Does ascendant Germany pose a challenge for China?

By By Zhao Ke / 03-07-2016 / (Chinese Social Sciences Today)

Delegates of 57 member countries attend the Signing Ceremony of the Articles of Agreement of the Asian Infrastructure Investment Bank (AIIB) at the Great Hall of the People in Beijing on June 29, 2015. Germany is the fourth-largest shareholder of the bank, representing a voice for countries in the EU.


On May 20, 2015, German Ambassador to China Michael Clauss said that Germany would have a director on the board of the Asian Infrastructure Investment Bank (AIIB), stressing that the representative would be a voice for countries in the European Union (EU).

In fact, Germany has represented Europe on more than one occasion. Since the sovereign debt crisis broke out in 2009, the growing influence of Germany within the EU has been indisputable. A Europe dominated by Germany is in the making. Germany has taken the lead not only in the debt crisis but also in the Ukraine conflict and the biggest refugee crisis since World War II.


Favored leader
Many observers, especially Germans, do not agree that a “German Europe” has been or will be a reality.
It is generally believed that Germany temporarily took the lead in Europe out of a need to address practical debt issues. Although Germany is economically strong and remains the most important supporter of the mechanism for coping with the debt crisis, there is no need for the country to seek political hegemony.

Moreover, the institutional arrangements of the EU also restrain Germany, so the power of Germany will decline in the future. At the same time, due to tensions with heavily indebted nations, Germany’s role in mitigating the European debt crisis has actually been weakened.

An editorial in The Economist titled “The Reluctant Hegemon” stated, “When American leadership shored up a vulnerable West Germany half a century ago, it was in the interests not just of Germans but of Americans too. Now it is Germany’s turn to lead its weaker allies, for their sakes and for its own.”

The implication is clear: Germany is reluctant to be a leader in Europe and its leadership on the continent is only a response to exigent circumstances.

However, Germany is no longer a reluctant hegemon. It now holds a positive attitude toward its expanding clout. It has been more self-confident and composed in leading Europe. In the speech commemorating the anniversary of German reunification on Oct. 3, 2013, German President Joachim Gauck asked Germany to take more responsibilities. In realpolitik, “responsibility” is in essence a euphemism for “power.”

When the new government was formed, the Christian Democratic Union and the Social Democratic Party struck a ruling coalition agreement that dedicated a chapter to discussing the responsibility of Germany in Europe.

In the opening statement, it is written, “the unification of Europe remains the most important task of Germany. In the past few years, European partners have changed their expectations of Germany.” The statement implies that European partners hope Germany will take more leading responsibilities.

Following the statement, the “agreement” reads, “Europe is in a historic period of change during which Germany, as an economically powerful member state and the anchor in stabilizing Europe, is shouldering increasing responsibilities, and its partner states place special hopes on it.” This means that Germany is expected to take the lead in the EU because this greater leadership role is consistent with the fundamental interests of Europe.


Leadership based on euro
International competition, to a large extent, is about the scramble for capital. Whether one is talking about waging war or economic development, sufficient capital is an absolute prerequisite.


The introduction of the euro as a common currency in Europe reshaped the economic pattern and cycle of capital in the region. By virtue of its strong industrial competitiveness, Germany manages to attract capital from real European economies through its trade surplus. At the same time, it absorbs financial capital from the international capital market on a large scale and at a low cost before redistributing it to other EU countries through capital output. Then the cycle repeats.

In the European capital cycle, Germany has always controlled the scale and direction of capital flow in Europe, acting as a de facto “European banker.” As a result, its status and influence in Europe continue to rise. This can fundamentally be attributed to the strong financing capacity of Germany within the euro system, which is the source of its power. Moreover, it can also be predicted that as long as the euro exists, Germany will be in a solid leading position.

‘Larger West’
The most prominent feature of the current world pattern is the dramatic change in the balance of power between developed and developing countries. Developing nations, particularly emerging markets represented by China, are playing an increasingly important role in the global political and economic arena.


Lawrence Summers, a professor of economics at Harvard University and former director of the United States National Economic Council, noted that the task of managing major countries is a big challenge in this era. In other words, developed countries need “rebalancing,” to counter the effect of emerging powers, especially the impact of China’s rise, on the vested interests of developed states.

Therefore, the US’s rebalancing strategy is to return to the Asia-Pacific, and for rebalancing purposes, Europe is trying to deepen cooperation between developed countries and build an institutionalized political, economic and financial group of developed countries, promoting a “larger West.”

Germany is a vigorous advocate of Europe’s “larger West” strategy. After taking office in 2005, German Chancellor Angela Merkel prioritized the Europe-US relationship. In 2006, the Merkel Administration proposed establishing a Europe-US free trade zone. During her visit to the US in early 2007, Merkel formally proposed the initiative to US President George W. Bush.

In October 2013, the EU and Canada signed a bilateral free trade zone agreement, which was the first of its kind among the G8 members, and it was inseparable from Merkel’s efforts. In August 2012, Merkel paid a visit to Canada, where she conducted special negotiations with Canadian Prime Minister Stephen Harper over details of the Europe-Canada free trade zone.

In 2013, after Merkel was reelected chancellor, the German government’s foreign policy was still based on intensifying trans-Atlantic relations and cooperation within the NATO framework. Furthermore, the government has been a staunch advocate for negotiations over the Transatlantic Trade and Investment Partnership (TTIP).


China as challenger?
The China-Germany relationship has made rapid progress in recent years, laying a good foundation for the development of China-Europe ties. In the trade dispute over the photovoltaic industry of China and Europe in 2013, Germany played a large role in changing the EU’s hardline attitude, and it argued against high punitive tariffs on Chinese photovoltaic products.

Nonetheless, does it mean that a German-led Europe will be more friendly and favorable to China? Obviously, the leadership of Germany in Europe will to a great extent lower our costs in dealing with Europe. But we cannot lose sight of the fact that most German political elites view China as a challenger rather than a real partner.

In the ruling coalition deal for the new government in 2013, Germany made clear its desire to deepen relations with Asian countries based on universal values and voiced support for the US Asia-Pacific policy, considering it  an opportunity for Germany.

The new German government believes that the friendship with Japan is an important pillar of its diplomatic policy, so it backed the negotiation between Japan and the EU over the establishment of a bilateral free trade zone.

Obviously, Germany supports the US Asia-Pacific policy and Japan’s strategic position as a means of balancing China. Although the new German government considers China a strategic partner of Germany and the EU because of various “common interests,” it is still committed to realizing human rights.

It can be seen that the new German government’s policy toward Asia highly conforms to the “larger West” strategy, which will pose the biggest challenge to the future development of China-Germany relations. If Germany’s outlook on China remains unchanged, the German-led Europe will undoubtedly make it much more difficult for China to handle its relationship with Europe in the long term.


Zhao Ke is from the Institute for International Strategic Studies of the Central Party School of the Communist Party of China.