor at the School of International Studies at Renmin University , in Beijing.

“Encouraging Germany – which is inclined to follow its allies on trade restrictions but remains slow and hesitant – to oppose them at this time is very important.”

In a study published this week, the Kiel Institute estimated that subsidies paid by the Chinese state to companies were three to nine times higher than those of OECD countries such as Germany or the United States.

But another study by the German Economic Institute also highlighted that the diversification efforts of German companies were notoriously insufficient.

For Mikko Huotari, president of the Merics Institute in Berlin, it is a question of “re-engaging” and stabilizing relations with Beijing, Germany having according to him a special role to play within the EU and opposing the principle of heavy sanctions in commercial disputes.

“I think all parties are suspicious, so the visit is seen as a good sign by the Chinese,” judge Maximilian Butek of the Chamber of Commerce.

“We insist on open markets because it is essential to our survival. The loss of this market would be greater than the gains made through tariffs on Chinese goods.” (Jean-Stéphane Brosse for the French version)