Notification obligation for companies: Habeck's ministry wants to drastically curb business in China

The Federal Ministry of Economics increasingly sees Beijing as a rival instead of a partner.

Notification obligation for companies: Habeck's ministry wants to drastically curb business in China

The Federal Ministry of Economics increasingly sees Beijing as a rival instead of a partner. According to a ministry paper, German companies that trade with China must therefore be prepared for restrictions. Instead, they should open up other sales markets.

The Ministry of Economics is planning extensive requirements for German companies doing business in China and the exclusion of providers from authoritarian states from the critical infrastructure. In a 104-page paper classified as confidential by the Ministry of Economic Affairs and available to the Reuters news agency, the German government's previous support for German companies in China is also questioned. The "Internal China Policy Guidelines" of November 24 call for a significant reduction in dependency on China.

At least a complete decoupling from the largest German trading partner is rejected. Instead, German companies should be offered more help in business with other countries, for example through state export guarantees. The paper from the Ministry of Economic Affairs led by Robert Habeck reads like a criticism of Chancellor Olaf Scholz's recent trip to Beijing with company bosses. As a recommendation for action, it is called for, for example, "to fundamentally question the political flanking of projects in China by high-ranking representatives of the federal government vis-à-vis the Chinese side". The support should only be granted if "a positive effect for Germany as a location can be proven".

For companies that are particularly active in China, extensive reporting obligations to the federal government about their business are required. It should also be checked "whether, based on this, regular self-obligatory or, if necessary, obligatory stress tests should be carried out," it said. The reference scenario should be "the simulation of the loss of China business or supplies from China". The consequences for companies remain unclear. In the case of critical technologies and infrastructure, the paper proposes excluding "suppliers of end, intermediate and preliminary products from autocratically governed third countries". This should even apply to providers from other countries who use such products. IT components are given as an example.

In tenders for particularly important European projects, for example in the semiconductor sector, it should also be checked whether third-country companies or certain components can be excluded. The ministry also advocates a new review of investments by German companies in Chinese companies if they "belong to security-relevant areas or the military-industrial complex or are involved in human rights violations".

China's development is described as very problematic. Reference is made to human rights violations and a more restrictive domestic policy course. "The fact that the relationship with China is shifting further in the direction of systemic rivalry is proven not least by China's pro-Russian attitude to the war of aggression against Ukraine," it says, alluding to the triad previously mentioned in Germany and the EU, according to which China is a partner, competitor and rival is.

"China refuses to condemn Russia for the attack on Ukraine, blames the West for the war and explicitly keeps open the option of annexing Taiwan," the paper said. It is also pointed out that Chinese President Xi Jinping has indicated that he wants to incorporate democratic Taiwan, which is seen as a breakaway province, during his lifetime. He also did not rule out the use of force. The authors point out that the year 2027, the 100th year of the founding of the People's Liberation Army, is repeatedly mentioned as a key date. As a consequence of this development, the Ministry of Economics wants a partial solution from China.

The reasoning is: "In a bilateral relationship characterized by growing system rivalry and increasing geopolitical tensions, close economic ties with and isolated dependencies on China pose growing risks for the political freedom of action of Germany and the EU." The policy should therefore be adjusted “in good time and decisively”. The great importance of China as a sales market for a number of German industrial sectors and dependencies in certain economic or technological areas is viewed critically.

Reference is made to Chinese technology in the mobile phone sector. Germany could be blackmailed in the event of a conflict, which "could lead to a restriction of its political ability to act". The fundamental interest in economic exchange with China remains, however, "a comprehensive decoupling is not intended," it says in addition.

The Federal Foreign Office has already presented a China strategy that is characterized by a similarly critical view of the communist regime in Beijing. The papers by Foreign Minister Annalena Baerbock and Habeck have not yet been coordinated within the federal government. Above all, objections are expected from the Chancellery, even if Chancellor Scholz expressly supports diversification and efforts to become more independent from China. Recently, however, there were differences between the Chancellery and the Green and FDP-led departments when the Chinese state shipping company Cosco entered an operating company at a terminal in the port of Hamburg.