Can a "friendly" solution be found?, German Minister of Economy to visit China, In-depth | EU wields tariff stick Zheng Chunrong | Habeck | Stick

According to China Daily, citing German government sources, German Vice Chancellor and Economy Minister Habeck will visit China from June 21 to 23.

This is another German politician visiting China this year after German Chancellor Schulz, and it is also the first visit to China by Habeck since taking office.

In addition to China, Habeck will also visit South Korea this time, but the trip to China is undoubtedly the highlight.

The outside world believes that against the backdrop of the EU wielding the tariff stick against China, the protracted Ukrainian crisis, and sluggish economic growth in Germany, Habeck's visit is intended to stabilize the situation, try to mediate China-EU economic and trade disputes, and deepen China-Germany economic and trade ties.

In German politics, Habeck from the left-wing Green Party is regarded as the toughest minister on China. He calls on German companies to "de-risk" and reduce their dependence on China.

Two months ago, this "minister of risk reduction" did not accompany Scholz on his visit to China, but now he is leading a team to visit China alone, which has attracted attention.

Similar to Scholz, Habeck also included Beijing and Shanghai in his schedule. The two just staggered their choices for the third stop, with Habeck going to Hangzhou this time and Scholz visiting Chongqing last time.

Unlike Scholz, the delegation led by Habeck does not include well-known German large companies, but rather some heads or executives of small and medium-sized enterprises, including automotive supplier Voss, metal processing company Schott, solar energy startup Enbo, etc.

The more important difference is that compared with Scholz's visit to China, Habeck's visit this time faces new changes in the situation - the tariff stick and the election defeat cast a shadow on this visit.

The European Union recently announced that it plans to impose a temporary anti-subsidy tax of up to 38.1% on electric vehicles imported from China from July 4.

In the European Parliament elections that just concluded not long ago, Germany's ruling three-party coalition suffered a crushing defeat, with a vote share lower than that of the far-right party Alternative for Germany.

Both incidents have dealt a heavy blow to the Scholz government. The former will hit German automakers. In 2023, nearly one-third of German automakers' sales will come from China, and the German business community has pressured the government to help resolve the tariff dispute; the latter will put great pressure on the Scholz government's future policies.

The changing situation has given Habeck a more difficult task on this visit.

Zheng Chunrong, director of the German Research Center of Tongji University, interpreted the background and considerations of Habeck's visit to China from four levels.

First, the EU's plan to impose tariffs on Chinese electric vehicles will seriously damage Germany's economic exports and the interests of German companies in China.

"The imposition of tariffs has caused dissatisfaction among German businesses. As Minister of Economy, Habeck needs to come to China to stabilize the situation, try to mediate the Sino-EU economic and trade disputes to safeguard Germany's economic interests, and respond to the calls of German businesses."

Second, as the Ukrainian crisis drags on, Germany's economic growth is sluggish and many problems remain to be resolved.

Last year, Germany's economy shrank by 0.3% and this year it may only grow by 0.2% or 0.3%.

"The Chinese market is very important for boosting the German economy. Habeck's visit is intended to maintain economic and trade cooperation with China and to find opportunities for German companies to cooperate with the Chinese market."

It is worth noting that Habeck visited China with small and medium-sized enterprises, which are the vital force of the German economy.

Zheng Chunrong said that the German government's previous policy adjustments, including the cancellation of guarantees for German companies investing in China, dampened the enthusiasm of small and medium-sized enterprises to invest in China. This visit by Habeck and small and medium-sized enterprises at least sent a signal of subtle policy changes, indicating that they have expectations for the Chinese market.

Third, there is the uncertainty of the US election this year.

"Once Trump returns to power, he may adjust his policy toward Europe, and trade frictions between Europe and the United States may recur. Germany needs to take precautions in advance through diplomatic balance."

Fourth, during his visit to China, Habeck will attend the China-Germany Dialogue on Climate Change and Green Transformation.

This is the first high-level dialogue held since the launch of the cooperation mechanism.

"In connection with the recent European Parliament election results, the vote share of Germany's ruling coalition has declined, with the Green Party, to which Habeck belongs, suffering the biggest drop, prompting the party to reflect on the balance between climate and economy. This visit will also echo this."

German public opinion predicts that due to the weak German economy and the Green Party's crushing defeat in the European Parliament elections, hawkish Minister Habeck will adopt a more moderate tone during his visit to China.

During his three days in China, Habeck will travel to three places and meet with Chinese political and business leaders and representatives. He will undoubtedly have an extremely busy journey.

According to the German side, Habeck plans to discuss issues such as economy and trade, climate protection and energy policy with Chinese government officials.

The German Ministry of Economy said the visit was aimed at explaining Germany's trade and economic policies to China, including the need for energy diversification. However, the issue of automobile tariffs could not be avoided.

Zheng Chunrong believes that Habeck's visit to China this time mainly focuses on economic and trade issues. The biggest concern is how he, as a mediator, will negotiate with China on the EU's tariff increase on Chinese electric vehicles and seek a solution.

According to the EU, if discussions with China fail to produce an effective solution, temporary tariffs will be introduced from July 4.

This means that from the time the EU announces its decision on June 12 to the time it takes effect on the 4th of next month, China and the EU will have a negotiation window of more than half a month.

During this period, Germany's voice is considered particularly critical as it is Europe's largest economy and the EU country that will be hardest hit by tariffs.

The Scholz government said it would push for a "friendly" solution. German public opinion said Germany hopes to prevent the EU auto tariffs from taking effect or at least weaken them.

The German Economy Ministry said Habeck would not negotiate on behalf of the European Commission but would push for "fairer trade conditions" in meetings with China.

Zheng Chunrong expects that Habeck will convey three messages to China: reiterate that Germany does not support the EU's imposition of punitive tariffs on China; point out that China's strong exports have caused problems for the European market; and call for resolving the issue through negotiations.

"Listening to China's demands and conveying them to the EU to promote a solution is a major goal of Habeck's talks with China."

As for whether Germany's "mediation" can influence the EU's decision-making, Zheng Chunrong believes that it depends on whether Germany can unite the forces within the EU that oppose trade protectionism to speak out together.

"However, the prospect of increasing tariffs will still depend on the results of communication and even bargaining between China and Europe."

Another focus of Habeck's visit is his attendance at the China-Germany Dialogue on Climate Change and Green Transformation.

In June last year, China and Germany held the seventh round of government consultations and agreed to establish a dialogue and cooperation mechanism on climate change and green transformation.

In November of the same year, President Xi Jinping mentioned this dialogue mechanism during his video meeting with Scholz and pointed out that "the first dialogue can be held as soon as possible."

"This is an important dialogue mechanism established by China and Germany. It is a consensus reached against the backdrop of Germany's strategy of reducing risk and dependence on China." Zheng Chunrong said that the implementation of the dialogue mechanism is of great significance for the two sides to expand economic and trade cooperation in the future. Through dialogue, the two sides can find more cooperation opportunities in the fields of climate and green.

Zheng Chunrong said that in the traditional industrial field, competition between China and Germany is inevitable, but in relatively new and less competitive green fields, such as new energy and new materials, the two sides may be able to cooperate better and even explore new cooperation paradigms.

Habeck is about to start his visit to China, which will have an impact on China-Germany relations on the one hand and China-Europe relations on the other.

From the Belgian Prime Minister's visit to China to Premier Li Qiang's visits to Switzerland and Ireland, to the visit of German Chancellor Scholz, and until President Xi Jinping's state visits to France, Serbia and Hungary last month, high-level exchanges between China and Europe have been endless.

Now, almost at the same time as Habeck's visit to China, Chinese Vice Premier Ding Xuexiang also attended the fifth China-EU High-Level Dialogue on Environment and Climate at the EU headquarters in Brussels and visited Luxembourg.

Next, another major EU leader, Italian Prime Minister Meroni, also intends to visit China.

However, compared with the relatively calm situation in the first half of the year, the waters of China-EU relations now seem to be surging.

The obvious change is that the "turn to the right" after the European Parliament election has become a fact; the EU's plan to impose additional tariffs on Chinese electric vehicles has increased the risk of a trade war.

So, what direction will China-EU relations take in the second half of the year?

Zheng Chunrong believes that at present, China-EU relations have both positive and negative aspects.

On the positive side, high-level exchanges have been strengthened, economic and trade cooperation has continued, and dialogue mechanisms have been implemented.

On the negative side, instability and uncertainty are also increasing.

In this European Parliament election, the rise of right-wing populist forces may make the EU more inward-looking and conservative in the future, and move further forward in terms of trade protectionism, which will have a negative impact on China-EU economic and trade cooperation.

In addition, the results of the US presidential election will also affect the direction of China-EU relations.

"In short, China-EU relations are in a delicate process of dynamic adjustment."