Germany urges companies to ‘derisk’ China, stresses it is not seeking decoupling

Germany said there was an urgent need for companies to de-risk China, while “not seeking a decoupling” of the economies.

“For Germany, China remains a partner, a competitor, a systemic rival. But the aspect of systemic rivalry has become more and more prominent in recent years,” German Foreign Minister Annalena Baerbock said. said thursday in the think tank of the Mercator Institute for China Studies in Berlin, according to a translation by DW, a German newspaper.

The minister was presenting the country’s strategy on China and explaining how the country plans to protect its interests.

“China’s economic strategy aims to make it less dependent on other countries, while making international supply chains more dependent on China,” the Foreign Ministry said in a statement. 64 page report posted on Thursday.

Chinese last week stopped the export of two key metals for the manufacture of chipsin what was seen as a warning to Europe and the US in a tech war over high-tech chips.

“In terms of foreign policy, China is pursuing its own interests much more assertively and is attempting to reshape the existing rules-based international order in various ways. This is having an impact on European and global security,” the report said.

“We don’t need to look too closely to see that China has changed. Anyone who listens to China knows the self-confidence with which it will decisively influence the development of our world,” Baerbock said during his speech.

China’s foreign ministry did not immediately respond to CNBC’s request for comment.

The Chinese Embassy in Germany said in a statement that “China expects Germany to view China’s development rationally, comprehensively and objectively.”

“Many of the challenges and problems Germany is currently facing are not caused by China. China is Germany’s partner in meeting the challenges, not its opponent,” the embassy said.

“Watching China and formulating strategies toward China based on ideology will only exacerbate misunderstanding and misjudgment, and damage cooperation and mutual trust between the two sides.”

The German Foreign Ministry report further stressed that competition between nations is beneficial and that “Germany accepts competition with China.” However, he said the competition must be “based on fair rules.”

“It is not our intention to impede China’s economic progress and development. At the same time, risk reduction is urgently needed. However, we are not seeking a decoupling of our economies,” the report said.

Germany wants to become “less dependent in critical sectors” such as medical technology, medicinal products and rare earths, according to the report. He added that “China has exploited other countries’ dependencies in the past,” listing semiconductors as an example.

The report also says that “economic and trade relations remain an important element of bilateral cooperation with China” and that Germany wants to ensure that this cooperation “is fairer, more sustainable and more reciprocal.”

China is Germany’s largest single trading partner. In 2022, Germany’s imports from China increased 33.6% for a year to 191.1 billion euros (204.4 billion dollars), according to data from the German Federal Statistical Office. Meanwhile, German exports to China rose by just 3.1% to €106.8 billion.

While “China’s dependencies on Europe are steadily declining, Germany’s dependencies on China have grown in importance in recent years,” the report says.

Last month, Chinese Premier Li Qiang met with German President Frank-Walter Steinmeier to discuss bilateral relations between the two economies.

Li said that China and Germany “enjoy a solid foundation for cooperation and strong dynamics for development.”

He also said that China “has full confidence in the prospects of China-Germany cooperation.”