Germany’s new economic pivot to Asia – DW – 11/19/2022

German Chancellor Olaf Schulz walks the red carpet with Vietnamese Prime Minister Pham Minh Chin during his recent visit to Hanoi.
As Germany seeks to diversify its interests in Asia, Vietnam is emerging as an alternative to ChinaImage: Kay Nietfeld/dpa/picture alliance

The new mantra of the German government is that Asia is not just about China. This may be obvious to many, but after 16 years of one-sided focus on China under Angela Merkel, this time represents another turning point in terms of economic policy. As for Russian gas, Merkel had brought Germany into an unhealthy and unwise dependence.

Under his leadership, China became Germany’s largest trading partner and the most important sales market for many companies. With every major deal made by German industrial groups, the dependence on China increased. Nowadays, the German government sees China as a systemic rival.

One-sided focus on China

Merkel’s travel statistics speak for themselves: she has visited China 12 times, always with a large business delegation. But what about Singapore or Vietnam? Or recent G20 host country Indonesia? The former German chancellor met each of them only once. These are the countries, which – each in their own way – are the economic heavyweights of the Southeast Asian association ASEAN, with about 650 million inhabitants.

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Indonesia boasted the largest gross domestic product (GDP) ever in 2021 at around $1.19 trillion (€1.8 trillion). Singapore’s economy is very small. However, the highly developed island state, roughly the size of Hamburg, has a higher GDP per capita than the United States or Germany. It also operates the world’s second largest container port and is a major financial center in Asia.

When it comes to democracy and human rights, Vietnam is less repressive and authoritarian than China. China’s southern neighbor is in the process of doubling its economic output in less than 10 years and will soon overtake developed Malaysia.

Picture by DW Business Editor Thomas Kohlmann
DW Business Editor Thomas KohlmannImage: Private

A quick German turnaround is unrealistic

And yet China’s economic power is sobering. The People’s Republic is Germany’s most important trading partner in the region. Germany and China exchange goods worth about €250 billion ($258 billion) per year. By comparison, trade volumes with Vietnam and Singapore are €14.5 billion and just over €11 billion respectively.

Rapid change is therefore unrealistic; The road to more foreign business diversification can be a marathon.

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The same applies to the supply of key raw materials. In addition to new energy suppliers, new suppliers of scarce raw materials are also important to support the energy transition. Copper, lithium and rare earths are the buzzwords here.

Germany must urgently address its failure in this regard. Why did German partners lose out to competitors in the mining of lithium in Bolivia? What happened to the raw materials initiative in Mongolia, where rare earths are waiting to be mined along with copper? Both materials are essential for energy transition. Whether it is copper for electric motors or rare earth metals processed in the production of permanent magnets used in wind turbines.

‘More than China’: Germany rethinks Asia

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The long overdue New China Strategy

To make matters worse, the German coalition government won’t unveil its new China strategy until the middle of next year. An economic strategy adapted to the new reality is long overdue—and not just with China. The government must find answers and define procedures together with the business community. The business, for its part, has long since begun diversifying its supply chain due to the coronavirus pandemic.

Where does Germany see its economy five, 10 or 20 years down the line? Alas, answers are in short supply. On the other hand, China has been defining its roadmap for economic development for a long time. Beijing has precisely determined the type and timing of its targets. In Germany, these targets are limited to declaring which energy sources should be shut down and when.

It would be unreasonable to expect the government to correct 16 years of one-sided tilt towards China under Angela Merkel in record time. However, there is no time to waste.

This article was originally published in German.

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