Tough discussions in Germany on Chinese FDI

11:11 by Hubert Fromlet, Kalmar

Germany is the largest economy in Europe and the EU. For this reason, the recently intensified German debate about the planned Chinese FDI in the harbor of Hamburg looks both interesting and dramatic. Fundamentally, the real reason for this domestic political conflict is mainly about Germany’s future political and economic dependence on China.

The original plan was to allow the Chinese shipping company COSCO to purchase 35 percent of one of the terminals named Tollerort. However, even within the German government a lot of opposition was raised against the planned Chinese harbor deal, particularly by the Greens – thus also criticizing German Chancellor Olaf Scholz who initially supported the 35-percent deal. Finally, the government agreed with a compromise to allow a Chinese participation of 24.9 percent – i.e. an enforced change from a strategic investment in line with the BRI-plans to a financial investment. (BRI means Belt and Road Initiative, see my article in Swedish in Ekonomisk Debatt https://www.nationalekonomi.se/sites/default/files/2022/08/50-5-hf.pdf).

After dependence on Russia a heavier dependence on China?

In the past few months, former German governments and top politicians have been sharply criticized for their contributions to the burdening gas dependence on Russia. This political failure explains very well German fears of a future, even more challenging dependence on China. Maybe, the German concerns have been enlarged further by the latest political powerful political manifestations at the Chinese Communist Party (CCP) Congress.

It should be added that Germany’s dependence on China already now appears purely economically much larger than it ever has been on Russia – i.e. the Russian war consequences excluded. Two important questions show up in this context:

¤ Will other European countries join German skepticism against Chinese outbound FDI?

¤ Will European companies voluntarily re-consider their (planned) FDI strategy in China?

We will see. Obviously, German Chancellor Scholz does not want to close the door to China completely at this point. This week he will visit China together with a delegation of German business leaders.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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