How Germany is changing its China strategy

Drawing on his recent article in International Affairs, Rafał Ulatowski analyzes Germany’s strategy on China and its implications for the wider Indo-Pacific.

Interview Updated 29 June 2022 Published 11 May 2022 4 minute READ

Rafał Ulatowski

Assistant Professor, Faculty of Political Science and International Studies, University of Warsaw

Jo Hills

Former Digital Content Editor, International Affairs, Communications and Publishing

In the aftermath of the Cold War, one of the apparent successes of globalization was the shared economic growth of China and Germany. Three decades later, relations between the two states have become increasingly tense. Both states are at odds over their roles in the Indo-Pacific, despite their close economic ties. 

In this interview, Rafał Ulatowski discusses his recent article in International Affairs and assesses the causes of the current rift, Germany’s increased engagement with Indo-Pacific states, and the direction of the Germany-China relationship.

Why did Germany pursue a partnership with China in the aftermath of the Cold War?

German policy towards China in the aftermath of the Cold War was rooted in two developments. First, Germany’s security situation. The Federal Republic of Germany was on the frontline of potential conflict with the Soviet Union during the Cold War.

Afterwards, Germany unified, the Soviet Union disintegrated, Central and Eastern European countries turned towards the West, and US military forces remained in Europe, making Germany a safe country surrounded by friendly states. The improved security situation enabled the German authorities to devote more attention to countries beyond the Euro-Atlantic area.

Second, as the US increased its engagement with China following the opening of the Chinese economy in the 1980s, Germany supported US policy. German politicians believed that, by integrating China into the global economy, China would not only become richer, but also more politically liberal.

This was a ‘change through trade’ strategy that Germany applied to countries such as China and Russia. Ultimately however, China did not reform its political system in line with Western expectations, and its policy towards the West has become increasingly confrontational.

What are the factors driving Germany’s changing China policy?

Germany is worried about the unprecedented growth of Chinese power combined with the challenge China’s international strategy presents to the existing liberal international order.

As indicated by Norbert Röttgen, former Chair of the Bundestag Foreign Affairs Committee, the two states find themselves at odds over Hong Kong, Taiwan, and the South China Sea. In other words, China’s desire to reshape the regional order concerns Berlin, particularly in the context of China’s efforts at military modernization. 

What are the key features of recent changes in Germany’s approach to China?

Having previously been characterized by increasing economic cooperation and political rapprochement, since the mid-2010s the two states have become increasingly distant. Just as the main pillar of the German–Chinese strategic partnership was their economic relationship, the first features of this shift were also economic.

Since the mid-2010s, Germany has been cautious about economic cooperation with China. A good example of this is Germany’s position on China’s international economic projects; Germany joined the Asian Infrastructure Investment Bank, becoming its fourth-largest shareholder, but avoided joining the Belt and Road Initiative due to concerns over transparency, a level playing field for business and European labour, as well as environmental and social standards.

Germany wants to strengthen its relations with the regional powers of the Indo-Pacific.

Furthermore, over the last two years Germany has attempted to limit Chinese influence by increasing its own diplomatic engagement with Indo-Pacific states. This has involved German politicians undertaking unprecedented levels of diplomatic activity in the Indo-Pacific region, meeting frequently with the leaders of other regional powers throughout 2020 and 2021.

What do these changes mean for Germany’s relationships with Indo-Pacific states?

Germany wants to strengthen its relations with the regional powers of the Indo-Pacific. Over the last three decades, Germany has prioritized maintaining positive relations with China when acting in the region, but that strategy has come to an end. While for many years China will remain Germany’s most important economic partner in the Indo-Pacific region, this may not continue indefinitely.

Germany is now trying to diversify its economic relations away from China and towards ‘democracies and partners with shared values’, as the German Indo-Pacific Guidelines indicate. Additionally, Germany is becoming more politically engaged in the region, and has increased its military presence albeit to a limited extent. For example, Germany sent the frigate Bayern into Indo-Pacific waters, a symbolic gesture intended to strengthen the position of Germany’s democratic partners in the region.

Finally, Germany’s presence may be strengthened by its capacity to deliver modern weaponry to allies in the region. Germany is a leading weapons exporter, and the developing arms race is creating additional opportunities for them.

How is China responding to increasing German engagement with other Indo-Pacific states?

There are two key themes that are central to China’s response. China is trying to leverage Germany’s economic dependence in order to keep Germany out of any US coalitions against China. In particular, China is using the dependence of the largest German automobile producers on the Chinese market to achieve favourable economic and political results.

Discussions over the access of Huawei to the German market illustrate this nicely. In December 2019, Chinese ambassador to Berlin, Wu Ken, suggested that German automobile companies could be targeted by the Chinese authorities if Huawei were excluded from the German market.

China is also trying to frighten Germany away from military engagement in the Indo-Pacific. When the Bayern was sent into the region, it not only avoided any disputed waters, but was also supposed to visit the harbour of Shanghai to demonstrate Germany’s friendly attitude towards China.

China, though, refused to admit the ship into the harbour, explaining that this was due to a lack of trust between China and Germany. Despite the German naval presence being largely symbolic, it provoked strong opposition from the Chinese government.  

What can we learn about economic interdependence in international politics from the Germany-China example?

Germany’s Indo-Pacific strategy in recent years shows that economic ties do not determine the behaviour of states. Despite the unprecedented increase in the level of Germany’s economic exchange with China, at the Munich Security Conference in 2020, German Federal Minister of Defence Annegret Kramp Karrenbauer said, ‘We are not “somewhere in the middle”. We are and will continue to be part of the West.’

In the short term, of course, close economic relationships may have a moderating effect on a state’s behaviour, but in the long term strategic interests prevail. In this case, Germany is seeking to diversify away from dependence on the Chinese economy rather than succumb to Chinese demands.

The golden era in German-Chinese relations is over.

What is the likely future of Germany’s relationship with China?

The golden era in German-Chinese relations is over. The growth in their relationship was enabled by the US strategy of integrating China into the liberal world order, and the failure of that project is having an adverse effect on relations between China and Germany.

Yet, while the political interests of China and Germany are diverging, their economic ties will probably stay strong in the short term. That said, they could weaken as China gradually reduces its need for German technology and capital.

The political differences between the two countries may also limit economic exchange between them in strategic sectors of the economy. Although full decoupling of the German economy from China is not expected or desirable, Germany is likely to prioritize increased economic cooperation with Indo-Pacific states that share its interests and values. While there is unlikely to be a sudden or dramatic rift, the interests of both powers seem set to diverge.

Rafał Ulatowski cont.

Rafał Ulatowski’s article ‘Germany in the Indo-Pacific region: strengthening the liberal order and regional security’ is in the March 2022 issue of International Affairs. It is free to access.

International Affairs was started at Chatham House in 1922 to communicate research to members who could not attend in person. Over the last 100 years it has transformed into a journal that publishes academically rigorous and policy relevant research. It is published for Chatham House by Oxford University Press. Read the latest issue.