China and Germany: Cooperation Based on Coordination

Name cards are key: Hanna Müller, Head of the BDI Office in Beijing, keeps good contacts with representatives from Chinese industries and politics. © Du Yusen

Asia is the biggest export destination for German goods. Therefore, it is becoming ever more important to observe and understand policy developments in the region. This understanding should be the basis for a coordinated approach to doing business with our partners in the region. In the case of China, the pursuit of a coherent strategy is particularly crucial.

For the German industry to develop ist full potential in China, close cooperation between politics, industry and science is needed – also at EU level, as the current debate on China’s market economy status has shown. In channelling a multitude of differing voices into a coherent strategy, the EU managed to come up with a solution that is largely supported by the industries of its members states.

China already presents a highly united front in economic policy issues, partly due to its political system. While Germany should not seek to emulate the Chinese approach – after all, the independence of the various social institutions and individual actors is one of the key strengths of our liberal system – we undoubtedly need to better coordinate our positions. It is ultimately a question of identifying the opportunities and risks for German companies and joining forces with the government if we are to effectively represent the interests of the German industry.

Based on such coordination, cooperation with China should flourish. China already is a key trading partner for Germany. In 2015, the trade volume between Germany and China amounted to 163 billion Euros, which corresponds to around 30 percent of total trade between the EU and China. Some sectors of the German industry generate a large share of their sales in China. But cooperation between the two countries is already about far more than just trade and investment from Germany to China. Innovation partnerships, for example, are becoming increasingly significant. Collaboration in research and development in the area of Industrie 4.0 is also set to increase in future.

Is Germany’s dependence on China set to increase in the medium term?

In spite of such success stories, the dependence of German industry on China is still lower than one might think. The untapped potential for collaboration with China remains high. However, German companies in China are currently less optimistic than they used to be. Foreign investment depends on good framework conditions. The fact that China is a gigantic market is no longer a sufficient incentive to invest. Legal certainty, a predictable regulatory environment, high-speed and uncensored internet, and the protection of intellectual property rights are some of the factors that constitute a favourable investment environment.