[Letters] Berlin and the Beijing connection

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[Letters] Berlin and the Beijing connection

The latest news reporting on the Chinese People’s Bank’s acquisition of 3.04 percent of German insurer Munich Re, the world’s largest reinsurer, tells of growing economic ties between Berlin and Beijing. This is part of a broader Asian narrative that Germany is setting in place.

Germany is an industrial powerhouse with an economic might exceeded every other European country. From multinationals to the Mittelstand, the top-performing small- and medium-sized companies in the state, German entrepreneurs understood way before their European competitors the importance of market opportunities in developing countries, notably in East Asia. As a result, while Italian companies still regard China more as a threat than as a new market, German businesses are currently prospering because of their strong presence in the booming Chinese economy. From Berlin’s perspective, the Beijing connection is important for four main reasons.

First, Berlin aims to increase trade with non-European countries in order to further diversify export destinations. Let’s be clear - Europe still matters a great deal to Berlin. More than 70 percent of German exports are still shipped to European countries and roughly the same percentage of imported goods in Germany come from the Continent.

This scenario, however, is gradually changing, with Beijing playing a major role. Since 2009, most of the imported goods in Germany come from China, and Beijing is already Berlin’s third-largest trading partner, with bilateral trade amounting to over 130 billion euros ($180 million) in 2010. Now, fast forward for a moment to 2020 and we will most likely witness China as being Germany’s number one trading partner.

Furthermore, Beijing is seen as instrumental to keeping Germany’s industrial primacy. German companies are utilizing China’s assembling competitive advantage within the global supply chain. China is also becoming an ever more important consumer market. From Adidas to Volkswagen to Bosch, Germany Inc. is further expanding its presence with full government support. Starting last year, Berlin holds regular government consultations with Beijing - a privilege Germany offers only to a select group of countries including France, Italy, Spain, Poland, Israel and India.

The third reason is that Berlin eyes China’s increase in Foreign Direct Investments in Europe. The acquisition of 3.04 percent of Munich Re by the People’s Bank of China, via the State Administration of Foreign Exchange; the planned purchase of home entertainment equipment producer Medion by PC giant Lenovo; and the interest of China’s Beijing Automotive Industry Holding Co. in taking over automaker Opel might be seen as the first wave of Chinese investments in Germany, which will pave the way for many other future operations.

Finally, a closer relationship with Beijing means envisaging a more flexible foreign policy, one that does not necessarily take into account decisions made by Berlin’s Western allies - notably Washington. Some analysts talk of a new foreign doctrine and a “new German exceptionalism.”

China is only one - though by far the most important - part of the Asian equation envisaged by Berlin. Germany’s chambers of commerce are working hard to sell “made in Germany” in Mumbai and Jakarta while trade promotion agencies are promoting Germany as a business and technology location in Seoul and Shanghai. Europe’s largest economy is securing its economic growth and development by reaching out to the most dynamic macroregion of the globe.

Emanuele Schibotto, editorial coordinator of Equilibri.net, an Italian online magazine
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