The trend of deglobalization after the COVID-19 pandemic
The rampant spread of the COVID-19 pandemic has impacted the major economies of the world, severely disrupting international trade. For example, according to the Industrial Analytics Platform report, in the first two months of the COVID-19 outbreak, China’s industrial production has fallen by 13.5% compared to last year. For many products, China is at the core of the global value chain, which contains great implications for other states. Germany, along with other European countries, has been suffering a sharp decline in Chinese imports. China is a main exporter to Germany in the manufacturing sector, making up roughly 10% of German manufacturing imports.
Not only have global economies been affected, but domestic conflicts have also intensified. For example, increased unemployment and numerous factory closures caused by quarantine measures have widened the income gap and weakened social cohesion. These are new catalysts of the resurgence in anti-globalization tendencies. The global pandemic has provoked an increase in protectionism, with governments restricting exports for public health purposes outlined by the WTO. For instance, Germany temporarily banned exports of medical equipment to avoid domestic shortages. However, governments have been slow to comply with WTO requirements for export protectionism to be “temporary and transparent.” Protectionist measures materialize through restrictions on trade, investment flows, and “shipments of essential medical supplies” as well as PPE. The deglobalization phenomenon presents a challenge for China-Germany relations, as the countries’ economic ties are the strongest aspect.
Germany and BRI focus on Sino-German trade relationship
Germany expressed its support and willingness to participate in China’s Belt and Road Initiative during the German Chancellor’s Special Representative and Federal Minister for Economic Affairs and Energy Brigitte Zypries’s 2017 trip to China. The first freight train route, from Xiangtan to Hamburg, was launched in 2008, serving as inspiration for future Belt and Road railroad development across Eurasia. Bilateral trade has continued to rise steadily since China and the EU established diplomatic relations in 1975. The current Sino-German trade volume accounts for nearly 30% of total China-EU trade. The trade volume growth has grown exponentially: products shipped to China made up only 0.6% of Germany’s total exports in 1990, and 7.1% in 2018. Even after the financial crisis of 2008, German exports to China continued rising, reaching a peak in 2018. China became Germany’s biggest trading partner in 2016 after surpassing the U.S.
Bilateral trade and economic mechanisms are becoming increasingly pragmatic and comprehensive. The establishment of the Joint Commission on Bilateral Economic Cooperation (JCBC) by the Chinese and German governments in 1979 marked the two countries’ first official system for bilateral economic and trade collaboration. In 2011, China and Germany launched the first round of intergovernmental consultation in Berlin, with the participation of German Chancellor Angela Merkel and Chinese Premier Wen Jiabao. This broadened the 1979-established scope for bilateral cooperation, including agreements on energy, environment, cultural exchanges, as well as the ambitious goal to increase China-German trade volume to $280 billion within five years. A major step during this consultation that predicted Germany’s partnership in the Belt and Road Initiative was the contract for China to “set up a special lending fund up to 2 billion euros to support SMEs” in areas such as R&D.
Obstacles in future Sino-German partnership
The last few years have seen intensifying criticism from all sides of the political spectrum in Germany towards the Chinese government’s handling of human rights issues, particularly the issue of Xinjiang re-education camps. In August 2018, China refused to allow the Human Rights Committee of the German Federal Parliament to visit China, causing strong backlash from Germany. Moreover, China canceled the German-Chinese human rights dialogue without specific reasons raised by either side. In 2019, Germany and 21 other countries signed a letter expressing concern about the detention of Xinjiang Uighurs and criticized China.
At the end of June, China’s Standing Committee of the National People’s Congress (NPCSC) passed the National Security Law for the Hong Kong Special Administrative Region, which triggered tensions in German-Chinese relations. China strongly resented Germany’s decision to grant two Hong Kong activists political asylum. In early September, German Foreign Minister Heiko Maas met with Joshua Wong (Wong Chi-fung), one of the most renowned student activists and Hong Kong’s secretary general of the pro-democracy political party Demosistō, at a gala event, resulting in Chinese official media backlash. This contradicted the attitude adopted by Chancellor Merkel, who had previously refused to meet with representatives of Hong Kong’s pro-democracy movement.
Due to Sino-German disagreements regarding these social and human rights issues, the outcome of China-Germany investment treaty negotiations seems uncertain. An inability to finalize this long-awaited investment treaty will weaken Chancellor Merkel’s legacy. Moreover, once Merkel steps down next year, China will likely face a challenge in fostering a stronger relationship with Germany, a lynchpin in China-EU relations.
New opportunities for COVID-19 cooperation
Despite the social and political challenges contributing to a shaky investment deal, on top of the broader trend of deglobalization, the Sino-German relationship has also been bolstered during the COVID-19 pandemic. The two countries worked out an agreement for China to send shipments of high-quality medical resources to Germany multiple times. Moreover, the former PRC ambassador to Germany Shi Mingde was elected as the new president of the German-Chinese Friendship Association earlier this month. During his time as an ambassador, he heavily promoted sister-cities and cultural exchange programs. Sister cities are surprisingly critical for the Chinese diplomacy strategy and cultivating friendship at the local level.
Continuing to emphasize people-to-people cultural understanding, particularly during a global pandemic, should bode well for Sino-German relations. For further development of the bilateral relationship, the Chinese and German governments should shift their focus towards more mutually beneficial areas. Trade, environmental protection, and other issues pertaining to global governance could potentially open opportunities for China and Germany to find common ground and partner closely, while remaining firm on areas of disagreement such as human rights.
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