Olaf Scholz Is Undermining Western Unity on China

“Political leaders should have the serenity to accept the things they cannot change, the courage to change the things they can change, and the wisdom to distinguish between the two.”

This is how Chinese President Xi Jinping set the terms of his meeting with German Chancellor Olaf Scholz in Beijing earlier this month, invoking the late West German Chancellor Helmut Schmidt, who was apparently a fan of American theologian Reinhold Niebuhr’s “Serenity Prayer.”

The quote serves a precise purpose. For Xi, Scholz’s visit to China—the first by a G-7 leader after Xi’s mandate was renewed at the 20th National Congress of the Chinese Communist Party in October—presented an opportunity to reaffirm Beijing’s core interests. Unfortunately for Scholz, the list of things that Xi expects to be accepted with serenity includes everything from China’s troubling treatment of ethnic minorities to its militarization of the South China Sea.

Diplomatic engagement with China is critical, particularly as Western governments navigate increasingly strained relations with the country. The question is how to do it. Unlike U.S. President Joe Biden and other world leaders, who used the G-20 summit in Bali, Indonesia, this month as a platform for bilateral engagement with Xi, the German chancellor sought to get ahead of the pack. Scholz argued it was time to speak directly with Xi after a three-year hiatus in such bilateral meetings due to the COVID-19 pandemic. The chancellor said he sought to confront issues in the Germany-China relationship precisely because it isn’t business as usual. In an op-ed in the Frankfurter Allgemeine Zeitung, Scholz wrote that “as China changes, so must our approach to the country.”

However, Scholz’s Germany-first approach has confused his coalition government’s development of China policy and alienated partners in Europe and beyond. The most effective way to approach an increasingly belligerent China is through a united front. Democratic powers need to align their rhetoric and policies on China to come to the table from a position of strength. Going it alone, based on subjective national interests, presents a vulnerability for China to exploit.

At the G-20 summit, Xi’s strategic preference for dealing with leaders bilaterally was on full display. He met with the leaders of France, Spain, the Netherlands, and Italy, while avoiding any formal engagements with European Commission President Ursula von der Leyen and European Council President Charles Michel. In other words, Xi skirted tough-minded Brussels leadership—who represent collective interests—and instead tried his luck with national leaders, who bring their own interests and liabilities to the table.

Though Scholz did raise difficult issues while in Beijing—both in private meetings and in public—his approach muddied the waters on Germany’s and the European Union’s respective China policies. The chancellor left the strong impression that his priority is boosting Germany’s economic relations with China at a time when other European leaders and his own coalition partners in Berlin are pushing the opposite. China may view Scholz’s Germany as a weak link in a Western coalition—and could seek to exploit this.

While in Beijing, Scholz did put forward clear messages condemning Russia’s invasion of Ukraine as well as China’s human rights violations, escalation in the Taiwan Strait, unfair economic practices, and economic coercion of other states, including fellow EU member Lithuania.

Observers highlighted two statements from Xi as key successes from Scholz’s trip. The Chinese president publicly warned against the use of nuclear weapons in Ukraine and agreed to approve BioNTech vaccines for foreign residents in China—the first green-lit mRNA vaccines in the country. “None of the commitments from Xi … would have happened if Scholz would have stayed in Berlin,” Jörg Wuttke, the president of the European Chamber of Commerce in China, said in an interview on the Australian Strategic Policy Institute’s podcast.

But we should be clear minded about how much China actually delivered. Xi did not name Russia as the power threatening to use nuclear weapons in Ukraine, and China continues to abstain from condemning Russia’s invasion. For China or others to define the use of nuclear weapons as a red line in Ukraine sends a signal that Russia’s ongoing conventional aggression there is acceptable. It is a very low bar for China—and allows Beijing to depict itself as a responsible global player while doing little to bring about peace.

For most observers, the real objective of Scholz’s visit seemed to be strengthening Germany’s commercial activity with China. The trip came just after Scholz forcibly approved Chinese shipping giant Cosco’s investment in the port of Hamburg—despite the objections and concerns of cabinet colleagues and security officials. He arrived in Beijing with a delegation of 12 industry executives, including from heavyweight companies such as Volkswagen, Siemens, and BASF.

“This visit sends a strong signal towards reinforcing economic cooperation between China and Germany,” BMW chairman Oliver Zipse, part of the delegation, told the Xinhua News Agency, a sentiment echoed by Chinese diplomats and state media. The Chinese government’s official readout from the Scholz-Xi meeting later stated that “Germany stands ready for closer trade and economic cooperation with China, and supports more mutual investment between Chinese and German businesses.” If this is genuinely Scholz’s position, it seems acutely naive at a time when German partners such as Lithuania and Australia face economic coercion enabled by their exposure to Chinese market power.

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Scholz has been at odds with his coalition partners, including Robert Habeck, minister of economic affairs and climate action, and Foreign Minister Annalena Baerbock—both members of the Green party—over how to deal with China. The Green ministers have been pushing for “no more naivety” and efforts to reduce the risk of “blackmail” from China. Six ministers in Scholz’s coalition government opposed the Cosco investment but ultimately agreed to a compromise that capped China’s stake in the Hamburg port. In an interview with Deutsche Welle, Habeck warned that heavily China-dependent German companies need to be conscious that they “risk their business model” should there be geopolitical headwinds with China, such as a potential conflict over Taiwan. At the Asia-Pacific Conference of German Business in Singapore last week, he said that Germany’s current economic diversification efforts were not adequate and that “we are even increasing our dependence on China.”

Scholz’s actions do not sit comfortably with the rhetoric of his colleagues. At this moment, the German government’s unequivocal message for the country’s businesses should be that they will be supported to reduce, not increase, their vulnerability to China.

The chancellor has sought to justify his approach with false binaries. He argued that Germany and others cannot refuse to engage with China and said that decoupling is the “wrong answer.” But full-scale decoupling from China is not a proposition that is seriously on the table. China’s integration with Germany and the global economy is vast and dismantling it would be an immensely complex and harmful undertaking. Rather, it is a question of engaging with China in an effective way, while pursuing targeted diversification of markets and supply chains, especially in critical sectors. Volkswagen, for example, derives half of its profits from the Chinese market and has more than 30 factories in the country. This is obvious economic overreliance that leaves both the company and Germany exposed to risk.

Scholz cannot allow a handful of powerful business executives to unduly influence his government’s foreign policy. Profit-minded CEOs should not be expected to advance anything more than a single-minded and short-sighted view on engagement with Beijing. Polls show that German voters do not trust China and oppose both the Cosco port investment and any prioritization of business activity over human rights. The chancellor must develop a more sophisticated approach to China that appreciates Germany’s long-term economic resilience and political and security concerns.

Through his so-called dual circulation agenda, Xi wants to make his country more self-sufficient while making others dependent on Chinese exports. Substantive opening and reciprocity are not going to happen, whatever the assurances of the Chinese government. Scholz should be taking the ongoing barriers to trade with China as signals of how increasingly perilous his agenda will be.

Domestically, Scholz needs to align with Baerbock and Habeck to ensure that Germany coherently increases its economic resilience and reduces its exposure to risks associated with dependence on China. Germany’s soon-to-be-released national security strategy and China strategy both need to be robust and unequivocal blueprints backed by a united German government. German industry needs these documents to develop a clear direction and substantively reduce its vulnerability.

A coherent German strategy is also essential for the EU’s positioning on China. Prioritizing Chinese investment when Europe is paying a high price for its overreliance on Russian gas does not set a good example for others in the EU, especially coming from the bloc’s largest economy. In a recent speech to EU ambassadors, the bloc’s top diplomat, Josep Borrell, said that economic reliance on China and Russia is no longer viable. “The adjustment will be tough, and this will create political problems,” he warned.

Scholz reportedly refused French President Emmanuel Macron’s invitation to go to Beijing together, as the pair struggle to establish an effective partnership. This was a missed opportunity for Europe’s two most powerful leaders to demonstrate unity on China. Scholz needs to steady the relationship with Macron and aid the EU’s China efforts.

Beyond Europe, Germany must work harder with the United States and other like-minded partners in the Indo-Pacific on coordinated strategies to counter China’s malign behavior. Germany right now looks like a weak link among Western partners. “Scholz made it clear that Germany has no intention of following the old path of ‘alliance,’ and China cannot be isolated,” one Chinese analyst argued after Scholz’s visit. Germany’s partners also have work to do. The United States, for example, could consult more effectively with key allies as it sharpens its approach to strategic competition with China, including on efforts to curb China’s semiconductor industry.

Solidarity—national, regional, and international—is essential if liberal powers want to have any hope of genuinely influencing Xi’s decision-making and building both economic and political resilience in the years ahead. To be credible, this solidarity needs to involve strategic domestic policy and coordinated diplomatic engagement—in Berlin, Europe, and beyond.