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German Chancellor Olaf Scholz came hot out of the gate when it comes to how he will approach China during his chancellorship.
In April, he used his first visit to Asia as chancellor to visit Japan instead of China, Berlin’s top trading partner. Scholz did not hide the significance of the trip to Tokyo and used his press conference with Japanese Prime Minister Fumio Kishida to stress the meeting’s importance.
“It’s no coincidence that my first trip as chancellor to this region has led today here, to Tokyo,” he said. “My trip is a clear political signal that Germany and the EU will continue and intensify their engagement in the Indo-Pacific region.”
Beijing’s decision to support Russia during its invasion of Ukraine has resulted in Berlin reconsidering its relationship with the world’s second-largest economy. German politicians recently expressed shock over the release of the “Xinjiang Police Files,” which document alleged human rights abuses.
Annalena Baerbock, the German foreign minister, called for an investigation, DW.com reported. She said human rights, “which Germany is committed to protecting globally,” are a fundamental part of the international order.
Germany decided last week to refuse the request by Volkswagen that would renew its risk insurance for operating in China, The Wall Street Journal reported, citing several people familiar with the situation. The paper said the move is significant because it now means VW is operating at its own risk in China. The move is seen as a way to discourage businesses from dealing with China.
Germany did not announce its decision publicly. Herbert Diess, the VW CEO, said, “We can guarantee that we have no forced laborers there, that we are working according to our standards there, and we make a positive contribution with our presence in region,” the WSJ said.
Diess called China the world’s leading driver of economic growth and the company remains committed to its operations in the country.
The paper said the move is the first of its kind in Germany that “links support for German companies investing in China with Beijing’s treatment of Muslims in the Xinjiang province.”
Mikko Huotari, the director of the Berlin-based China think tank Mercator Institute for China Studies, wrote that engagement with China should be calibrated “in relation to the extent of Beijing’s support for Putin,” DW.com reported.
Huotari wrote that the “overriding priority of reducing those dependencies on China that threaten to limit Germany’s strategic ability to act in the event of sustained tensions or a crisis.”
TREND FORECAST SELF-SUFFICIENCY TREND: The German government is looking to detach itself from its economic dependence on China, which it considers an unreliable partner. But as we note, “the business of business is business” and German exports to China are a lucrative market sector that companies will not vacate.
Despite The Wall Street Journal pointing out that Berlin has appealed to companies to become less dependent on the Asian market in general, exporters will not abandon the Chinese nation of 1.4 billion people and a middle class of which McKinsey & Company projects that 76 percent of China’s urban population will enter the middle income bracket by 2022.
However, Berlin’s decision is a reflection of our Top 2022 Trend of Self-Sufficiency in which nations, rich in human and natural resources, will seek to attain as economic conditions deteriorate and geopolitical tensions escalate.
The trend toward self-sufficiency will see companies and countries cultivating homegrown capabilities across a range of critical industries, energy independence and agricultural production.
This trend will also place an even greater emphasis on automation to cut costs and streamline production, as we explained in “Virus Speeds Automation: Bye Bye Workers” (21 Sep 2021).
TOP TREND 2021: THE RISE OF CHINA: As we have forecast, the 20th century was the American century—the 21st century will be the Chinese century. The business of China is business; the business of America is war.
While America spent countless trillions waging and losing endless wars and enriching its military-industrial complex, China has spent its trillions advancing the nation’s businesses and building its 21st-century infrastructure.
And while America and Europe have outsourced their manufacturing to China and developing nations to increase profit margins, China’s dual circulation/self-sustaining economic model is directed toward keeping jobs and trade and profits within the nation, thus relying less on global trade.