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International relations

Germany ends China honeymoon with new Indo-Pacific strategy

European country's industrial powerhouses wary of alienating supersized market

German Chancellor Angela Merkel and Chinese President Xi Jinping attend a ceremony in Berlin in 2017. Germany's new Indo-Pacific strategy takes a tougher approach toward Beijing.   © Reuters

BERLIN -- After years of shaping its Asian strategy around China, Germany has made a sharp break and will focus instead on stronger partnerships with democracies in the region such as Japan and South Korea to promote the rule of law.

The shift comes as part of a rising sense of alarm throughout Europe about economic dependence on China and the country's track record on human rights.

"We want to help shape [the future global order] so that it is based on rules and international cooperation, not on the law of the strong," German Foreign Minister Heiko Maas said on Sept. 2. "That is why we have intensified cooperation with those countries that share our democratic and liberal values."

Germany that day adopted new policy guidelines covering the Indo-Pacific, stressing the importance of the rule of law and promoting open markets in the region. The strategy echoes the approach taken by France, as well as Japan, Australia and members of the Association of Southeast Asian Nations.

China had been Berlin's diplomatic focus in Asia, with German Chancellor Angela Merkel visiting the country almost yearly. China also accounts for 50% of Germany's trade with the Indo-Pacific region.

But economic growth has not opened the Chinese market as hoped. German companies operating there have been forced to hand over technology by China's government. Negotiations for an investment treaty between the European Union and China to address such issues have stalled, fueling concerns about becoming too economically dependent on Beijing.

This coincided with growing criticism of China's new national security law in Hong Kong and its detention centers for members of the Uighur Muslim minority, which in turn have led to increasing resistance in Germany to Merkel's pro-China policies.

Berlin's new Indo-Pacific strategy takes a tougher approach toward China, including criticism of the vast debt racked up by countries participating in Beijing's Belt and Road infrastructure-building initiative.

German companies also have concerns about doing business and protecting their intellectual property in China, especially after Chinese appliance maker Midea Group bought German robot maker Kuka in late 2016.

But they are hesitant to snub such a supersized market. About 40% of vehicles sold last year by Volkswagen, as well as nearly 30% by Daimler and BMW, went to China.

Volkswagen CEO Herbert Diess calls China his company's "most important market." The automaker in May agreed to take a 50% stake in the parent of China's state-owned JAC Motors. The German company has defended its plant in Xinjiang, the Uighurs' home region.

Volkswagen has only committed more firmly to China after an emissions scandal in the U.S. and setbacks in its tie-up with Tata Motors in India.

Daimler and BMW also see China as the key to success, especially with the European market still stricken by the coronavirus pandemic. Daimler issued an apology in 2018 for quoting the Dalai Lama in an ad.

BASF, a leading chemical producer, is constructing its second integrated chemical project in China as well. The German company's Guangdong Province site is slated for completion in 2030 and will cost $10 billion.

Still, Europe as a whole appears to be reevaluating its ties to China. The European Union in 2019 labeled China a "strategic competitor," highlighting its trade and technological rivalry with the Asian giant. A shift toward a more sober strategy on Beijing has occurred, said Patrick Koellner at the German Institute for Global and Area Studies.

Germany plans to work with France toward an EU-wide strategy on the Indo-Pacific. Berlin aims to boost its influence on the issue by having the entire bloc on its side.

The U.K. and France also have begun freezing Chinese telecommunications giant Huawei Technology out of their 5G networks. Foreign Minister Wang Yi recently toured Europe as part of Beijing's charm offensive, but his trip largely highlighted the growing rift between the two sides.

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