Robert Habeck wants to encourage the German economy to reorient itself away from China. The announced support is well received. But the companies have long since set off, even if it is likely to be longer than the Economics Minister claims.
One of the many challenges of being a minister is certainly the credible presentation of expertise. Robert Habeck has only been Federal Minister of Economics for almost a year, he has never been to Southeast Asia before and yet he is officially supposed to show German companies the future path in the region. And Habeck is actually doing that before and during the Asia-Pacific Conference (APK) in Singapore. German entrepreneurs could see the Green politician’s loud criticism of their dependence on China as an affront. But at first glance, when they appear in public, nothing fits between the minister and the assembled top representatives of German industry and small and medium-sized enterprises. At second glance, however, it becomes apparent that Habeck is setting a direction that many companies have long since taken.
Coincidentally, the traditional conference falls at a time when Germany’s relations with China are receiving more attention than they have for a long time. First, head of state Xi Jinping dashed Western hopes that he could distance himself from Putin’s Russia, then he had the People’s Congress grant him historic power and finally the federal government had to make two controversial decisions when it granted the Chinese state-owned company Cosco a minority stake in part of the Hamburg port allowed, but rejected a takeover of the chip manufacturer Elmos by a company controlled from Beijing. In addition, there was an inaugural visit by Chancellor Olaf Scholz to Beijing, in the run-up to which a number of prominent politicians from the FDP and the Greens called on the Chancellor to show “attitude”.
And finally, it is Habeck who continues to place relations with China prominently: “Germany’s economic dependence on China is too great,” he told ntv.de on the flight to Singapore. He therefore wants to offer companies incentives to position themselves more broadly; to also consider other countries when it comes to sources of raw materials, production sites and sales markets. Hardly any other geographical area offers as many opportunities as the countries from Japan to Australia, from India to the Philippines. Intensified cooperation with established national economies such as South Korea and Singapore as well as increased involvement in so-called emerging markets such as India and Indonesia still promise real growth in economically challenging times.
When Habeck opened the 17th APK together with Siemens CEO Roland Busch, Busch was really enthusiastic. All “mega trends” can be observed in the region: adaptation to the consequences of climate change, progressive urbanization, aging societies in Japan and China, the localization of manufacturing processes and the rapidly advancing digitization. For Busch, these are all opportunities that an innovative export economy like Germany must seize. The end of globalization that is sometimes discussed in Germany is a long way off in Singapore, Asia’s international economic hotspot.
In public and non-public meetings, Busch and Habeck repeatedly emphasize how close their assessments are to each other. According to his biography, the Green politician, who is rather distant from business, is also well received by many managers as a guy with his “don’t complain, do it!” attitude. You have to listen a little more closely to hear the contradiction to the Federal Minister of Economics.
Habeck’s distrust of China is massive. In an interview with ntv.de, Habeck warns that Beijing wants its economic strategy to influence the critical infrastructures and vital products of other countries in order to gain political power. What he doesn’t say, but which has worried the German government more than ever since Russia’s attack on Ukraine: What will actually happen if Beijing escalates the conflict over what he sees as a breakaway from Taiwan? Should Germany have to impose a sanctions regime comparable to that currently imposed on Russia, the resulting upheavals cannot be calculated seriously.
Habeck says, without addressing the Taiwan scenario: “If China were to disappear as a sales market, some German industries would not be able to cope with it.” With some verve, Habeck therefore wants to initiate a rethink in German companies. “We have to create rules and incentives that change the way companies make investment decisions,” says Habeck. This could bear fruit in a few years. Busch has other time horizons in mind. Reducing dependence on China is not a matter of three to five years, says Busch. “Maybe we won’t see the full impact for 20 years.”
If someone then looks back, he or she will not necessarily name Habeck as the main initiator of this change. The names Xi, Donald Trump and Biden have better chances. In any case, the big topic at the Asia-Pacific Conference is not the system competition from the dictatorial superpower, but how difficult it has become to do business in China. The Covid regime, which is unprecedented in the world, has driven many Western managers out of the country.
A businessman in Singapore complains that he has not personally seen his factory in Sichuan for three years. A China expert warns entrepreneurs and managers against handing over Chinese branches entirely to Chinese employees. The fact that the microchip supplier ARM almost lost its China branch to the manager there is an extreme case, but a cautionary tale nonetheless.
Another problem is non-tariff barriers, with which Xi’s China is making market access more difficult than ever for western companies. Proprietary technological standards for the Chinese market are intended to maintain state control over citizens and support Chinese companies on their way to global technology leadership, which the CP wants to see realized by the middle of the century.
Chinese representatives are not present at the AKP due to the ongoing lockdown. The German representatives can speak openly, but their criticism of China is difficult to quote in the media. Open criticism can have painful consequences when doing business with China, and the German economy cannot and does not really want to leave China anyway. When the entrepreneurs in Singapore talk about possible alternative locations for China, it quickly becomes clear that no other country in the region can foreseeably come up with comparable quality in production, let alone a comparable density of suppliers. Political stability and legal certainty are also not available everywhere, system competition between China and the western democracies or not.
German companies generate sales of more than 500 billion in Asia, with the People’s Republic of China accounting for just over half of this. Production processes are closely linked and multi-layered. And Habeck also knows that in the coming years not only the German economy will be dependent on China, but also the federal government: the transformation towards renewable energies will not be possible within a few years without raw materials, solar panels and wind turbines from China, as the Traffic light that has made firmly. A decoupling of the economic areas will therefore be pushed, if at all, more by Beijing and Washington.
In Southeast Asia, the German and European economy encounters a number of countries that have the same concerns. Because there are parallels to Germany not only in Busch’s “mega trends”, but also in trade policy. Joe Biden’s government has adopted and developed Trump’s confrontational approach to China. US sanctions prohibit the export of certain technologies to China. At the same time, the USA is letting fewer and fewer Chinese products into the country, for example through production quotas for public contracts.
The federal government views this critically, despite the good relations with Biden. Companies, both Asian and European, are increasingly faced with the question of which market is more important to them when in doubt. New alliances between Southeast Asia and Europe have therefore long been apparent, for example in the key technology of semiconductors or in servers for industry. The federal government is not left out, but already under Peter Altmaier laid claim to a more active European economic policy. The diversification announced by Habeck, which he wants to promote with investment aid and new trade agreements, is therefore not as new as it might appear in view of the sometimes passionate debate of the past few weeks. But that doesn’t make her any less right.
