Last updated in October 2018
The Federal Republic of Germany and the People’s Republic of China established diplomatic relations in 1972.
Since then, these relations, which are good and amicable, 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 growing uncertainties, international crises and global challenges, cooperation and coordination of policy between the two strategic partners 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 state visit to Germany at the end of March 2014. Regular intergovernmental consultations have been held since 2011, most recently in July 2018. These are attended by German and Chinese Cabinet members and presided over by the two countries’ Heads of Government.
In addition, there are a total of more than 80 dialogue mechanisms in place, many of them at senior government level: between line ministers, state secretaries, director-generals and government agency heads. Important formats for coordinating policy are the Strategic Dialogue on Foreign and Security Policy between the German and Chinese Foreign Ministers and the high-level dialogue on financial policy between the two countries’ 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 for promoting the rule of law in China is the rule of law dialogue. Equally important is the planned 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 Germany’s then Federal Chancellor Gerhard Schröder and China’s then Premier Zhu Rongji. It is designed to offer a long-term approach to developing the rule of law and implementing human rights in China. The rule of law dialogue is coordinated on the German side by the Federal Ministry of Justice and Consumer Protection (BMJV), and on the Chinese side by the Ministry of Justice (MOJ).
A symposium is held once a year at which German and Chinese Government representatives and experts debate a topical legal issue. The last Sino-German Rule of Law Symposium took place in Germany in August 2018 and was presided over by Justice and Consumer Protection Minister Katarina Barley and Chinese Minister of Justice Fu Zhenghua. The subject of the symposium was the development of a state system of legal services.
The insights and ideas gained from this dialogue have had an impact on the development of legal norms in China, thus supporting the Chinese Government’s efforts to enforce legal norms in specific areas.
The most recent dialogue on human rights was held in Berlin and Traunstein from 6 to 9 November 2016. The talks focused on implementing the rule of law, in particular access to lawyers and the rights of lawyers, restrictions on freedom of speech and of the press, the use of torture and the human rights situation in Tibet, including individual cases.
Bilateral trade between the two countries reached 186.6 billion euros in 2017. This made China Germany’s most important trading partner for the second consecutive year, ahead of the Netherlands (177.3 billion euros) and the United States (172.6 billion euros). During the same year, Germany exported goods worth 86.2 billion euros to China, making it the third-largest buyer of German exports, after the United States (111.5 billion euros) and France (105.2 billion euros). With imports from Germany totalling 100.5 billion euros in 2017, China was the largest importer of German goods, followed by the Netherlands (91.4 billion euros) and France (64.2 billion euros). (All figures sourced from the Federal Statistical Office.)
The transformation of China’s previously export-driven economy into one geared towards achieving sustainable, innovation-driven growth and strengthening domestic consumption offers great opportunities for German business. China is the most important market for German machinery worldwide and the world’s largest single market for automobiles. In 2017, the Volkswagen Group alone sold 4.18 million vehicles in China. In no other country are more German vehicle parts sold. In 2016, German exports of electronic goods to China amounted to 11.3 billion euros, while in the same year sales of machinery totalled 15.1 billion euros and exports of motor vehicles/land vehicles were worth 19.9 billion euros.
To date, German companies have been engaged in China to a much greater degree than Chinese companies in Germany. There are currently some 900 Chinese companies operating in Germany, compared with more than 5000 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 in selected sectors by Chinese companies abroad. Despite the fact that the number of German companies bought by Chinese investors fell from 68 in 2016 to 54 in 2017, Chinese investment in Germany in 2017 (13.7 billion US dollars) was up on the previous year. The realisation of the Made in China 2025 strategy, an industrial policy aimed at strengthening China’s position in key technologies, is also playing a role in promoting investment in Germany. In the first six months of 2017, Chinese investors acquired more companies in Germany than in any other EU country.
Chinese investment in Germany has focused on the mechanical engineering, electronics, consumer goods as well as information and communication technology sectors.
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 location for investment, 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 (usually in the form of a joint venture controlled by the Chinese side) or 3. worthy of support (usually in the form of a joint venture controlled by the foreign side). All non-listed projects are in principle permitted, including wholly foreign-funded ventures (without the joint venture requirement). The catalogue does not, however, contain any legally binding or definitive requirements. A revised version of the Foreign Investment Industrial Guidance Catalogue entered into force in September 2017. However, it fails to provide major improvements for German investors. Market access restrictions in China, compared with those in the European Union, remain, on the whole, asymmetrical, putting foreign investors at a disadvantage.
A German-Chinese bilateral investment protection agreement has been in place since 2005. This agreement is intended to regulate the overall conditions for mutual investment and create 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. The negotiations are still continuing.
Foreign trade and investment promotion
To promote German trade and investment interests in China, there are – besides the German Embassy in Beijing and the German Consulates General in Shanghai, Guangzhou (formerly Canton), Chengdu, Shenyang and Hong Kong – Delegate Offices of German Industry and Commerce (under the umbrella of the German Chambers of Commerce Abroad network, AHK, which is coordinated by the Association of German Chambers of Commerce and Industry, DIHK). Germany Trade and Invest (GTAI) also has staff responsible for foreign trade (in Beijing, Shanghai and Hong Kong) and investment promotion (in Beijing and Shanghai).
The Delegate Offices of German Industry and Commerce 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. The idea is to alleviate the country’s environmental and resource problems by achieving a better balance than in the past between economic development and modernisation, industry, agriculture, urbanisation and ecology. With its current Five-Year Plan, the Chinese Government is therefore making greater efforts to promote sustainable and qualitative – rather than purely quantitative – growth.
Key issues that China is therefore addressing more vigorously are the modernisation of its environmental policy, the improvement of air quality and the pursuit of a more eco-friendly energy policy including expanding non-fossil energy sources, improving energy efficiency across the board, climate protection measures (in particular emission reduction and climate change adaptation measures), and approaches to dealing with the 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 problems with water availability and quality and their negative impact on agriculture as well as poor soil quality. The foreseeable increase in energy consumption in the coming years reinforces the need for action.
The pioneering role played by Germany in many areas of climate and environmental protection as well as in the renewable energy sector and energy efficiency opens up a wealth of opportunities for establishing partnerships with China.
Germany and China have had an energy partnership since 2006. This partnership, which aims to promote policy dialogue and offer a platform for exchanging expertise and experience, was deepened in 2013 by two agreements. With its International Climate Initiative (IKI), the German Government is supporting numerous climate protection projects, including advising China 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 activities and developments. The work of this body is based on a memorandum of understanding concerning cooperation in combating climate change, which was agreed by the two countries in 2009.
A bilateral urbanisation partnership, designed to ensure the sustainability of China’s urbanisation process by implementing concrete projects, has been in place since 2013. This is opening up many potential areas of collaboration as well as opportunities for business.
Germany and China have numerous agreements governing bilateral cooperation on transport.
Back in 1984, Germany concluded a bilateral agreement with China concerning cooperation in the field of inland shipping. This agreement was expanded in 2003 to cover cooperation in the fields of inland shipping and waterways. The two countries hold regular consultations to actively coordinate matters related to the agreement.
An action plan on “green logistics” was signed by Germany and China in 2011 in order to deepen their international cooperation in this field. Green logistics is aimed at developing environmentally friendly and resource-efficient logistics processes, taking into consideration the three sustainability pillars – economy, environment and society – and thus represents an important future issue for companies around the world. The two Governments jointly hold a conference every year, alternately in Germany and China, to support the action plan’s implementation. The goal of the conference is to give German and Chinese companies as well as research institutes and other organisations the opportunity to not only present projects and activities involving green logistics, but also to network with relevant contacts in the partner country and thus initiate collaborations.
An intergovernmental agreement of 28 June 2011 set up the Sino-German Strategic Platform on Electro-Mobility, which forms the basis for the German Government’s cooperation with the Chinese Central Government in this area. The reason for Germany’s strong interest in cooperating with China in key mobility-related fields lies mainly in the fact that developing alternative propulsion systems and fuels is heavily dependent on international demand and innovations in technology and that here China is a decisive global actor. In addition, at the 2016 German-Chinese intergovernmental consultations, the two countries signed a joint declaration of intent concerning cooperation on mobility and fuel strategies.
Autonomous and connected vehicles in particular will play a central role in the future of mobility. In a joint declaration of intent of July 2018, Germany and China agreed to cooperate closely on the development and introduction of autonomous and connected vehicles.
As a result of embarking on an opening-up policy in 1978 and implementing a series of gradual economic reforms, China has lifted more than 600 million people out of poverty. People in China are considered to be below the poverty level if their income is less than 2300 renminbi (around 300 euros) a year. In its 13th Five-Year Plan, China has committed itself to eradicating poverty among its remaining poor population – some 43 million people – by 2020. If China achieves this, it will have met this central development goal ten years earlier than set out in the 2030 Agenda for Sustainable Development.
Due to this development progress, the German Government decided in 2009 to end traditional development cooperation with China. In future, it will be increasingly 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 of development aid. The German Government is seeking to engage more intensively with China in dialogue on global development issues and to establish new forms of cooperation – such as trilateral cooperation projects. To this end, the Chinese-German Centre for Sustainable Development was officially opened in Beijing in May 2017.
Science and technology
2018 marks 40 years of cooperation between Germany and China in science and technology. Since 1978, the cooperation has been continually expanded and intensified. With the China Strategy of the German Federal Ministry of Education and Research and the Germany Strategy of the Chinese Ministry of Science and Technology (launched in October 2015 and autumn 2016 respectively), both countries have developed a coherent and systematic framework for their scientific partnership. For many years now, Germany and China have been cooperating in the areas of education and vocational training.
The Chinese Government has put innovation at the centre of its efforts to restructure its economy towards a more sustainable path. In line with this, spending on research and development has steadily increased and numerous government initiatives have led the way with ambitious goals. These include the Made in China 2025 strategy and the establishment of innovation zones and clusters. Germany is often a preferred partner in these areas. Through the Sino-German Innovation Platform, the two countries’ strategic innovation partnership, which was relaunched in 2017, is focusing on promoting the exchange of experience among experts and identifying common goals in innovation policy.
German research organisations play an important role in science cooperation between the two countries. Prominent among the research organisations with an active presence in China are the German Research Foundation (DFG), the Fraunhofer-Gesellschaft (FhG) and the Helmholtz Association of German Research Centres (HGF).
Food and agriculture
Since 2011, China has been the world’s biggest market for food, ahead of the United States. Since 2004, it has become increasingly dependent on imports, switching from being a net exporter to a net importer of food and agriculture products. In particular, Chinese imports of grain and soy (used as feed to produce food of animal origin) have risen, but processed food is also being imported in ever greater quantities. An example here is high-quality dairy products from Germany like infant milk formula and yoghurt, which enjoy a good reputation among Chinese consumers. Overall, however, gaining access to the Chinese market continues to be difficult and arduous, and not just because of the intensely competitive environment.
China remained an attractive market for the food and agriculture industry in 2017. The share of exports of German food products in Germany’s total exports to China fell last year to 1.8 percent. German food exports decreased slightly in absolute terms, too, dropping to 1.6 billion euros. There is also little change anticipated in food exports to China in 2018, with the meat sector expected to suffer the biggest decline. The reasons for this are the high prices on the EU and world markets, the price competition among substitute products and rival exporters as well as the recovery of China’s own pork industry following a production decline in previous years caused by tougher environmental regulations. It is difficult to predict how China will be affected by a series of African swine fever outbreaks, the first of which was reported in August 2018. However, regional price differences are already being seen. In 2017, the most important export segments for Germany were products of animal origin (0.9 billion euros, a decrease of 24 percent) – in particular meat and meat products (507 million euros, a decrease of 43 percent) and milk and dairy products (331 million euros, an increase of 29 percent) – as well as baked goods (272 million euros, an increase of 66 percent) and beer exports (129 million euros, a decrease of 25 percent), which suffered greatly from competition and stagnant domestic consumption.
The bilateral projects of the Federal Ministry of Food and Agriculture (BMEL) are coordinated by the German-Sino Agricultural Center (DCZ), which was founded in 2015 to serve as a platform for dialogue on agricultural policy, agricultural research and other agricultural sector issues. The DCZ’s activities include organising workshops and seminars on specialist topics, such as promotion policies, digital technology in agriculture, rural development issues as well as nutrition issues. Planning and conducting annual German-Chinese agriculture conferences has also become a highly regarded and integral part of the DCZ’s work. The second project phase of the DCZ began in 2018. The BMEL is also continuing the forestry project that was launched in 2017 to develop forest reorganisation in pilot regions into an exemplary model for sustainable forest management. These initiatives are supplemented by successful joint research activities and projects in sustainable crop science, modern agricultural technology, livestock management and genetics, involving a lively exchange of knowledge in which partners from relevant industries also participate. The purely scientific exchange between German and Chinese research institutions, which has taken place as part of bilateral research collaborations supported by the BMEL, has for years proved fruitful and effective.
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 is being done by both state-run cultural institutions (“cultural centres”) and the Confucius Institutes, which mostly take the form of university cooperation arrangements.
Germany gives particular attention to China in its cultural relations and education policy. Numerous German cultural and education intermediaries are active in China, including the Goethe-Institut’s branch offices in Beijing and Shanghai, as well as nine German language learning centres, which are cooperative ventures between the Goethe-Institut and Chinese education institutions. Other important cultural and education intermediaries are the German Academic Exchange Service (DAAD), the Central Agency for Schools Abroad (ZfA), the German Archaeological Institute (DAI), the Book Information Centre (BIZ), the Academic Evaluation Centre (APS) and a number of private foundations.
Privately organised cultural exchange is gaining in importance. In the performing arts sector, for example, numerous outstanding German orchestras, opera and ballet companies have toured China in recent years. The same is true of the visual arts sector: in addition to major state-supported exhibitions, private galleries and art fairs are making an important contribution. But state-funded efforts to support cultural exchange continue, such as the “Deutschland 8” exhibition that opened in Beijing in September 2017. It follows the “China 8” exhibition that was staged in North Rhine-Westphalia in 2015.
The first meeting of the Sino-German High-Level People-to-People Dialogue to promote and support social and cultural exchange was held in Beijing on 24 May 2017. Attended by more than 500 people, the meeting was co-chaired by Germany’s then Foreign Minister Sigmar Gabriel and China’s then Vice-Premier Liu Yandong. The dialogue aims to improve the environment for civil society exchange between Germany and China in the areas of education, culture, language, media, sports and youth.
The Schools: Partners for the Future initiative (PASCH) is being implemented with great success in China. The Goethe-Institut and the Central Agency for Schools Abroad (ZfA) are currently assisting more than 120 Chinese secondary schools to provide more intensive German teaching, through their own seconded staff. The Educational Exchange Service (PAD) of the Standing Conference of the Ministers of Education and Cultural Affairs supports this initiative by conducting annual school exchanges and further training programmes for teachers.
There are German schools in Beijing, Shanghai, Changchun and Hong Kong. These schools are certified by the ZfA.
The Higher Education Compass currently lists over 1200 bilateral cooperation partnerships between German and Chinese higher education institutions. The German Academic Exchange Service (DAAD) provides resources, including scholarships and advisory services for students and researchers, aimed at coordinating and supporting academic exchange in both directions. The DAAD is represented in China by a regional office in Beijing, Information Centres in Shanghai, Guangzhou and Hong Kong, and more than 30 lectors and language assistants at Chinese universities.
The Alexander von Humboldt Foundation, which provides fellowships to highly talented scientists and academics, has a network of more than 1350 alumni – known as Humboldtians – in China. According to the latest available statistics from the Chinese Ministry of Education, there were some 8150 Germans studying in China in 2016. Conversely, there were around 37,600 Chinese nationals studying at German higher education institutions in 2017.
This text is intended as a source of basic information. It is regularly updated. No liability can be accepted for the accuracy or completeness of its Contents.