Angela Merkel warning: German companies ‘addicted to poisoned chalice of Chinese market’

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Germany’s Chancellor, Angela Merkel, is the most influential figure within the EU, while the German economic sector props up the entire bloc. It is therefore not surprising that the German perspective on investment tends to indicate which direction the whole bloc is going in. In 2019, Germany accounted for more than half of the EU’s exports to China, demonstrating the growing ties between the two strong economies.

It was also the fourth year in a row in which Beijing has beaten the US among Berlin’s trade rankings — China is now Germany’s top supplier and top trading partner.

Indeed, China has been courting Germany for years.

Mrs Merkel has even visited 12 times during her 15 years as Chancellor, often accompanied with high-profile business figures.

Upon their arrival, China would greet them “with open arms” in a “steeply embrace from which it would be painful to escape from”, according to a paper written by the former director of research to George W Bush, Peter Rough.

It was reportedly Berlin which gave the new Comprehensive Agreement on Investment (CAI) with China the nod back in December — despite the furore the deal created across the Atlantic.

This deal was seven years in the making, but accelerated when President Xi Jinping feared Joe Biden’s electoral victory would make the EU swing back towards the US again.

Many in Washington fear the consequences of such a deal, as it seems China is tightening its grip in the EU.

In an exclusive interview with, Mr Rough explained: “Right now, Europe is a manufacturer and producer of all sorts of high-tech world renowned products, like many great German companies such as Siemens, for example.

“They export a lot of this to China and over the years they [German businesses] have grown dependent, if not addicted, to the Chinese market.

“So, they really can’t afford to pull back from the Chinese market in their own eyes.

“Yet the Chinese make it a condition of access to this growing Chinese consumer market that they either enter into joint ventures, or that they hand over some intellectual property, or the Chinese outright steal this intellectual property, among other methods.

“The real risk is that Europe is so dependent on the Chinese market, but really what it’s doing is it’s almost like [drinking] from a poisoned chalice.

“It’s taking this large gulp to keep itself healthy in the short-term but in the long-term, the Chinese are using all these subversive methods to build up their own home industries.

“By 2049, the goal is not interdependence with Europe but autarky — where the Chinese companies hold all the risk with the high-end manufacturers.

“Then Europe is basically reduced to being a consumer market and rather than exporting to the Chinese consumer market, it will be China exporting to the EU.”

He explained that it is “worrying” because China “has a fundamentally different vision of the world” compared to the Western leaders within the US and EU.

While the US and the EU tend to balance trade according to who is better at manufacturing certain products, China “moves with ruthless brutality” when they have established superiority in a field to eliminate competition, according to Mr Rough.

He claimed this is evident in the way Beijing has dominated the solar panel and telecoms sectors.

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In this way, he warned that the CAI may not be as promising as Berlin had been led to believe.

Writing in a paper for the Hudson Institute, Mr Rough warned many experts believe there were “fake jewels” in the CAI which China would not live up to.

He wrote: “In the waning days of the German presidency of the EU, however, Merkel found them attractive enough.”

Analysing the deal, he explained: “It does not address China’s underlying transgressions because it undercuts the transatlantic approach, which is the only way Europe can marshal the strength to enforce any agreements’ commitments.”

However, another element to their relationship was revealed in December when a diplomat suggested it was not just future economic growth which ties Germany to Beijing.

A diplomat told Foreign Policy that Mrs Merkel has not forgotten how Beijing assisted with Europe’s financial crisis a decade ago.

China bought the bonds of eurozone member states who were struggling, providing a market where Germany thrived.

Germany appears to have been strengthening its links to China ever since.

A week before news of the investment talks hit the headlines, Mrs Merkel’s cabinet approved a draft law which may allow Huawei, the controversial telecoms network banned in the UK, a role in Germany’s 5G network.

China is also key for German carmakers, as Berlin invested billions of euros in the Eastern superpower to aid electric vehicle ventures.

Writing in Foreign Policy, researcher Noah Barkin pointed out: “If you forced Germany’s biggest firms to choose between China and the US right now, many would pick China, despite concerns about the hand of the Communist Party in the economy.”

Others suggest that Mrs Merkel is keen not to find Germany on the wrong side of Beijing as it grows — especially as the election of Donald Trump meant the US was no longer seen as a reliable ally in the Chancellor’s eyes.

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