by Chaoting Cheng


The German economy is recovering quickly after being hit hard by the corona pandemic, and a V-shaped rebound has been seen in many sectors, largely thanks to China’s strong economic recovery. In the automotive industry, for example, 40 percent of Volkswage’s, 24 percent of BMW’s and 26 percent of Mercedes-Benz’s cars were sold to Chinese customers. In the second quarter of 2020, sales of the Mercedes-Benz brand fell 20 percent globally, but rose in China by 22 percent. According to the German Federal Statistical Office, German exports to China totaled 23 billion euros from April to June 2020, compared to just $20 billion to the United States during the same period. The U.S. had previously been Germany’s largest export market, but that position is being replaced by China, as the U.S. economy has been hit hard by the pandemic.

So, is the German economy really dependent on the Chinese market? Did China thus gain significant influence over Germany? How do German economic and political elites view this situation?

On the one hand, the Chinese market is indeed important for the German economy, especially for the automotive industry, which is one of the pillars of Germany’s national economy. However, on the other hand, we must also realize that the EU market is still most important for German economy, the scale and interdependence of Germany’s trade with EU countries far exceeds those of the Chinese market. In 2018, intra-EU trade accounts for 59% of Germany’s exports (France 8% and the Netherlands 7%), while outside the EU 9% go to the United States and 7% to China. China’s contribution is comparable to that of the Netherlands, but with a population of only 17 million, the Netherlands does not have as many people as a single city in Shenzhen, China. Thus, the close economic ties between Germany and its EU neighbors are evident.

Compared to exports, the share of EU member states in Germany’s total imports is even higher, at 66%, with the Netherlands accounting for 14%, France 6% and Belgium 6%; among non-EU countries, China accounts for 7% and the U.S. 4%. Just because of the extreme importance of the EU market, after the outbreak of corona pandemic, Germany has taken a completely different position from its past fiscal policies, and joined France in pushing for the adoption of the largest fiscal and economic recovery plan in the EU’s history, which was approved on July 21, 2020. The plan totals €1.8 trillion, of which €1074 billion is allocated to the budget over the next seven years and €750 billion as a fund for post-pandemic recovery. Of this fund, €390 billion is non-reimbursable assistance and another €360 billion is used as a bailout loan. As the EU’s largest economy, Germany is of course one of the main contributors to this huge sum. For Germany has been pursuing a conservative and prudent fiscal policy, this generous donation is indeed unprecedented. In the 2010 European debt crisis, Germany also vigorously assisted Greece, but the conditions were quite harsh, free aid is unthinkable. It can be seen that Germany has made a great deal of effort to stabilize the EU internal market, which is vital to its own economy.

Given that the current international geopolitical situation is becoming increasingly tense, the closer the economic and trade ties between Germany and China and the greater the dependence on the Chinese market, the more worried Germany is. The economic elites are increasingly worried that China is becoming a competitor, while the political elites are worried about how to take sides in the increasing sino-american confrontation. Germany’s dependence on the Chinese market would not have been a problem in the days when the United States still pursued its engagement policy toward China. Volker Perthes, the former director of the Stiftung Wissenschaft und Politik (SWP), Germany’s most important research institute for international issues and security affairs, pointed out that the U.S.-China confrontation has become the guiding paradigm in international relations today and that all major international issues must be seen within this paradigm. His successor, Stefan Mair, is even less optimistic about Sino-German relations. He previously worked for the Confederation of German Industry (BDI), and first proposed the concept of China as a “systemic rival” to Germany in January 2019, which was subsequently adopted by the European Commission in March 2019. As the head of an important German government think tank, he will have significant influence on German policymakers.

Therefore, close economic and trade ties with China are increasingly a source of pressure for Berlin’s policymakers in a challenging international context. How to reduce dependence on the Chinese market, diversify supply chains and geopolitical ties, and strengthen cooperation with like-minded partners is now on the agenda of German government. It is against this background that the much-anticipated German version of the Indo-Pacific strategy has emerged. In addition, political tensions between Germany and China have increased since the outbreak of the corona pandemic. On the Xinjiang and Hong Kong issues, the German government has taken a tougher stance against China, even going so far as to offend China by representing 39 countries in the UN General Assembly and accusing China of human rights issues on October 6, 2020. All of this signals a shift in the direction of German policy toward China. Germany is now trying to promote a unified strategy toward China at the EU level, because it has realized Germany alone is not powerful enough to confront China. For many years, German policy towards China has been a balance between ideological values and economic and trade interests. It is certain that, due to major changes in the international situation, German policy toward China will become more assertive and that values will play an even more important role.