Germany is open to trade with China — but we’re not stupid, vice chancellor says

Germany is open to strengthening ties with China but would need to remain cautious on where any investment goes, the country’s Economy Minister and Vice Chancellor Robert Habeck said.

“We are an open market. That’s not saying we are a stupid market, so we have to be careful,” Habeck told CNBC’s Tanvir Gill Saturday in Singapore.

There is “nothing wrong” with Chinese companies investing in Germany and vice versa, but the war in Ukraine has shown that “what seems to be a reliable partner can very soon turn out as one that is hijacking you,” the economy minister told CNBC, giving a nod to Russia’s invasion and Europe scrambling to diversify their energy supplies.

The Chinese embassy in Germany didn’t immediately respond to a CNBC request for comment.

Habeck’s comments come after German Chancellor Olaf Scholz made a controversial solo trip to China to meet President Xi Jinping in early November. He was the first G-7 leader to travel to the People’s Republic since the start of the Covid-19 pandemic.

Habeck also told CBNC which industries should and should not form closer bonds with China, saying there are some sectors “which are not open for sale.”

Parts of Germany’s health services, semiconductors, telecommunications, energy and critical infrastructure, such as ports in Hamburg, were among the areas where Germany would regard money from abroad “skeptically,” Habeck said.

Members of Scholz’s ruling coalition in Berlin have expressed concern over Germany’s links to China, and Habeck said that while there is “unity with regard to China,” he “can’t promise” there won’t be further arguments on the topic within the German government.

China’s human rights history is one reason for countries’ hesitancy in growing closer to the country. In August, the United Nations said China’s treatment of Uyghurs and other minority ethnic groups could constitute crimes against humanity, while the Biden administration put trade restrictions on more than 30 Chinese entities in December for human rights violations. Beijing has repeatedly denied that it has been committing human rights abuses against Uyghurs.

Investors and businesses outside China have also become more cautious of dealing with the country in recent years after stringent Covid-19 lockdowns choked supply chains and Beijing cracked down on foreign tech companies, something which is unlikely to change now that President Xi Jinping has set out plans for a third term in office.

Partnership with China

The relationship between Europe and China “has to be a partnership” because of China’s prominence in the global market, according to Arancha Gonzalez, dean of PSIA at Sciences Po, and Philippe Varin, VP at the International Chamber of Commerce.

“Now there is a space for cooperation and we have to use it,” Gonzalez told CNBC’s Silvia Amaro at the Paris Peace Forum Saturday.

“If we are to guarantee financial stability globally, if we are to fight pandemics, if we are to succeed in [the] fight against climate change, we have to talk and discuss with China,” Gonzalez said. 

She added Europe may also have to speak to China “if we want to avoid … a nuclear weapon from being used in the European continent.”

Speaking to CNBC’s “Squawk Box Asia” on Friday, Joerg Wuttke, the president of the EU Chamber of Commerce in China, said concerns Germany was over reliant on the country were “overblown.”