China-Germany relations: dream team or pipe dream?

Aside from Chairman Mao, China’s power elite aren’t usually known for quotable quotes.

So when Premier Li Keqiang said this weekend that China and Germany could become an economic “dream team,” it caught my attention.

Li made the comment in Berlin on his first visit to a European Union capital since becoming premier in March. “If we both come together in an ideal and optimal way, a dream team will emerge,” he said, addressing a group of German business types.

What he meant is anyone’s guess as he did not elaborate, but if by chance he was comparing Germany and China to the 1992 United States men’s Olympic basketball team, arguably the greatest sports team ever assembled, he wasn’t far off the mark.

Like America’s gift to the Barcelona Olympics, China and Germany are dominant global players. They’re the world’s top two exporters, together shipping US$3.4 trillion worth of goods in 2011.

Like the world championship team which defeated its opponents by an average of almost 44 points, China and Germany rack up huge numbers. China is the world’s second largest economy; Germany the fourth.

Like the all-stars who all went on to become Hall of Famers (okay, except for one), the relationship of China and Germany is special. Germany, for example, accounts for about a third of China’s total trade with the 27-nation European Union, with bilateral trade volume exceeding US$192 billion in 2011. Last year, nearly half of EU exports to China came from Germany, and almost a quarter of EU imports from China went to Germany.

That relationship, perhaps, is where the “dream team” analogy begins to fall apart.

In my book, the two countries are too interdependent. Let me rephrase: China has been propping up the German economy for years.

German auto manufacturers, for example, “cling to China like a shipwreck victim clings to a life buoy in the open seas,” reported Worldcrunch. In 2012, German manufacturers sold a whopping 15.5 million motor vehicles in China. Doing the math, that means Chinese consumers buy one in every five German cars built. For Volkswagen, it’s one in four. According to Financial Times, China became BMW’s largest single market last year.

The story is similar for other bedrock German industries as well, including aircraft, railroads and machines, with some companies reporting they do more than 50 percent of their business in China. The Middle Kingdom is the third largest market for corporate giants Siemens and BASF.

I’m no economist, but it sounds like an economic disaster waiting to happen if for whatever reason all hell breaks loose in China.

Pick your poison: territorial conflict, too-rapid expansion of credit, lax environmental oversight, disparity between the rich and the poor, slowing population growth and an aging society, widening discontent among the Communist Party faithful, et cetera. All are legitimate problems that could crack China’s economic engine.

For China watchers, it would be just another day at the office (nothing about China surprises us). But for those who also happen to like German engineering, and appreciate the nuances of German sausages, sauerkraut and beer, it can be more than a little disconcerting.

China’s state media said Li’s visit to Germany was “fruitful” and that talks with German Chancellor Angela Merkel pushed the China-Germany relationship to a “new high.” Merkel vowed to use her country’s economic clout to prevent the EU from imposing punitive tariffs on some Chinese products to avoid a trade war.

Interestingly, Germans on the street don’t share the same views on China as do Merkel and German big business. According to a 2013 BBC World Service Poll, only 13 percent of Germans view Chinese influence positively, with 67 percent expressing a negative view.

Go figure.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

1 Comment on "China-Germany relations: dream team or pipe dream?"

  1. 1) “Aside from Chairman Mao, China’s power elite aren’t usually known for quotable quotes”: Deng Xiaoping was quite prolific too. And, even more recently, Xi Jinping told people about the “New Chinese Dream” as well. Said this, I don´t like the Chinese government either 🙁

    2) “The two countries are too interdependent”: Of course, mainly because they are two of the world largest economies! Countries like China, Japan, US or those in Europe all are too interdependent between them, aren´t they? Indeed, China is the largest trade partner for many other countries, not only Germany. It´s normal given that China is the most populous country with a growing demand. What should Germany do? Stop selling that much to China? Giving up such those big profits? Wake up, man! This is the real World 🙂

    3) “Don´t sell too much to China because all hell could break loose here”: And then U outline some real problems, I agree with, but “cracking China´s economic engine”? Do U really think so? Based on speculations any country could collapse, even the US. I insist, we are talking for real scenarios.

    4) “Germans don´t share the same views on China than Merkel, according to BBC World Service Poll”. Yes, but they make money and keep their jobs exporting German goods to China. And they will keep doing like this (casting their ballots for those big companies – now represented by Merkel).

    Frankly speaking, and according to my opinion, a relationship between two countries is much more complex than mere speculations or political affinity.

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