Last updated in May 2015
The Federal Republic of Germany and the People’s Republic of China established diplomatic relations in 1972.
Over the past 40 years, these relations have become extremely wide-ranging, remarkably close and of growing political substance. Like all other EU partners, Germany adheres to a one-China policy. China is Germany’s most important economic partner in Asia and Germany is China’s leading trading partner in Europe. Given the growing uncertainties in the world and the repercussions of the global economic and financial crisis which are still being felt, cooperation and coordination of policy between the two strategic partners Germany and China is becoming increasingly important. China views Germany both economically and politically as its key partner in Europe. Important elements of bilateral relations are regular high-level coordination of policy, dynamic trade relations, investment, environmental cooperation and cooperation in the cultural and scientific sectors.
Since 2004, Sino-German relations have therefore been described as a “strategic partnership in global responsibility”. Relations were upgraded to a “comprehensive strategic partnership” during President Xi Jinping’s official visit to Germany at the end of March 2014. Regular intergovernmental consultations have been held since 2011, most recently in October 2014. These are attended by the two Cabinets, with more than ten line ministers from each side, and presided over by the two heads of government.
In addition, there are a total of more than 60 dialogue mechanisms in place, many of them at senior government level: between line ministers, state secretaries and the heads of government authorities. Important new formats for coordinating policy are the strategic dialogues on foreign and security policy between the two countries’ foreign ministers and the high-level dialogue on financial policy between the two finance ministers and central bank heads.
Although bilateral relations are developing positively overall, fundamental differences remain over human rights, especially individual freedoms. Germany remains keen to see China continue to make progress on the domestic front, in developing the rule of law and social systems, in increasing political and economic justice, and above all in allowing fundamental personal rights and peacefully resolving minority issues.
An important cooperation instrument to promote the rule of law in China is the rule of law dialogue. Equally important is the annual bilateral human rights dialogue.
Rule of law dialogue and human rights dialogue
Sino-German dialogue on the rule of law dates back to the agreement reached in November 1999 by then Federal Chancellor Gerhard Schröder and then Chinese Prime Minister Zhu Rongji. It is designed to offer a long-term approach to developing the rule of law and implementing human rights in China. On the German side, the rule of law dialogue is coordinated by the Federal Ministry of Justice and on the Chinese side by the State Council’s Legislative Affairs Office.
A symposium is held once a year at which German and Chinese government representatives and experts debate a topical legal issue. The 14th Sino-German Rule of Law Symposium was held on 1 and 2 September 2014 in Leipzig and was presided over by Federal Minister of Justice Maas and Minister Song Dahan of the State Council’s Legislative Affairs Office. The subject of the symposium was Property Rights and Land Registration Rights in a Modern Economy. The 15th Symposium is scheduled for summer 2015 in China.
The insights and ideas gained from this dialogue have had an impact on the development of legal norms in China, thus also supporting the Chinese government’s efforts to enforce legal norms in specific areas.
The most recent dialogue on human rights was held on 4 and 5 December 2014 in Berlin. The talks focused on the general human rights situation in China, including the death penalty, as well as issues relating to religious minorities (especially in the Tibet and Xinjiang Autonomous Regions), freedom of speech and of the press, cooperation in international bodies and the integration of juvenile offenders.
Since diplomatic relations were established in 1972, Sino-German economic relations have evolved into the great success story they are today. In 1972, German companies exported to China goods worth USD 270 million. In 2014, German exports to China were worth EUR 74.05 billion, an increase of 11.3 per cent compared with the previous year. German imports from China currently stand at EUR 79.3 billion, 6.4 per cent more than in the previous year. With bilateral trade worth more than EUR 150 billion in 2014, Germany is China’s biggest European trading partner by far and ranks sixth among China’s trading partners worldwide (and fourth if Hong Kong and Taiwan are not taken into account). China is Germany’s principal trading partner in Asia and its third most important trading partner worldwide.
The transformation of China’s previously export-driven economy into one geared to sustainable, innovation-driven growth and the strengthening of domestic consumption offers great opportunities for German business. In January 2014, China opened its first European chamber of commerce in Berlin with a view to further promoting economic relations and investment. In 2015, China was also the official partner country at the CeBIT technology trade fair, at which many Chinese companies were represented.
China is the fourth biggest buyer of German exports, after France, the United States and the United Kingdom, and the principal market for German machinery worldwide (EUR 19 billion). China is the biggest buyer of German cars (EUR 21 billion), after the United States and the United Kingdom, and in no other country are more German vehicle parts sold. China is the world’s second largest exporter of pharmaceuticals (EUR 1.6 billion), topped only by Japan (EUR 2 billion), but it is a more dynamic market for German pharmaceutical exports. Last year, China’s growth rate stood at 6.9 cent, compared with just 2 per cent in Japan, reaching a total volume of EUR 6.5 billion. With domestic sales of electrical engineering products totalling EUR 7.5 billion, China was ahead of the United States (EUR 6.4 billion) and France (EUR 4.7 billion), making it the biggest buyer of German goods in this sector. Between 2008 and 2014, German exports of electronic goods to China doubled, to EUR 2.6 billion. In the same period, German exports of food and semi-luxury goods to China grew by an annual 15 per cent and have now risen to EUR 817 million.
So far, German companies have been engaged in China to a much greater degree than Chinese companies in Germany, this being not least a reflection of the differences in the two economies’ level of development. There are currently some 900 Chinese companies operating in Germany, compared with the more than 5,000 German companies active in China. Overall, investments by German companies in China have so far been many times higher than the other way around. There is, however, evidence of a significant increase in Chinese business activities in Germany, due in part to the Chinese government’s Going Global Strategy, which encourages and supports investment by Chinese companies abroad. In 2014, German direct investment in China was worth more than EUR 40 billion. Chinese direct investment in Germany amounts to approximately EUR 1.4 billion. Chinese investment in Germany has so far focused on the following sectors: mechanical engineering, electronics and consumer goods and information and communication technology. Takeovers have included the purchase of concrete pump manufacturers Putzmeister and Schwing and the acquisition of automotive supplier Kiekert and computer wholesale dealer Medion by Chinese companies.
In recent years, China has been very successful in attracting foreign direct investment, but it needs to improve transparency and certainty for investors to ensure that it remains an attractive business destination, especially for small and medium-sized companies. The lack of legal certainty and transparency remains a fundamental problem here. Investors expect more freedom of contract and equal market access conditions, in particular the same access to public tenders as Chinese companies. Particularly in the hitherto strictly regulated service sector (banking, insurance, logistics and trade), time will show whether the Chinese government’s reform plans bring about any improvement.
In China, a detailed investment catalogue for foreign companies specifies for each market segment whether and in what form foreign investment is welcome. It contains a detailed list of sectors that can be classified in one of three categories: 1. prohibited, 2. permitted under certain conditions or 3. worthy of support. All non-listed projects are permitted. The catalogue does not, however, contain any legally binding or definitive requirements. A new, revised catalogue has been in force since April 2015, but this does not contain any significant new liberalisations. China also plans to completely reform the current system, in particular replacing the investment catalogue with a so-called negative list. This list will then only contain sectors to which access is prohibited or permitted under certain conditions. It is to be regulated by a new law on foreign investment, which is currently being discussed by the Chinese government.
An exception from the investment catalogue system is already in effect for the Shanghai Free Trade Zone, which was set up in autumn 2013. Foreign investments in sectors that are not on the negative list are not subject to approval; they must merely be registered. The Chinese government trims the list at regular intervals, but it is still very long.
A German-Chinese bilateral investment protection agreement has been in place since 2005. This agreement regulates the overall conditions for mutual investment and creates a level playing field for investors on both sides. In November 2013, negotiations began on a comprehensive investment agreement between the European Union and China, which besides regulating investment protection is also designed to improve market access.
Export trade promotion
To promote German business interests in China, there are – besides the German Embassy in Beijing and the German Consulates-General in Shanghai, Guangzhou (Canton), Chengdu and Shenyang – Delegations of German Industry and Commerce (under the umbrella of the German Chamber Network of the Association of German Chambers of Commerce and Industry, DIHT). Germany Trade & Invest (gtai) also has foreign staff responsible for foreign trade (in Beijing, Shanghai and Hong Kong) and investment promotion (in Beijing and Shanghai). The German Industry and Commerce offices and the gtai offices work closely with the German Embassy in Beijing and the German Consulates-General. German companies in (mainland) China have set up a chamber, which is headed by the Delegation of German Industry and Commerce in Beijing. There is a German Business Association in Hong Kong.
Energy, the environment and climate
Building an “ecological civilisation” is one of the guiding principles of China’s current leadership under Xi Jinping and Li Keqiang. The idea is to achieve a better balance than in the past between economic development and modernisation, industry, agriculture, urbanisation and ecology. Key issues that China is therefore addressing more vigorously are climate protection measures (in particular emission reduction and climate change adaptation measures), modernisation of its environmental policy, a more eco-friendly energy policy including the development of non-fossil energy sources, improving energy efficiency across the board and dealing with the serious problems resulting from the continuing substantial urbanisation pressures in China. The current state of China’s environmental assets underlines the need for such measures: continuing severe air pollution in wide areas of the country, increasingly visible water-availability and water-quality problems and their negative impact on agriculture as well as poor soil quality. Reinforcing the need for action is the foreseeable increase in energy consumption in the coming years.
The pioneering role played by Germany in many areas of climate and environmental protection as well as in the alternative-energy sector and energy efficiency opens up a wealth of opportunities for establishing partnerships with China. Germany has adopted an ambitious energy programme that involves phasing out nuclear energy and developing renewable sources of energy. With its 12th Five-Year Plan, which runs until the end of 2015, China’s national government is increasingly seeking to promote qualitatively sustainable rather than purely quantitative growth.
With its International Climate Initiative, the Federal Government supports numerous climate protection projects, including advising Chinas on the introduction of an emission trading system, the development of low-carbon transport systems, low-carbon land use and offering further-education measures for decision makers. At an annual Working Group on Climate change, the two countries engage in an intensive exchange of views on current developments and measures. This work of this body is based on a Memorandum of Understanding on Cooperation in Combating Climate Change, which was agreed between the two countries in 2009.
A bilateral urbanisation partnership has been in place since 2013 which is designed to ensure the sustainability of China’s urbanisation process, thus opening up numerous potential areas of collaboration and opportunities for business.
After embarking on its opening-up policy in 1978 and implementing a series of gradual economic reforms, the People’s Republic of China has undergone rapid development and in recent years has made a major contribution to attaining the United Nations Millennium Development Goal of halving extreme poverty by 2015.
In 2009, the Federal Government decided to end traditional development cooperation with China and has since made no new financial commitments. All remaining programmes are to be completed in the course of the next few years. In future, it will be important to involve China more closely in the resolution of global development problems and in international systems of responsibility. This applies in particular to China’s role as a new donor in the interest of promoting sustainable development in the respective partner countries. The Federal Government is seeking to engage more intensively with China in dialogues on global development issues and explore new forms of cooperation as part of the two countries’ strategic partnership.
Science and technology
Cooperation in science and technology has steadily evolved over a period of more than 30 years. Germany and China have become partners cooperating on an equal footing.
For a number of years now, there has also been successful cooperation in the education sector. Cooperation between universities and institutions involved in vocational training and further education is being constantly expanded.
For many years now, German and Chinese research institutions in particular have been cooperating very closely. In addition to the Sino-German Centre for Science Promotion, which is jointly run by the German Research Foundation (DFG) and the National Natural Science Foundation of China (NSFC) in Beijing, the Max Planck Society (MPS) and the Chinese Academy of Sciences (CAS) set up a joint Institute for Computational Biology in Shanghai. Since 2004, the Leibniz Association (WGL) has, with a network of WGL research institutions, Chinese research institutes and industrial partners on both sides, been conducting research on biologically active substances derived from plants known in traditional Chinese medicine. Over the past five years, marine and ecosystems research has become increasingly important in the WGL’s bilateral cooperation. In 2011, the Center for Sino-German Cooperation in Marine Sciences in Qingdao was co-founded by the Ocean University of China, the Leibniz Institute of Marine Sciences at the University of Kiel and the Leibniz Centre for Marine Tropical Ecology at the University of Bremen. The Helmholtz Association of German Research Centres (HGF) cooperates in an extensive network with leading Chinese institutions in areas such as environmental, health and energy research. In 2014, the German and Chinese governments decided to set up a Clean Water Innovation Center in Shanghai.
During the visit to Germany by Chinese President Xi Jinping in late March 2014, it was agreed to make 2015 the year of innovation cooperation between the two countries. An important instrument here is the German-Chinese Innovation Platform, the establishment of which was agreed on during the first German-Chinese intergovernmental consultations, held in June 2011 in Berlin, and which serves to promote the exchange of experience and the identification of common challenges and points of contact between German and Chinese innovation research and innovation policy experts.
At the third intergovernmental consultations on 10 October 2014, cooperation with China was further intensified, the focus being on cooperation during the Science Year 2015 – City of the Future. In future, cooperation is also to be stepped up in the water sector and in marine and polar research and extended to include deep sea research. In addition to long-standing successful cooperation with China’s Ministry of Science and Technology, this will now make it possible to intensify cooperation with China’s State Oceanic Administration (SOA).
Vocational training continues to play an important role in bilateral cooperation. At the third intergovernmental consultations, the Joint Declaration on the Establishment of a German-Chinese Alliance for Vocational Education and Training, which was signed in 2011, was extended for another three years. The first German-Chinese training centre specialising in automotive mechatronics was opened in Chongqing in 2011. Other centres for cooperation in vocational training are located in Qingdao, Shanghai, Sichuan and Canton.
Food and agriculture
Since 2011, China has been the world’s biggest consumer market for food, ahead of the United States, and for the past 11 years has been a net importer of agricultural products, in particular grain for use as feed in livestock production, but also of an increasing number of foodstuffs. Annual growth rates of 30 per cent in the past five years and corresponding annual increases in imports of 15 per cent, to USD 98 billion in 2012, make China an attractive export market outside the EU for the German food industry, too, along with the United States, Switzerland and Russia. That’s why German food exports to China have nearly tripled over the past three years (to EUR 896.5 million in 2014). In bilateral trade with China, Germany’s agricultural and food sectors record a deficit overall, with exports worth USD 1.38 billion and imports totalling USD 2.19 billion. According to German food industry estimates, China remains Germany’s third most important market outside the EU, with growth potential of 65 per cent in 2015. For Germany, the principal segments continue to be animal products, in particular pork (EUR 310 million), milk and dairy products (EUR 167 million), edible oils and fats (EUR 119 million) and alcoholic beverages (EUR 114 million). In autumn 2014, China announced concrete import relief measures for agricultural products.
For many years, there have also been joint agricultural research activities and projects in crop science, livestock breeding, forestry and bioenergy, involving a lively exchange of knowledge in which the relevant industrial sectors also participate.
Since embarking on its reform and opening-up policy, China has gradually opened up to foreign culture as well. At the same time, the Chinese government has for some years now been stepping up its efforts to spread the Chinese language and Chinese culture abroad. It sees this as a contribution to promoting international understanding and improving China’s image abroad. This job is being done by both state cultural institutions (“cultural centres”) and the Confucius Institutes (currently 14 in Germany), which mostly take the form of university cooperation arrangements.
Privately organised cultural exchange is increasingly gaining importance. In recent years, for example, numerous outstanding German orchestras, opera and ballet companies have been on tour China. The same is true of the arts sector: in addition to major state-supported exhibitions, private galleries and art fairs are making an important contribution.
Numerous German cultural intermediaries are active in China, including the Goethe Institutes in Beijing and Shanghai as well as seven German language centres. Other important cultural intermediaries are the German Academic Exchange Service (DAAD), the Central Agency for Schools Abroad, the German Archaeological Institute, the Book Information Centre and a number of private foundations.
The Schools: Partners for the Future initiative (PASCH), which was launched by the Federal Foreign Office in 2008, is being successfully implemented in China. There are currently more than 120 Chinese secondary schools being looked after by the Goethe Institute and the Central Agency for Schools Abroad with their own staff. The Educational Exchange Service of the Standing Conference of the Ministers of Education and Cultural Affairs of the Länder in the Federal Republic of Germany support this initiative by conducting annual school exchanges and further-training programmes for teachers.
The German International Schools in Beijing and Shanghai teach the German school curriculum and offer German school-leaving qualifications as well as hosting cultural and sports encounters. There are also German International Schools in Changchun and Fuzhou as well as German sections at international schools in Wuxi, Suzhou, Guangzhou (Canton), Shenyang, Nanjing and Shenzhen.
More than 28,000 Chinese students were enrolled at German universities and other higher education institutions in the 2013-2014 winter semester, making them once again the largest group of foreign students in Germany. The number of Chinese who travelled to Germany last year to commence their studies here was around 12 per cent higher than in 2013. Conversely, there were more than 6,000 studying at higher education institutions in China in 2012. Their number has increased nearly fivefold since 2003.
There are more than 1,000 cooperation projects between German and Chinese universities and other higher education institutions. The DAAD provides resources including scholarships and academic teachers to coordinate and support academic exchange in both directions. Applicants wishing to study in Germany are served by the Academic Evaluation Centre Beijing (APS), a joint service provided by the DAAD and the German Embassy in Beijing.