Despite Olaf Scholz's government pushing to reduce Germany's dependence on China, bosses from some of the country's biggest companies are pushing back. BASF SE, Mercedes-Benz AG, Siemens AG and Volkswagen AG seek to separate business interests from political concerns that have heightened since Moscow's invasion of Ukraine, exposing Germany's dangerous reliance on Russian energy. Germany links to China go even more in-depth, considering that the Asian superpower is Germany's most significant trading partner. Last year, trade reached approximately €300 billion, or almost 8% output of Europe's largest economy. In addition to significant investments in local factories, China supplies critical parts and materials, along with a buyer of goods for German companies.
Despite political concerns about Beijing's global ambitions and its tensions with the US, executives are plowing ahead. BASF is investing approximately $10 billion in a chemical plant in China's southern coast of Zhanjiang. Volkswagen has reaffirmed its commitment to an automotive plant in Xinjiang, despite persistent concerns regarding the treatment of Muslim Uyghurs and other ethnic minorities in the northwest region. "We won't give up on China," said Arno Antlitz, VW's CFO, on an earnings call this month after BYD Co. overtook the German manufacturer as China's top-selling carmaker in the first quarter.
The comments from top business leaders run counter to Scholz's plea to diversify away from China. His administration has emphasized “de-risking” rather than an initial US call for “decoupling” — a tacit acknowledgment that Germany can ill-afford a hard cut with the world's second-largest economy. Trade relations will need to shift, so "the risks of dependencies from a single country or a few single states won't become big," Scholz said last week at the G-7 summit in Hiroshima, Japan.
But there's little sign that companies are paying heed. Abandoning China is "unthinkable" for German industry, Mercedes CEO Ola Källenius said in an interview with the Bild tabloid in April. "The major players in the global economy — Europe, the US, and China — are so closely intertwined that decoupling from China makes no sense." The Chinese market accounts for approximately 40% of Mercedes' deliveries, with the luxury automaker selling more than twice the number of vehicles there than in the US.
Siemens CEO Roland Busch vowed to "defend" and "expand" the company's market share in China, saying in an interview with the Financial Times on Wednesday that Chinese customers are the ones pushing the German engineering giant to innovate. Scholz's top spokesman responded with an unusually blunt warning. "This is an appeal by the government not to put all eggs in one basket," German government spokesman Steffen Hebestreit told reporters in Berlin, adding that "I have no doubt that this is being examined very closely."
However, corporate leaders are deciding based on their accounts and opting to stick with China's massive market. "The world doesn't become any less risky when you divide it, rather the contrary," said Stefan Hartung, head of German car parts giant Robert Bosch GmbH, at the company's annual press conference earlier this month. Similarly, BASF CEO Martin Brudermüller has warned that it is riskier not to expand in Asia's powerhouse economy rather than pull back due to geopolitical concerns, saying, "It is urgently necessary that we get away from China bashing and look at ourselves a little self-critically," in October.