We’re diversifying, says Scholz, as German businesses warn against damaging ties with China

BERLIN, Nov 22 (Reuters) – German Chancellor Olaf Scholz said on Tuesday that Germany would not repeat the mistakes it made with Russia in China and was already diversifying its trade.

“A dependency mistake like Russia’s will not happen again,” he told an economic forum organized by Süddeutsche Zeitung, referring to Germany’s decades-long reliance on Russian energy supplies.

His comments came after representatives of German industry reacted critically to a leaked draft of a new Berlin strategy and called for more political support for diversifying trade and securing key raw materials from elsewhere.

A major German company with a strong presence in China said on Tuesday it agreed with the need to expand trade ties but worried that the tone of the strategy could damage its relationship with its Chinese partners.

“Every line of the text clearly demonstrates the mistrust of China and market players like us,” said the business representative, who spoke on condition of anonymity due to the sensitivity of the matter. “The frame is the problem.”

The draft Foreign Office document advocates stronger trade ties with other economies, while tightening controls on Germany’s trade with China, including “stress tests” of dependence on raw materials and a review of the environmental and human rights impact of German investments.

“The stress test will be another bureaucratic hurdle that only we will face, not competitors from other countries. What’s the point?” the business representative said. “Of course we want more open trade with China … but every region of the world has its own problems.”

China’s foreign ministry warned Germany in a statement on Tuesday that erecting protectionist barriers could destabilize supply chains, saying “politicizing normal economic and trade … runs counter to the principles of a market economy.”

However, Germany’s draft document points to the disadvantages European companies face in China, including limited market access, mandatory joint venture rules and forced technology transfers.

In an interview with German business daily Handelsblatt on Tuesday, Ralf Brandstaetter, president of Volkswagen (VOWG_p.DE) China, said the company “has not closed itself off to reality and adjusted our strategy… …but that doesn’t mean we can’t take advantage of the market opportunities that China presents.”

Reporting by Riham Alkousaa and Victoria Waldersee, writing by Rachel More, editing by Miranda Murray and Tomasz Janowski

Our Standards: Thomson Reuters Trust Principles.

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