Germany’s blocking of a Chinese company’s acquisition of German firm IMST last month underscores a growing distrust of China and hints at a change in policy toward China in the post-Merkel era that could harden after Chancellor Angela Merkel’s failed credo of using trade to change China.
The Berlin government last month banned a subsidiary of China Aerospace Science and Industry Corp. from acquiring IMST, a small German company specializing in satellite, 5G and radio technology, a deal the economy ministry concluded at the time “posed a serious threat to public order and national security.
In fact, German officials became alerted to the intentions of the Chinese leadership as early as 2016 in the case of a deal.
That year, Chinese appliance maker Midea Group acquired Kuka, Germany’s largest manufacturer of industrial robots at the time, for 4.5 billion euros. The deal raised fears that key German technology would fall into Chinese hands. Politicians also complained that German companies would never have the chance to acquire a Chinese company of the same strategic importance as Kuka.
Soon after, Germany tightened its foreign investment laws and increased the authority of ministers to block foreign acquisitions of strategic assets. This change in law allowed the cabinet to block the IMST acquisition last month.
However, the Financial Times (FT) pointed out that although the German system is already moving, as long as Angela Merkel is not out of office, there is unlikely to be a drastic change in policy toward China. A diplomat in Berlin said, “The biggest constraint is Merkel herself.
Now that Angela Merkel, who has been in office for 15 years, is leaving the political arena, the future direction of Germany’s policy toward China may be seen in the blockage of the IMST merger.
The Financial Times analyzes that Merkel embodies the old idea of the Western world’s rapprochement with China: deepening economic ties with the West will encourage a change in Beijing’s politics to embrace liberalism and Western values.
At the same time, Germany has benefited from China’s integration into the global economic system. The volume of German-Chinese trade reached €200 billion by 2018, and China is at the same time Germany’s largest trading partner. In this context, Germany will never adopt the “decoupling” approach of US President Donald Trump. Merkel also strongly opposes the tendency to see China as an enemy, lest the Cold War between the West and the Soviet Union be replayed.
However, many Germans see Merkel’s approach as increasingly outdated.
Some in Merkel’s camp had hoped that China would open up its politics along with its economy, but their hopes were dashed. The Chinese Communist Party has become more domineering externally as it oppresses Hong Kong and the Uighur people internally. Under Xi Jinping‘s presidency, China has promoted “war-wolf diplomacy” to counter foreign criticism and intensified its prying into Western economic and political activities, including those of Germany.
We are all very disappointed,” said one German official. We all watched China open up and reform over the last few decades, thinking that we could move toward reconciliation and that our steps would finally become more consistent. That didn’t happen.
Merkel continues to defend her commitment to dialogue with China. She argues that if China does not cooperate, the world has no chance to look forward to solving the great challenges of climate change. But her “partnership” approach has come under increasing criticism, with politicians accusing her of putting German business interests ahead of human rights.
Nils Schmid, foreign policy spokesman for the Social Democratic Party (SPD), a partner in Merkel’s government, said, “There is no will to change on Merkel’s part, but after she leaves office, [Germany] will certainly take a more resolute approach to China.
Schmid added: “We need a real foreign policy toward China – not a business-oriented policy. We have to decouple our foreign policy from the commercial interests of big business.
Conservative politician Friedrich Merz is running to be the next leader of Merkel’s Christian Democratic Party (CDU). He also said during his recent campaign: “We are facing an expansionist, imperial foreign policy. China has a strategy for Europe, do we have a strategy for China?
Noah Barkin, a Berlin-based analyst at New York-based research firm Rhodium Group, said, “Whoever succeeds Merkel in the future, the next German government will probably have to include The Greens, which is the most hawkish German party toward China, with a strong focus on human rights issues.
Barkin said that if the Greens enter the government, it will change the German discourse on China.
In addition to domestic pressure, the Financial Times also pointed out that Germany will inevitably face pressure from its allies in the future.
The European Union (EU) recently signed a long-awaited investment agreement with Beijing, but the EU is increasingly wary of the growing influence of the Chinese Communist Party and other “authoritarian powers”, calling for a stronger alliance with the U.S. government to protect the interests of democratic countries in global governance. Berlin will play a central role in how Europe will then act.
The analyst Barkin said: “In the future, the threat of authoritarian regimes will be discussed among democratic countries, whether it is the Chinese Communist Party, Russia or other countries. If Germany is to participate in the discussion, it will feel enormous pressure from its allies to strengthen its voice and confront the Chinese Communist Party with a stronger and more forceful attitude.
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