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China

Last updated in March 2016

Politics

The Federal Republic of Germany and the People’s Republic of China established diplomatic relations in 1972.

Over the past more than 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 most recent Sino-German Rule of Law Symposium was held in July 2015 in Beijing 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 Legal (Regulation) Systems and Mechanisms to Combat Domestic Violence.

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 from 24 to 28 November 2014 in Beijing and Lhasa. The talks focused on the rights of human rights defenders (in particular human rights lawyers), restrictions on freedom of speech and of the press, the use of torture and the human rights situation in Tibet, including individual cases.


Economy

With bilateral trade worth nearly EUR 163 billion in 2015, Germany remains China’s principal trading partner in the European Union (approximately 30 per cent of China’s trade is with the EU). However, the current weakness of the Chinese economy led in 2015 to the first decline in exports since 1997. According to Federal Statistical Office (Destatis) figures, German exports to China fell by around 4.5 per cent, to just over EUR 71.2 billion, while German imports from China in the same period continued to grow, by nearly 15 per cent to more than EUR 91.5 billion. The decline of German exports to China was, however, from a very high level. Since 2000, German exports to the world’s second-largest economy have increased nearly eightfold and the trade figures for 2014 were especially positive, German exports growing by 11.3 per cent compared with the previous year, to EUR 74.5 billion and German imports from China also increasing, by 6.4 per cent to EUR 79.7 billion (gtai/Destatis figures).

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 in Berlin its first European chamber of commerce 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 numerous 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. China is the biggest buyer of German motor vehicles, after the United States and the United Kingdom, with 4.4 million vehicles sold in 2015 – a slight decline compared with the previous year –  which means German automakers have a market share of 20.8 per cent. And in no other country are more German vehicle parts sold. From 2008 to 2014, German exports of electronic goods to China doubled, to EUR 2.6 billion. After three years of record growth, German exports of food and semi-luxury goods to China levelled out in 2014 at just under EUR 900 million. With further strong growth forecast (a 65 per cent increase for 2015), China remains one of the most important overseas markets for German agricultural and food industry products.


Investment

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 the past year, a new record was set for Chinese business takeovers in Europe: they were worth an estimated EUR 20 billion, a whopping 44 per cent increase compared with 2014.

In 2014, German direct investment in China was worth more than EUR 40 billion. Chinese direct investment in Germany amounted 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 as well as the acquisition of automotive supplier Kiekert and computer wholesale dealer Medion by Chinese companies, and not least the takeover of machine manufacturer KraussMaffei.

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. 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 country’s hitherto strictly regulated but fast-growing service sector (banking, insurance, logistics and trade), time will show whether the Chinese government’s reform plans bring about any improvement. Up to now, foreign companies have been legally denied access to many interesting business sectors – or such access has been de facto impossible.

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. Numerous separate catalogues specify the requirements for individual sectors. For example, a revised investment catalogue for the IT and telecommunications sector has been in force since 1 March 2016. China does actually plan 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 not yet known exactly when it is due to come into force. 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 current Five-Year Plan, 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.


Development cooperation

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 – such as trilateral cooperation projects – as part of the two countries’ strategic partnership.


Science and technology

There has been cooperation in science and technology between the two countries for more than 30 years, and this is being continually expanded and intensified. 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 and vocational training sectors. Bilateral cooperation between German and Chinese research institutions in particular has for many years been very close. The joint promotion of science is fostered not only through cooperation between the two countries’ relevant ministries but also through the Sino-German Centre for Science Promotion, which is jointly run by the German Research Foundation and the National Natural Science Foundation of China in Beijing. In addition, German research institutions such as the Max Planck Society, the Leibniz Association, the Helmholtz Association of German Research Centres and the Fraunhofer-Gesellschaft engage in their own intensive – and in some cases joint institutional – cooperation partnerships in many different areas of research.

The strategic partnership in innovation agreed on in 2014 led to the creation of the German-Chinese Innovation Platform, 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. This cooperation was given more concrete form in January 2016 by the signing of a Joint Declaration of Intent on Scientific and Technological Cooperation in Intelligent Manufacturing (Industry 4.0) and Smart Services, which is designed to initiate cooperation on the digitisation of manufacturing and business. The fourth joint innovation conference is being held in Berlin in April of this year. For the first time, it is being extended to cover concrete areas of innovative technologies, e.g. urbanisation.

At the third intergovernmental consultations in October 2014, China’s status as guest of honour during the Science Year 2015 – City of the Future was agreed on. This led to an intensification of cooperation on urbanisation. It was also agreed to step up cooperation on clean water and marine and polar research and extend the latter to include deep sea research.


Food and agriculture

Since 2011, China has been the world’s biggest consumer market for food, ahead of the United States, and since 2004 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. The overall weakness of the economy was mirrored back in 2014 by a decline in the growth rate to 15 per cent, compared with 30 per cent in the previous year. The demand for imports grew by 3 per cent. Nevertheless, China also remains an attractive market for the German food industry outside the EU. 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 the past three years, German trade with China in the food sector has nearly tripled (in 2014 it was worth EUR 896.5 million). Overall, Germany’s agricultural sector and food industry record a deficit in bilateral trade with China (USD 1.38 billion in exports compared with USD 2.19 billion in imports from China). According to German food industry estimates, in 2015 China remained Germany’s third most important market outside the EU with growth potential of 65 per cent. In autumn 2014, China announced concrete import relief measures for agricultural products, but these have not yet been implemented.

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.


Culture

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 (of which there are currently 15 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 toured 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 eight German language learning centres, which are cooperative ventures between the Goethe Institute and Chinese education institutions. 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.


Education

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 on the ground. 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.

There are also a wide range of opportunities for German-speaking students to be taught in German: there are German International Schools, which are certified by the Central Agency for Schools Abroad, in Beijing, Shanghai, Changchun and Hong Kong, as well as German sections or German-language instruction at schools in Chengdu, Fuzhou, Guangzhou (Canton), Nanjing, Beijing, Shenyang, Shenzhen, Suzhou and Wuxi.

In the academic sphere, the Higher Education Compass of the German Rectors’ Conference currently lists over 1,100 cooperation partnerships. The DAAD provides resources including scholarships and academic teachers to coordinate and support academic exchange in both directions. According to Chinese Ministry of Education statistics, there were some 8,200 Germans studying in China in 2014. Conversely, there were more than 30,000 Chinese nationals studying as foreign students at German higher education institutions in 2015. Applicants wishing to study in Germany are served by the Academic Evaluation Centres in Beijing and Shanghai, which for their part are service providers of the German Academic Exchange Service (DAAD) and the German Embassy in Beijing or the German Consulate-General in Shanghai.

Development cooperation

China is a partner country of German development cooperation. For more information please visit the website of the Federal Ministry for Economic Cooperation and Development

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