Germany publishes new strategy on 'increasingly assertive' China

[July 13, 2023]  BERLIN (Reuters) - Germany published its long-awaited China strategy on Thursday, which took stock of an "increasingly assertive" Beijing and outlined possible responses such as outbound investment controls on cutting-edge technology with military use.

The 64-page document comes amid a broader push in the West to reduce strategic dependencies on a China - which policymakers have labelled "de-risking" - amid concerns about Beijing increasingly seeking to assert its hegemony in the Indo-Pacific.

"China has changed. As a result of this and China's political decisions, we need to change our approach to China," said the document, which was agreed by the cabinet on Thursday after months of wrangling within Chancellor Olaf Scholz's three-way coalition.

China remained an indispensable partner to tackle global challenges such as climate change and pandemics, it said.

However, it was also increasingly assertive in its attempts to change the rules-based international order with consequences for global security.

China's decision to expand its relationship with Russia also had immediate security implications for Germany, it said.

Germany would continue to strengthen its military presence and cooperation with partners in the Indo-Pacific, it said, warning that the status quo of the Taiwan Strait may only be changed by peaceful means and mutual consent.

"Military escalation would also affect German and European interests," the strategy said.

Germany would expand its close relations with Taiwan while continuing to adhere to the "One China policy", which recognises the government of the People's Republic of China as the sole legal government of China.

The flags of Germany and China are seen ahead of a meeting between German Chancellor Olaf Scholz and Chinese Premier Li Qiang in Berlin, Germany, June 19, 2023. REUTERS/Fabrizio Bensch

On the economy, the strategy outlined proposals to reduce critical dependencies on China, in line with what has previously been agreed by the European Union.

There is particular concern in Germany about the impact of this de-risking strategy on an economy already in recession given its strong business ties with China, which became the country's single biggest trade partner in 2016.

At now nearly 300 billion euros ($325 billion) in imports and exports, it is a core market for top German companies including Volkswagen, BASF and BMW.

"The Federal Government affirms its responsibility and determination to coordinate with partners on preventing the cutting-edge technologies we develop from being used to further military capabilities that threaten international peace and security," the strategy said.

"We acknowledge that ... appropriate measures that are designed to counter risks connected with outbound investment could be important as a supplement to existing instruments for targeted controls of exports and domestic investments."

(Reporting by Sarah Marsh, Andreas Rinke, Matthias Williams, Friederike Heine, Miranda Murray, Rachel More; Editing by Rachel More and Alex Richardson)

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