Germany’s new economic pivot to Asia – DW – 11/19/2022

German Chancellor Olaf Schulz walks a red carpet with Vietnamese Prime Minister Pham Minh Chinh during a recent visit to Hanoi
As Germany seeks to diversify its interests in Asia, Vietnam is emerging as an alternative to ChinaImage: Kay Nietfeld/dpa/picture alliance

The German government’s new mantra is that Asia is more than just China. This may be obvious to many, but after 16 years of a one-sided focus on China under Angela Merkel, this represents another turning point, this time in terms of economic policy. As with Russian gas, Merkel maneuvered Germany into an unhealthy and unwise dependence.

Under her leadership, China became Germany’s largest trading partner and the most important sales market for many companies. With each major contract signed by German industrial groups, the dependence on China grew. These days, the German government views China as a systemic competitor.

One-sided focus on China

Merkel’s travel statistics speak for themselves: She has visited China 12 times, always accompanied by a large business delegation. But what about Singapore or Vietnam? Or the recent G20 host country Indonesia? The former German chancellor visited each of them only once. These are countries which – each in its own way – are the economic heavyweights of the Southeast Asian association ASEAN with its approximately 650 million inhabitants.

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Indonesia boasted by far the largest gross domestic product (GDP) in 2021 at around $1.19 trillion (€1.8 trillion). Admittedly, Singapore has a much smaller economy. However, the highly developed island nation, roughly the size of Hamburg, has a higher GDP per capita than the United States or Germany. It also operates the world’s second largest container port and is an important financial center in Asia.

In terms of democracy and human rights, Vietnam is hardly less repressive and authoritarian than China. China’s southern neighbor is doubling its economic output in less than 10 years and will soon overtake the more developed Malaysia.

A photo of Thomas Kohlmann, editor of DW Business
Thomas Kohlmann, editor of DW BusinessImage: private

A quick German turnaround is unrealistic

And yet a look at China’s economic power is sobering. The People’s Republic is by far Germany’s most important trading partner in the region. Germany and China exchange goods worth about €250 billion ($258 billion) a year. By comparison, the trade volume with Vietnam and Singapore is just €14.5 billion and just over €11 billion respectively.

A quick turnaround is therefore unrealistic; the road to greater foreign trade diversification is likely to be a marathon.

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The same applies to the supply of key raw materials. New energy suppliers aside, new suppliers of scarce raw materials are also essential to support the energy transition. Copper, lithium and rare earths are the buzzwords here.

Germany must urgently address its failures in this regard. Why did German partners lose out to competitors in the mining of lithium in Bolivia? What happened to the raw materials initiative in Mongolia, where rare earths are waiting to be mined along with copper? Both materials are essential for the energy transition. Whether it is copper for electric cars or rare earth metals that are processed in the manufacture of permanent magnets used in wind turbines.

‘More than China’: Germany rethinks Asia

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A long overdue new China strategy

To make matters worse, the German coalition government will not reveal its new China strategy until the middle of next year. An economic strategy that has been adapted to the new realities is long overdue – not only vis-à-vis China. The government must work with the business community to find answers and determine an action plan. Business, for its part, has long since begun to diversify its supply chains in the wake of the coronavirus pandemic.

Where does Germany see its economy five, 10 or 20 years from now? Alas, answers are few. China, on the other hand, has long defined its road map for economic progress. Beijing has spelled out precisely the type and timing of its goals. In Germany, these targets are limited to announcing which energy sources are to be shut down and when.

It would be unfair to expect the government to correct 16 years of a one-sided orientation towards China under Angela Merkel in record time. However, there is no more time to waste.

This article was originally published in German.

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