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Germany weighs harder line on China and its ‘massive human rights violations’

BERLIN — Germany’s foreign ministry wants to take a tougher line on China and push companies to reduce their dependence on Beijing, while also promoting EU efforts to negotiate an investment agreement with Taiwan.

The central question will now be whether the ministry’s position will ultimately make any difference to long-established China policy. Germany has long been at the forefront of pushing a dovish EU policy on China, largely because its manufacturers have big investments there. Berlin roundly dismissed human rights concerns in 2020 when it led the way in trying to secure an EU investment deal with China.

A 61-page-long draft copy of the upcoming German China Strategy, which is planned to be adopted early next year, warns that the Chinese leadership “is willing and capable” to employ its market “as leverage” to extract concessions from other countries. The document also criticizes “massive human rights violations” in China’s autonomous regions of Tibet and Xinjiang, which is home to the Uyghur Muslim minority.

POLITICO obtained a copy of the draft document, dated November 1, which was drafted by the foreign ministry but still needs to be officially adopted following consultations with other ministries and the chancellery, meaning that changes could still occur.

“We aim to use market-based instruments to change the incentive structure for diversification for German companies so that reducing export dependencies becomes more attractive,” the draft text says, adding that companies “that are particularly exposed to China” should be obliged “to specify and summarize relevant China-related developments and figures” under their disclosure requirements.

“We will examine whether affected companies should carry out regular stress tests in order to identify China-specific risks at an early stage and be able to take remedial action,” the document continues.

According to the text, Germany will also “examine” the possibility of creating a legal basis that would allow the government, or the EU, to scrutinize “security-critical” foreign investments by German or European companies in China — a measure that could potentially stop companies from transferring critical infrastructure to the People’s Republic and thereby increase dependencies.

Berlin also wants “a better overall European overview of Chinese investments and holdings in critical infrastructure” in Europe, such as harbors.

Moreover, the text also proposes creating EU buyers’ cartels for purchasing specific minerals such as rare earths to “strengthen the negotiating position of European companies.”

Additionally, state-backed investment guarantees should be limited to €3 billion per company and face stricter criteria such as respecting environmental standards and labor rights and ensuring no forced labor in the supply chain. “When issuing export credit guarantees, we will tighten the criteria to prevent unwanted technology transfer,” the draft text says.

The document also calls for “enhancing” relations with Taiwan. “We support the European Parliament’s call for a rapid and open-ended scoping exercise and impact assessment for a bilateral investment agreement with Taiwan,” it says, adding that because Taiwan is a member of the World Trade Organization, “such an agreement is compatible with the EU’s One China policy.”

However, moving toward such an investment deal would likely antagonize China, which has seen the ratification of its investment deal with the EU being blocked over political tensions. Beijing’s foreign ministry already reacted angrily to the German draft strategy, criticizing the “denigration of China by the German side” on issues such as human rights.

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