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Scholz’s visit to China: Balancing distance and diplomacy

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The German leader wrapped up a three-day visit to China this week, and trade was high on the agenda. Can the EU afford to be protectionist – and is cooperation on the cards?

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The German chancellor Olaf Scholz held talks with the Chinese President Xi Jinping this week, as well as holding discussions with business leaders across China.

The trip marked Scholz’s second visit to the Asian nation since he became Chancellor, and the first since Germany unveiled its “China strategy”.

The tough-worded policy, which focuses on reducing Berlin’s reliance on Beijing, was branded a “miscalculation” by Chinese officials last year.

As the leader of Germany’s biggest trading partner, Xi Jinping has frequently stressed the benefits of friendly relations.

During Scholz’s recent bilateral visit, the notion of “de-risking” nonetheless hung over discussions, with the EU currently on the defensive regarding Chinese imports.

Last year, the Commission launched an anti-subsidy investigation into Chinese electric vehicles, and officials now have Chinese suppliers of wind turbines in their sights.

These cheap imports, the Commission argues, may be harming EU businesses.

Chinese state subsidies allow manufacturers to keep their costs down, meaning that they can offer cheaper prices to consumers whilst muscling their European competitors out of the market.

“At some point there will also be Chinese cars in Germany and Europe. The only thing that must always be clear is that competition must be fair,” Scholz told an audience of university students in Shanghai on Monday.

“In other words, that there is no dumping, that there is no overproduction, that copyrights are not infringed,” Scholz added.

The EU has ramped up efforts to become more self-sufficient since Russian President Vladimir Putin’s decision to ration gas supplies to Europe.

Many Western countries continue to hold China – as well as Russia – at arm’s length, despite Beijing’s assurances that it is not a European security threat.

This isn’t helped by the fact that Xi Jinping refuses to condemn Russia’s actions in Ukraine, and there are reports that Chinese companies are still selling “dual-use” items to Russia that can be used to make military hardware.

“As long as both sides adhere to mutual respect, seek common ground while reserving differences, communicate and learn from each other, and achieve win-win co-operation, relations between the two countries will continue to develop steadily,” Xi told Scholz this week.

Regardless of political hostilities, it’s clear that Germany and China, both crippled by economic slowdowns, could benefit from a healthy, open trade relationship, at least in the near-term.

During his recent trip, Scholz was joined by Germany’s top corporate officials such as Ola Kallenius, chairman of Mercedes-Benz, and Oliver Zipse, chief executive of BMW.

Both businessmen have shown their support for strengthening Sino-German economic relations.

“We actually see more opportunities than risks,” BMW’s Zipse told the news programme Tagesschau.

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The EU’s protectionist tendencies have also been criticised by those who underline the importance of cheap, clean technology to the EU’s climate ambitions.

“China’s export of electric vehicles, lithium batteries and solar products have enriched supplies to the global market and eased inflationary pressure, as well as made a great contribution for global efforts to tackle climate change and green transition,” Xi told Scholz this week, according to Chinese state television.

It appears that Germany, despite hesitancy on the competition front, is still keen to maintain trade operations with China.

During his visit, Scholz notably pushed for more market access on behalf of German companies in the Asian nation.

Critics have suggested that the move diverges from Brussels’ more hostile stance, arguing that Germany is prioritising short-term financial gain over long-term security.

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