Worries over Germany's China dependency overshadow Scholz trip

  • Scholz is first G7 leader to visit China since start of pandemic
  • Germany is drafting new, tougher China strategy
  • Hawks fear Scholz to keep prioritizing economic ties
  • Business delegation to accompany chancellor to Beijing on Nov. 4

BERLIN, Nov 2 (Reuters) - Chancellor Olaf Scholz makes an inaugural visit to China on Friday that will be closely watched for clues on how serious Germany is about reducing its economic reliance on Asia's rising superpower and confronting its Communist leadership.

His one-day visit on Nov. 4, will make Scholz the first G7 leader to visit China since the start of the COVID-19 pandemic and the first to meet Chinese President Xi Jinping since he consolidated his grip on power at a Communist Party Congress.

Deep trade ties bind Asia and Europe's biggest economies, with rapid Chinese expansion and demand for Germany's cars and machinery fueling its own growth over the past two decades. China became Germany's single biggest trade partner in 2016.

A recent survey by the Ifo think-tank found that nearly half of German industrial firms now rely on significant inputs from China.

But Scholz's trip comes at a time of growing concern in the West - particularly in Germany's top security ally, the United States - about China's trade practices, human rights record and territorial ambitions.

It also comes amid worry at home about Germany's dependence on another increasingly assertive, authoritarian state given the ongoing fallout of its over-reliance on Russian energy.

"It is extremely important that we never again make ourselves so dependent on a country that does not share our values," Foreign Minister Annalena Baerbock told broadcaster ARD when asked about China.

Scholz, who will meet with both Chinese Premier Li Keqiang and Xi, will press China to open up its markets, raise human rights concerns and discuss "autocratic" tendencies, a German government spokesperson said last week.

He also hopes China can help persuade Russia to end the war in Ukraine, a government official said on Wednesday.

"This trip is an exploratory trip to find out in personal exchange where China stands, where China is going and what forms of cooperation are possible," the official said.

Germany had already started to take a slightly more hawkish stance on China under former Chancellor Angela Merkel, for example by sending a warship to the disputed South China Sea for the first time in two decades last year.

Now Scholz's government is drafting its first ever China strategy, on the basis of a coalition deal that struck a tougher stance on Beijing, mentioning sensitive issues such as Taiwan and Hong Kong and human rights violations in Xianjiang.

The chancellor made his inaugural Asia visit to Japan, not China, unlike his predecessor in a sign of the changing times.

MERCANTILE APPROACH?

Yet some coalition members, European officials and rights activists worry there are early signs Scholz, who has warned against decoupling, will not mark a decisive break with what they view as Merkel's mercantilist approach towards China.

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Scholz will be accompanied by a delegation of business leaders including the chief executives of Volkswagen (VOWG_p.DE) , BASF (BASFn.DE), Siemens (SIEGn.DE), Deutsche Bank (DBKGn.DE), BMW (BMWG.DE), Merck (MRCG.DE) and BioNTech , according to sources familiar with the matter.

No company deals were planned, a German government official said.

However, "his decision to bring a business delegation shows that, for Germany, profit continues to trump human rights," Dolkun Isa, president of the Munich-based group the World Uyghhur Congress, said on Wednesday, arguing that Scholz was overlooking a genocide taking place in the Xinjiang region.

Beijing denies any abuses there.

Last week the German chancellor also pushed through a cabinet decision to allow China's Cosco to invest in a terminal at Hamburg port despite pushback from his coalition partners.

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Scholz's junior coalition partners, the Greens and (FDP) Free Democrats, have long been more hawkish on China than his Social Democrats (SPD) and the Cosco decision prompted outcry.

FDP General Secretary Bijan Djir-Sarai called the decision "naive" and criticized the timing of Scholz's trip to China as "deeply unfortunate".

Moreover French and German government sources told Reuters French President Emmanuel Macron had suggested to Scholz they go together to Beijing to send a signal of EU unity to Beijing and counter what they see as Chinese attempts to play one country over another.

But the German chancellor declined Macron's offer, the sources said.

EU countries should adopt a more united approach, the European Union's industry chief told Reuters on Monday.

Reporting by Sarah Marsh and Andreas Rinke; Additional Reporting by Paul Carrel; Editing by Alexandra Hudson

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