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GERMANY AND CHINA

Germany to cap investment guarantees for China

Germany will limit guarantees for companies doing business in China as it looks to reduce its dependence on Beijing, Economy Minister Robert Habeck said Tuesday.

Audi shop in Beijing
Cars from Volkswagen subsidiary Audi on display at a shop in Beijing. Photo: picture alliance/dpa | Soeren Stache

The investment support programme would be overhauled to create “a strong incentive for diversification”, Habeck told a news conference in Paris.

Policymakers would implement a quota, “so that not all German guarantees are aimed at one country, that is to say China,” Habeck said, flanked by French counterpart Bruno Le Maire.

Germany has been reevaluating its economic relationship with China amid concerns over human rights and the communist regime’s ties with Russia.

READ ALSO: EXPLAINED: Why is Olaf Scholz’s stance on China so controversial in Germany?

“There will be an upper limit for investments in a particular country,” with a figure of €3 billion euros being discussed, Habeck said.

“Above that, companies can of course invest in a country but they will no longer be further secured with taxpayer money,” he said.

The guarantees would also be subject to an “in-depth” check, taking into account environmental and social standards, the German weekly Spiegel reported last week, citing internal government documents.

In May, Germany refused guarantees to Volkswagen in China due to concerns over human rights abuses in the Xinjiang region, where the car manufacturing giant has a facility.

Critical infrastructure

Germany could not “decouple from China, nor can we completely do without the Chinese market, Foreign Minister Annalena Baerbock said at an event hosted by the Süddeutsche Zeitung daily.

Berlin however had the potential to “accompany” more investments with guarantees around the globe in countries other than China, she said.

Scepticism has also grown in Germany around Chinese investments in what is deemed to be critical infrastructure.

“We are increasingly refusing investments from Chinese firms in these areas (critical infrastructure),” Habeck said.

By blocking Chinese buyers from taking stakes in sensitive areas, Germany was “claiming the same right that China claims for itself”, he said.

Earlier this month, Berlin blocked the sale of two chipmakers to Chinese investors, citing a potential threat to security.

The key technology has increasingly become a zone of confrontation with China, as Germany and its European partners look to reduce their dependence on Asia and grow their domestic industry.

Germany did give the green light to the sale of a stake in the Hamburg port terminal to the Chinese firm Cosco, despite internal government opposition.

READ ALSO: Scholz defends China trip with accord on anti-nuke message

Chancellor Olaf Scholz defied calls from six ministries to veto the sale, permitting Cosco to acquire a reduced stake.

Scholz made a plea for “pragmatism” in relations with China ahead of a controversial trip to Beijing earlier this month.

Germany should not withdraw from the key market but would look to “reduce one-sided dependencies”, he said.

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GERMANY AND CHINA

Scholz defends China trip with accord on anti-nuke message

German Chancellor Olaf Scholz on Saturday defended a controversial trip to China as "worth it" due to an agreement to oppose the use of nuclear weapons in the war in Ukraine.

Scholz defends China trip with accord on anti-nuke message

German Chancellor Olaf Scholz on Saturday defended a controversial trip to China as “worth it” due to an agreement to oppose the use of nuclear weapons in the war in Ukraine.

Speaking to a meeting of his Social Democrats a day after his 12-hour visit to Beijing, Scholz hailed an accord with Chinese President Xi Jinping that a nuclear escalation of Russia’s invasion of Ukraine must be avoided.

“I think that in light of all the debate about whether it was the right thing to travel there or not — the fact that the Chinese government, the president and I could state that there must not be any nuclear weapons used in this war — for that alone, this trip was worth it,” he said.

Scholz said after talks with Xi on Friday that he had insisted “the Russia war in Ukraine is a dangerous situation for the whole world” and urged Russia’s ally Beijing to use its “influence” on Moscow to avert an escalation and stop the invasion.

“Xi underscored the need for China and Germany, two major countries with great influence, to work together in times of change and instability and contribute more to global peace and development,” Beijing’s Xinhua News Agency reported on Friday.

The White House said this week that repeated discussion by Russian officials of the potential use of nuclear weapons in Ukraine has left Washington worried it could become a reality.

Russia’s foreign ministry responded that the world’s “top priority” should be to avoid a clash of nuclear powers “in the current difficult and turbulent situation.”

The German chancellor was the first G7 leader to visit China since the start of the coronavirus pandemic, which he undertook accompanied by a large business delegation.

The trip prompted criticism in Germany and among European partners over Berlin’s growing economic reliance on Beijing, and sparked controversy for coming so soon after Xi strengthened his hold on power in China just last month.

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