HAMBURG, Germany -- The election defeat of the outgoing German Chancellor Angela Merkel's Christian Democratic Union is set to complicate relations between Europe's biggest economy and China.
Merkel's conservative CDU won 196 seats, fewer than the center-left Social Democratic Party's 206. With neither party gaining a majority in the 735-seat Bundestag, Merkel's successor will be crowned after complex coalition negotiations.
The most likely scenario is that the SDP's Olaf Scholz will be supported by both the Greens and the pro-business Free Democratic Party. Other options include the CDU's Armin Laschet being backed by the Greens and the FDP, or a continuation of the current CDU-SPD coalition with the chancellorship passing to the center-left party.
After 16-years of a relatively Beijing-friendly Merkel, Chinese officials will be watching keenly as Germany is its most important partner in the European Union, with a mutual trading value of 212.9 billion euros (about $250 billion).
They will be anxious about the prospect of the Greens and FDP entering government. The Greens insist that universal human rights become enshrined in any economic agreement between the EU and China, and the FDP's inherent aversion to state-driven economics and subventions to state-owned enterprises would pit it against China.
Arguably, the least desirable outcome for Beijing would be the Greens' chancellorship candidate Annalena Baerbock being named as foreign minister -- a role traditionally given to the second-largest coalition partner. She used her last televised debate before the elections to call for "a new chapter" in EU human rights policy on China.
"A Green foreign minister would certainly raise questions over human rights in places like Xinjiang and Hong Kong and likely even question whether Germany should stick to the One China Policy or upgrade relations with Taiwan," Ulf Schneider, founder of the management consulting firm Schneider Group and publisher of the foreign trade magazine ChinaContact, told Nikkei Asia.
"But the SPD's Scholz would be as pragmatic on China as Merkel and strive to get the most for European companies out of China's Belt and Road Initiative," he added, pointing out that Scholz had pragmatic relations with Beijing when he was mayor of Hamburg, Germany's largest port city.
An undesirable outcome for China -- and also other East Asian export powerhouses such as Taiwan, South Korea and Vietnam -- would be if the Greens put their weight behind an EU carbon border tax on imports of carbon-intensive goods. The tax was proposed by the European Commission in July as part of an EU program to meet its new climate target.
"The Greens will insist on taking the carbon border tax proposal very seriously, and the tax would likely be used as a trade weapon against China," said Sebastian Heilmann, chair of government and the political economy of China at the University of Trier.
"However, in any of the two three-party coalition scenarios, the FDP would cool such efforts, as this pro-business party is very critical of heavy-handed intervention in supply chains," he added.
German observers noted that Chinese state media has not yet run commentary on the German election results.
Ariane Reimers, a senior fellow at Merics, a China think tank in Germany, said that Beijing sees the long Merkel chancellorship as evidence that Germany is an extremely stable country.
"The Chinese tend to like a long-term policy approach and therefore see Merkel's long reign with sympathy," Reimers said.
"If the now starting coalition negotiations produce a new chancellor before Christmas -- this goal has been set by several leading politicians -- there will be a long period of uncertainty in bilateral relations," she added.