Germany is urging companies to “de-risk” from China, and stresses that it is not seeking decoupling

Germany said there was an urgent need for companies to de-risk in China, while “not seeking to decouple” the economies.

“For Germany, China remains a partner, competitor and systemic adversary. But the aspect of systemic rivalry has become increasingly prominent in recent years,” said German Foreign Minister Analina Baerbock. Thursday said at the Mercator Institute for Chinese Studies in Berlin, according to a translation from DW, a German newspaper.

The minister was reviewing the country’s strategy on China and explaining how the country plans to protect its interests.

“China’s economic strategy aims to make it less dependent on other countries, while making international production chains more dependent on China,” the State Department said in a statement. 64-page report Posted Thursday.

Last week, China imposed export restrictions on key metals for the chip industry, in what was seen as a warning to Europe and the United States in a technology war over high-tech chips.

“In terms of foreign policy, China pursues its own interests more resolutely and tries in various ways to reshape the international order based on the existing rules. This has an impact on European and global security,” the report said.

“We do not need to look closely to see that China has changed. Anyone who listens to China knows the self-confidence with which it will decisively influence the development of our world,” Burbock said during her speech.

China’s foreign ministry did not immediately respond to CNBC’s request for comment.

The Chinese Embassy in Germany said in a statement “China hopes that Germany will look at China’s development rationally, comprehensively and objectively.”

“Many of the challenges and problems that Germany is currently facing are not caused by China. China is Germany’s partner in dealing with challenges, not its opponent,” the embassy said.

“Looking at China and formulating strategies towards China based on ideology will only exacerbate misunderstandings and misjudgments, and harm cooperation and mutual trust between the two sides.”

The German Foreign Ministry’s report also highlighted that competition between countries is beneficial and that “Germany accepts competition with China.” However, he said the competition should be “based on fair rules”.

“It is not our intention to impede China’s economic progress and development. At the same time, there is an urgent need to reduce risks. However, we do not seek to decouple our economies,” the report said.

The report said Germany wanted to become “less dependent in critical sectors” such as medical technology, medical products and rare earths. “China has taken advantage of other countries’ dependencies in the past,” she added, listing semiconductors as an example.

The report also said that “economic and trade relations remain an important component of bilateral cooperation with China” and that Germany wants to ensure that such cooperation becomes “fairer, more sustainable and more reciprocal.”

China is Germany’s largest trading partner. In 2022, Germany’s imports from China up 33.6% from a year ago to 191.1 billion euros ($204.4 billion), according to data from Germany’s Federal Statistical Office. Meanwhile, German exports to China rose by just 3.1%, to €106.8 billion.

While “China’s dependence on Europe is constantly declining, Germany’s dependence on China has taken on greater significance in recent years,” the report said.

Last month, Chinese Premier Li Qiang met with German President Frank-Walter Steinmeier To discuss the bilateral relations between the two economies.

Li said China and Germany “enjoy a solid foundation for cooperation and strong dynamics for development.”

He also said that China “has full confidence in the prospects for Sino-German cooperation.”