Following the 20th Congress of the CCP, Germany closely followed the changes in the Party’s military leadership along with Xi Jinping’s statements on Taiwan and its importance for “the rejuvenation of the nation.” Now, the German government is reviewing its entire investment policy in China.
China has been one of Germany’s major trading partners for the past six years, and German investments represent the largest inflow of resources from the European Union, contributing an average of 43 percent of total investment over the past four years.
According to a study by Rhodium Group, “European investment in China is now increasingly dominated by a small number of large players, predominantly German companies.”
Competition between the two countries is great and China overtook Germany for the first time in 2020, exporting more machinery and equipment.
As reported by the Taiwan Central News Agency, for years, Germany promoted investment in China. However, after the congress, the tension in the Taiwan Strait worried Germany, because if Western countries decide to intervene in a possible conflict and sanction the CCP, the trade relationship with Germany would be affected.
In this respect, Germany’s strategy toward China is changing, as it is in other European countries. The aim is to counter the influence of the Chinese Communist Party in the country. The German cabinet recently banned two semiconductor manufacturers, Elmos and ERS Electronic, from selling products to Chinese-funded companies on national security grounds. The government is also actively encouraging companies to relocate from China to other Asian markets.
German Economics and Climate Minister Robert Habeck said he did not look favorably on sales by these two semiconductor companies to China. He stressed, “Critical production sectors require special protection.”
Previously, the German government regarded China as a strategic partner, however, it’s now being treated as a “systemic rival” to be protected against.
According to statistics from the German Institute for Economic Research, German companies invested $10.37 billion in China in the first half of 2022, mostly in the chemical and automotive industries.
As for the situation in the Taiwan Strait, Germany is in a position where it must choose between preserving its largest trading partner or supporting the island’s independence.
Any action in favor of Taiwan’s like-minded democratic values puts Germany and its commercial closeness to the CCP under the spotlight.
In order to preserve these trade relations, Germany follows the “one China” principle to the letter. Its diplomacy toward Taiwan is similar to that of the United States, on the one hand recognizing the CCP’s demands, on the other hand dealing with Taiwan as if it were an independent nation, although for diplomatic purposes it uses ambiguous terms such as “Taiwanese authorities” rather than “Taiwanese government.”