Olaf Scholz hugs China close — but ‘Germany first’ policy risks US and EU wrath

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Meanwhile, Joe Biden, the US President, is pushing allies for a more coordinated posture towards China, whether that be a tougher line on intellectual property theft, curbs on investment in sensitive industries, opposing bellicose threats to Taiwan or confronting Beijing’s campaign against Lithuania, which has spoken out against it.

For German car makers, Lithuania presents a particular headache, as many are reliant on parts made in the country which China now wants them to ditch.

Many also have a big presence on the Chinese mainland and oppose any change in relations, with Volkswagen boss Herbert Diess recently warning it would be “very damaging”.

They are at risk of swimming against the tide as patience wears thin among western governments. But Scholz faces potentially painful choices regardless. 

“Undoubtedly, if the Germans changed their policy, and became a lot more hard hitting on human rights and things like that, the Chinese would target German firms to put on the pressure,” says Charles Parton, a former British diplomat in China and senior associate fellow at the Royal United Services Institute.

“That’s what Scholz is afraid of.”

But Parton argues that failing to stand up for western values carries far greater costs than any temporary loss of business.

“You can’t necessarily point to a particular action, but over time the lack of rigour in defending our own interests, security and values becomes quite debilitating,” he explains. “It is a threat to our way of life.”

For Tatlow, Scholz is facing the trickiest balancing act of his career.

“He is under great pressure and China has a lot of tools at its disposal to punish Germany,” she adds.

“It is going to take real backbone, real leadership. But it remains to be seen whether Scholz is even interested in that.”

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