EU-China summit: is the economy saying goodbye to its growth engine?

Mood cooled: China’s President Xi Jinping and Chancellor Merkel.

picture alliance / NurPhoto

It was actually supposed to be a highlight of the German EU Council Presidency: a summit meeting with China’s head of state Xi Jinping, EU Commission President Ursula von der Leyen and all 27 EU heads of state. But nothing will come of the meeting, the corona pandemic thwarted the planning here too. Instead, there was a smaller video summit on Monday.

The need for discussion is indeed high. Political conflicts are causing tension between the EU and China, most recently Beijing’s uncompromising response to the protests in Hong Kong and the treatment of the Uyghurs. China’s leadership is systematically suppressing the Muslim minority in the north of the country, and human rights defenders keep sounding the alarm. When it comes to economic issues, too, one is at odds. In Germany and Europe there is increasing skepticism towards China.

Rethinking European companies

China is still an important trading partner for Europe. Trade with the Middle Kingdom accounts for 16 percent of the EU’s imports and exports. The market is even more important for Germany’s auto industry: VW sells almost every second car in China.

Nevertheless, the economy is also viewed very critically. This has to do with the conditions under which European companies operate in China. Foreign companies almost always have to form a joint venture with local companies. They benefit from the advanced know-how and can copy it. At some point, according to the calculation, you no longer need your European partner or you can outdo them. Conversely, Chinese companies in Europe receive far fairer conditions than their competitors. The EU no longer wants to accept that.

After the video exchange, EU Council President Charles Michel warned China against striving for dominance and called for more cooperation. “We want a balanced relationship with respect for each other’s interests,” says Michel.

CDU economic expert Friedrich Merz wrote on Twitter: “In terms of economic relations with China, the concept of reciprocity should shape the debate, that is, the mutual opening of markets with equal rights and obligations for both sides. But market access in China is limited. ”An investment agreement should make the playing field fairer. This will also be discussed on Monday at the video summit, but hardly anyone expects a quick agreement.

Business representatives have often generously overlooked the human rights situation in China. The focus was on business. Before the EU-China video summit, however, there were quite sharp tones from the Federation of German Industry (BDI). “Political factors are currently overshadowing the business prospects of our companies in and with China. The human rights situation in Xinjiang and Hong Kong is a burden on relations, ”said BDI President Dieter Kempf,“ Die Welt ”.

Fundamental and human rights are of course a global and non-negotiable good for German industry. “Beijing must be clear that the way in which political and social conflicts are resolved always has an impact on economic relations,” said the BDI President. “We categorically reject any form of oppression, forced labor and involvement in human rights violations,” said Siemens boss Joe Kaeser. Clear words and a sign of a more critical look at China.

Corona is also changing the China strategy

But it is not just China’s policy that makes European companies rethink their business in China. In the wake of the corona pandemic, many companies were shocked by their dependence on Chinese suppliers. The supply routes stalled, and many companies are now trying to diversify the supply chains.

Another reason for the change of course: China’s growth is slowing down, making it less attractive. After the financial crisis of 2008/09, the German economy grew thanks to strong exports to the Far East. In the Corona crisis, China is now having problems itself and is no longer able to launch quite as lavish economic stimulus programs due to increased national debt.

At least there was positive news from the summit on Monday afternoon. Both sides agreed on the protection of food with geographical indications. In the future, Franconian wine, Munich beer and French champagne will be protected against imitation in China. A guarantee that machine builders and automotive groups are sure to want.


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