Interview by Ambassador Clauss on relations with China, the challenges and potential (SCMP)
Published on 22 December 2017 (South China Morning Post)
1. Germany’s intelligence service has released details of Chinese social media profiles they say were faked by Chinese intelligence to gather personal information about German officials and politicians. Meanwhile there was an incident involving the Chinese U20 soccer team in Mainz some weeks ago – over Tibet – and the Chinese team’s tour of Germany has been suspended. What’s your view on the two issues?
Actually there were three cases recently which caused some unwanted irritations in our bilateral relations and caught extensive media coverage. As to the findings of the German Federal Office for the Protection of the Constitution (BfV), I would like to point out that in June 2016, Germany and China agreed to establish a consultation mechanism on cyber issues during the last Sino-German government consultations. Up to now this consultation mechanism, where these findings could have been discussed, has not yet seen the light of day. I expect the Chinese side to join us in setting up the agreed upon cyber consultation mechanism by early 2018.
Football has great potential to bring our people closer together on an emotional level. I think this is definitely worthwhile. I am therefore confident that the ongoing contact between the German Football Association and their Chinese counterparts will soon lead to a solution that takes into consideration both Chinese political sensitivities and our constitutional right to free expression of opinion.
In addition to those issues let me just add the recent controversy on the role of the Communist Party in foreign equity joint ventures. We learned about several cases where foreign partners in joint ventures have been asked to amend the articles of association with the purpose of giving party cells a role on the management board. Recently we were pleased to receive encouraging signals from the State Council and higher levels of the party that party cells shall not have a role in management boards of foreign equity joint ventures. Therefore, I hope that party and state authorities at all levels, national and regional, will act accordingly.
2. Will these issues cast a cloud over bilateral relations between China and Germany?
Today relations between Germany and China are close and intense as never before in history. So it is only natural that occasionally there are disagreements. However, all these more or less minor irritations should not distract us from seeing the overall picture of our relations. In particular our economic exchanges, which constitute the principal pillar of our bilateral relations, are tremendously successful. Bilateral trade volume has risen to €170 billion (US$201.54 billion) in 2016 and further increased by 11 per cent in the first eight months of this year. China is Germany’s top trading partner in the world. German investment in China has risen by €3 billion in 2016, constituting more than 50 per cent of EU foreign direct investment and Chinese investment in Germany soared by almost 3,000 per cent. This year again the upward trend in bilateral investment exchanges is unbroken. With their investments our companies play a major role for China’s economy by supplying cutting-edge technology and creating millions of jobs. While there are no geopolitical rivalries standing between us, Germany and China increasingly team up on the international scene to address global challenges together. We both support deepening and strengthening globalisation; we jointly defend the Paris climate accord and share an interest in promoting a rule-based global free trade system with a strong WTO at its centre.
3. Have small and medium-sized German companies operating in China complained about difficulties with internet access given Beijing’s tightening control over VPNs?
Foreign companies were already worried by the new cybersecurity law, which entered into force on June 1. Now the impending ban on unlicensed VPNs has further increased concerns. Secure and undisturbed end-to-end communication is essential for foreign companies and a prerequisite for advanced manufacturing. What especially gives rise to concerns are the uncertainties caused by the opacity of the procedures of regulation and standard setting, and the lack of communication with those concerned. Economists have already warned against the possible negative impact on the investment climate. Our repeated requests to have a meaningful dialogue on VPNs and cyber-related questions with the relevant Chinese authorities have regrettably not yet received a positive response.
4. Have German companies continued to complain about forced technology transfers in exchange for business operations in China? Is there any sign the Chinese government is making efforts to address the issue?
As I mentioned earlier, economic relations between Germany and China are currently developing extremely advantageously for both sides. I am also confident when we talk about the outlook over the medium-term of about four or five years. However, we cannot deny the various indications looming on the horizon that conditions for foreign businesses in China are changing and apparently not in a positive direction. China’s economic success story will obviously lead to more competition in our economic relations. However, it has to be noted that the increased competition is not always based on fair and equitable conditions for all market players. More and more German companies approach the embassy and express their grievances about increasing discrimination and obstruction as a result of state intervention and administrative measures. Notorious complaints about forced technology transfers, compulsory joint ventures in some sectors or the inadequate legal protection of intellectual property have still not been remedied. Also it must be stated that when it comes to improvements with regard to market access for foreign companies and a level playing field with Chinese competitors, not much progress has been made. Recent surveys by the EU and German chambers of commerce show that a vast majority of companies do not believe that the numerous political announcements will be followed by real moves to market opening. Instead we witness that regulatory interventions like production quotas for electric vehicles or capital controls have increased.
The concept of “Made in China 2025” – with its ambitious targets for vast market shares reserved for Chinese companies in various strategic industries and a focus on indigenous innovation – has given rise to concerns that China might be steering towards a self-centred economic system which will eventually leave little room for foreign businesses. I am afraid such an approach will not only harm the interests of foreign companies but ultimately be to the detriment of China itself.
I am convinced that these issues, much more than differences over football cooperation or faked social media accounts, are the real challenges we will have to grasp in order to ensure that our bilateral relations will remain smooth and advantageous for many more years to come.
5. Will China’s relations with Germany be affected by uncertainty over Angela Merkel’s coalition talks?
However the next German government will look, we can expect that based on the broad consensus in foreign policy matters among all relevant political parties our future policy vis-à-vis China will be characterised by continuity and therefore also reliability. I am sure that the new German government immediately after taking office will reach out to the Chinese leadership in order to jointly work on lasting solutions to the challenges that lie ahead of us. Relations between Germany and China have an enormous potential for further mutual benefits if we purposefully address the key problems in our economic relationship.