EU Chamber of Commerce says Germany’s dependence on China is “overblown”

EU Chamber of Commerce says Germany’s dependence on China is “overblown”

16 million jobs in China depend on the European market, says the EU Chamber of Commerce in China

Europe’s top business representative in China played down concerns about Germany’s economic reliance on China as German Chancellor Olaf Scholz is making his first personal visit to Beijing.

EU Chamber of Commerce in China President Joerg Wuttke told CNBC’s “Squawk Box Asia” on Friday that much of Germany’s imports from China are fungible, when asked if the European country has become dependent on China for many of its goods.

But he said Germany needed to better diversify its sources of critical materials from China, such as rare earths and pharmaceutical precursors, adding that the chancellor would have to have “very clear language” with Beijing on these issues.

Experts largely agreed with Wuttke, but warned that Germany should step up its diversification with China.

“Sure, you can paint some kind of picture that you’re dependent on Chinese furniture, toys, underwear, and maybe cell phones and computers — but actually, that’s not the case, you can get it elsewhere,” Wuttke said.

German Chancellor Olaf Scholz is visiting China, and some of his Western counterparts are not happy about it, arguing that Berlin needs to learn from its previous close ties with Russia.

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“What we’re really dependent on is the rare earths, pharmaceutical precursors … that’s what we have to explore, but these are 20, 30 items out of thousands of items.”

“So the addiction debate is completely overblown, I would say, because we can actually do something about it.”

Like any commercial relationship, working with China is about managing risks, Wuttke said.

“The risk of not being in China outweighs the risk of being here. So, in a way, we have to manage these risks. And we have to look at the areas where we are really short,” Wuttke said, adding that Germany has managed them quite successfully so far. .

“The market is simply too big to ignore.”

Wuttke also said that the dependencies between Germany and China are mutual. China also depended on Germany for its exports.

Frederick Kliem, an expert on EU and international relations at the S. Rajaratnam School of International Studies, largely agreed with Wuttke’s comments, given Wuttke’s extensive knowledge of German stakes in China.

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But he acknowledged that Germany is leaning about China.

“There is no doubt that Germany’s dependence on China is too great on at least three levels: dependence on the consumer market, on China as a production base and on the import of some critical products, such as rare earth elements,” he said.

“[But] hysteria is never a good political guide. What needs to happen is not decoupling, abandoning economic interdependence or even signing up to some form of containment policy.”

He said that Germany must reduce its dependence so that it is neither vulnerable to blackmail by Beijing nor able to implement sanctions.

Former permanent secretary at Singapore’s Ministry of Foreign Affairs, Bilahari Kausikan, told CNBC that “the Germans have become too optimistic.”

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Scholz’s visit to China this week rattled Europe amid mounting political pressure on Germany to reduce its reliance on China.

The chancellor is in Beijing with a delegation of 12 key German business leaders for less than 24 hours.

In response to widespread criticism, Scholz explained in the text for the Frankfurter Allgemeine Zeitung and Politico on Thursday that he would not seek separation from China, but would instead seek diversification and economic resilience

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