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China

China

Last updated in April 2014

Political relations

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. In the face of the global economic and financial crisis, stable cooperation between the two countries’ strongly export-oriented economies is of great importance. China views Germany both economically and politically as its “gateway to Europe”. Important elements of bilateral relations are dynamic trade relations, investment, environmental cooperation, cooperation in the cultural and scientific sectors as well as frequent high-level visits in both directions.

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. Intergovernmental consultations have been held since 2011. The most recent round of consultations, held in Beijing in August 2012, were attended by Federal Chancellor Merkel and then Prime Minister Wen Jiabao as well as more than ten line ministers from both sides. Apart from economic and environmental issues, questions relating to social development and the stepping up of cooperation on education, science and research were also on the agenda. Both sides agreed to actively promote more intensive civil society exchange, including youth exchange and town twinning arrangements. So far, the intergovernmental consultations have resulted in a total of more than 40 concrete agreements.

Apart from the intergovernmental consultations, there are very frequent high-level official visits between the two countries, including the visit to Germany by Prime Minister Li Keqiang in May 2013, his first trip abroad. During this visit, he also officially opened the German Language Year in China and the Chinese Language Year in Germany together with Federal Chancellor Merkel. In March 2014, Xi Jinping paid an official visit to Germany on his first trip to Europe as Chinese President.

There are now 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.

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.

Dialogue on the rule of law

Sino-German dialogue on the rule of law dates back to the agreement reached in November 1999 by then Federal Chancellor Gerhard Schröder and former 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 13th Sino-German Rule of Law Symposium was held on 8 and 9 April 2013 in the Chinese city of Hangzhou. The subject of the symposium was The Avoidance and Settlement of Administrative Disputes.

The rule of law dialogue is also underpinned by concrete projects to promote cooperation in the legal sphere. In this connection, Federal Justice Minister Leutheusser-Schnarrenberger and the head of the State Council’s Legislative Affairs Office, Minister Song Dahan, signed an agreement in Berlin in November 2010 on a three-year programme (2011-2013) designed to foster exchange and cooperation in the legal field. Agreement was reached on a follow-up programme during talks held on the sidelines of the 2013 Rule of Law Symposium.

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 in May 2013 in Yinchuan in the Ningxia Hui Autonomous Region. The talks focused on issues relating to the situation and working conditions of migrant workers, freedom of opinion and the situation of national minorities.

Economic relations

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 just USD 270 million. In 2013, German exports to China were worth EUR 67.03 billion, an increase of 0.6 per cent compared with the previous year. German imports from China were worth EUR 73.38 billion, 5 per cent less than in the previous year. With bilateral trade worth more than EUR 140 billion in 2013, 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 will also be the official partner country at the CeBIT technology trade fair.

China is the fifth biggest buyer of German exports, after France, the United States, the United Kingdom and the Netherlands. The main German exports to China are motor vehicles and vehicle parts (accounting for 29 per cent of exports), machinery (27 per cent), data-processing equipment, electrical and optical goods (9 per cent), electrical equipment (9 per cent) and chemical products (9 per cent). In 2013, Germany’s capital goods industry and automotive manufacturing sector again derived above-average benefits from China’s investment-driven growth model.

China is also the second largest supplier of German imports, after the Netherlands. In 2013, the principal German imports from China were data-processing equipment electrical and optical goods (accounting for 36 per cent of imports), clothing (11 per cent), electrical equipment (10 per cent), machinery (8 per cent) and metal goods (4 per cent). German companies import more goods from China than China does from Germany, which has resulted in a German trade deficit since 1989, though this has declined sharply (by EUR 26.8 billion) since 2008. In 2013, it stood at just EUR 6.35 billion.

Investment

German companies are currently engaged in China to a much greater degree than Chinese companies in Germany, this probably being not least a reflection of the differences in the two economies’ level of development. 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 nearly EUR 39 billion. Conversely, Chinese companies have so far invested approximately USD 3.1 billion in Germany. Chinese investment in Germany has so far focused on the mechanical engineering, electronics and consumer goods sectors as well as on information and communication technologies. Takeovers have included the purchase of concrete pump manufacturer Putzmeister by China’s Sany Heavy Industry and the acquisition of automotive supplier Kiekert and concrete pump manufacturer Schwing by Chinese companies.

There are currently some 900 Chinese companies active in Germany. By contrast, there are already more than 5,000 German companies operating in China.

In recent years, China has been very successful in attracting foreign direct investment, but it needs to improve transparency and security for investors to ensure that it remains an attractive business destination, especially for small and medium-sized companies. Rule of law deficits remain 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.

A detailed investment catalogue for foreign companies, compiled under the responsibility of the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), specifies for each market segment whether and in what form foreign investment is welcome. It contains a detailed list of investment projects 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 investment catalogue came into effect in January 2012. Investment promotion focuses on a total of four sectors: the environment, energy (e.g. electromobility), high tech (e.g. chip and touch systems) and heath care (e.g. hospitals). This contrasts with additional restrictions in other sectors, e.g. industries that are particularly harmful to the environment, heavy industry and strategic commodities. The draft provides for prohibitions, e.g. in the case of the construction and management of residential developments and domestic courier services. There are no changes in the banking and insurance sectors or in most of the service sector.

An exception from the investment catalogue system is to be made 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 negative list currently encompasses around 200 sectors, with a 90 per cent overlap with the investment catalogue’s “prohibited” or “permitted under certain conditions” categories. However, the Chinese government has announced its intention to further trim the negative list.

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.

Export trade promotion

To promote German business interests in China, German industry and commerce has delegates’ offices in Beijing, Hong Kong, Shanghai and Guangzhou (Canton) (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 for investment (in Beijing). The delegates’ offices and the gtai offices work closely with the German Embassy in Beijing and the German Consulates-General in Shanghai, Guangzhou (Canton), Chengdu, Shenyang and Hong Kong. German companies in (mainland) China have set up a Chamber of Industry and Commerce, which is headed by the Representatives of German Industry and Trade in Beijing. There is a German Business Association in Hong Kong.

Cooperation on 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 relative emissions reduction) as well as climate change adaptation, modernisation of its environmental policy, a more eco-friendly energy policy including developing its alternative-energy sector, 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, China’s national government is increasingly seeking to promote qualitatively sustainable rather than purely quantitative growth.

That is why the Energy-Environment-Climate triangle constituted one of the priority issues addressed at the 2011 and 2012 intergovernmental consultations. Both countries – working from totally different premises – have decided to implement structural change towards a green economy. Over a period of 30 years, the two countries have worked together trustfully in development cooperation to achieve broader environmental goals and have implemented targeted cooperative measures in the area of climate protection. 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. 

Economic 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 ongoing programmes are to be completed in the course of the next few years and new forms of cooperation with China are to be developed as part of the two countries’ strategic partnership. This involves providing support for China’s continuing reform policy and for restructuring the Chinese economy towards greater sustainability – a process in which greater involvement of German business is also being sought.

Scientific and technological cooperation

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. The key partners are, on the German side, the Federal Ministry of Education and Research (BMBF) and, on the Chinese side, the Ministry of Science and Technology (MOST) and the Ministry of Education (MOE).

For many years now, there has been very close cooperation between German and Chinese research institutions. Along with 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 Fraunhofer Society has opened two institutes together with the High Technology Research and Development Center at Beijing University of Astronautics and Aeronautics: the Sino-German Joint Software Institute (JSI) in Beijing, and the Sino-German Mobile Communication Institute (MCI) in Berlin. In 2005, 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 been working to implement a network comprising WGL research institutions, Chinese research institutes and industrial partners on both sides. Its task is to isolate, characterise and test 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 BMBF and MOST decided to launch a Sino-German Research and Innovation Programme on Clean Water in Beijing.

At the second intergovernmental consultations on 30 August 2012, German research cooperation with China was further intensified, the focus being on cooperation in the area of innovation policy and LED technologies. 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 MOST, this will now make it possible to intensify cooperation with China’s State Oceanic Administration (SOA). Two new joint declarations have been signed in these two areas.

Vocational training continues to play an important role in bilateral cooperation. Besides the Dialogue Forum on Vocational Training, held in Beijing in June 2012 and organised by the German Chamber of Commerce in Shanghai as part of Sino-German cooperation on sustainability, a second bilateral symposium, jointly organised by the BMBF and the MOE, was held in Chongqing directly before the second intergovernmental consultations. On this occasion, the first Sino-German training centre specialising in automotive mechatronics was opened in Chongqing. Cooperation in vocational training also focuses on Qingdao, Shanghai and Canton.

Cultural exchange

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.

In May 2013, Federal Chancellor Merkel and Prime Minister Li Keqiang opened the German-Chinese Language Year 2013/2014. The aim is to promote the teaching of German in China and of Chinese in Germany, the training and further training of language teachers in both countries and language-related cultural events.

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.

Educational exchange

The Schools: Partners for the Future initiative (PASCH), which was launched by the Federal Foreign Office in 2007, is being successfully implemented in China. There are currently 99 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 and 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.

There are some 36,000 Chinese students learning German as a foreign language. A bachelor’s degree in German can be obtained at 104 universities and other higher education institutions in China.

There are currently around 23,000 Chinese students studying at German universities and other higher education institutions, making them the largest group of foreign students. The focus here is on engineering programmes. 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.

There are around 4,000 German students enrolled at Chinese universities, most of them short-term or language students.

There are more than 950 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.

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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