promises, promises

German business draws back from China as skepticism grows

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He's here, he's there, he's everywhere. Source: Reuters

German business is finally over its crush on China. A decade ago, no praise was too high, as executives salivated over access to the large Chinese market.

But after 10 years of disappointments and broken promises, German companies are drawing back. At a recent meeting of the Asia-Pacific Committee of German Business the group’s head, Hubert Lienhard, said its focus now is to cooperate with like-minded countries. China, he made clear, doesn’t belong to this group.

German executives kept hoping China would conform to Western market standards, but that hope has been dashed. “Under President Xi Jinping, the trend is clearly in the direction of a state economy,” said Friedolin Strack, international market specialist at the Association of German Industry, or BDI.

In confronting China as an opponent rather than a partner, German business is taking sides with Donald Trump, who declared China a “strategic rival.” The US president has launched a trade war with China, imposing tariffs on $250 billion (€220 billion) in goods and promising to double that amount if China makes no concessions.

Sharing Trump’s criticism of China

German businessmen have come to share his criticism of China for technology theft, government-directed and finance investment abroad, and obstacles to foreign companies seeking access to the Chinese market.

The Berlin government is looking for ways to tighten its restrictions on foreign takeovers of high-tech German firms. Business executives would prefer more transparency regarding ownership and loan ties, along with company balance sheets in line with international standards.

President Xi is not unaware of these concerns and clearly wants to win allies against the United States. At the opening of the import fair in Shanghai this week, he portrayed himself as a champion of free trade. He promised lower import tariffs and better protection of intellectual property. In addition, he extended market access to telecommunications, agriculture, manufacturing and mining.

So he says

Xi also pledged in Shanghai to take $30 trillion in imports over the next 15 years as well as $10 trillion in foreign services. He wants to speed up talks for an investment treaty with the EU and create a free-trade zone with Japan. Or so he says. European executives remain skeptical after years of vague, unfulfilled promises.

If the fronts harden along the lines traced by President Trump, the West could be looking at a new Cold War. Former Treasury Secretary Hank Paulson recently spoke of an Iron Curtain between the world’s two biggest economies.

For all its protests about willingness to compromise, China is fixed on its ambitious strategic plan, Made by China 2025, to be among world leaders in key technologies.

Several Handelsblatt reporters contributed to this article. Darrell Delamaide adapted it into English for Handelsblatt Global. To contact the author: d.delamaide@extern.handelsblatt.com

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