Western powers in the G7 group of nations are failing to coordinate their China strategies, senior western officials admit, adding that the need to do so has been given sharp impetus by Xi Jinping’s consolidation of power at this month’s Communist party congress.
The G7’s poor coordination reflects a deep disagreement, also reflected within the EU, about whether dialogue and trade with China have a future if Beijing is seen as an existential threat that requires strict strategic controls on economic ties.
Chinese aggression
At the week-long Communist party congress, Xi was confirmed as leader of China for a precedent-breaking third term around a new leadership principle that puts national security, and self-reliance, ahead of trade with the west, strengthening the hand of those in the G7 who see China primarily as a threat. The congress in effect confirmed the abolition of collective leadership, advanced a more aggressive foreign policy based on Marxist nationalism and underlined China’s ambition to become the world’s technological leader.
By doing so it also confirmed that China, not Russia, will dominate western foreign policy thinking in the medium term.
Different types of threat
British officials in particular have taken to describing Russia as “the active threat”, but China as the “pacing threat” – a variation on the recent remark by the MI5 director general, Ken McCallum, who likened Russia’s behaviour to “bursts of bad weather” while noting that “China is changing the climate”.
An update, due to be published next year, to last year’s British Integrated Review policy paper may not formally upgrade the Chinese threat but it will argue that the past year has shown the risk of a “great power” conflict has grown alarmingly. One source said: “The rate of deterioration has been at the far end of the predictions in the review.”
An integrated approach
This all requires the west collectively to do more to integrate its approach to China, by coordinating an economic strategy to protect itself from Chinese economic coercion and supply chain vulnerabilities in a host of areas, such as microchips, defence, fusion technology, lithium and energy.
On 7 October, the US effectively tried to kneecap China’s technological advance by controls that severely restrict the export to China of high-end semiconductors, as well as the equipment and software needed to manufacture them. The aim, according to Mathilde Velliet at the French Institute for International Relations, is to freeze Chinese capabilities in semiconductors to preserve US technological leadership.
It also requires what Canada’s deputy prime minister, Chrystia Freeland, described in a speech at Brookings this month as “friendshoring” – a commitment that “democracies must make a conscious effort to build our supply chains through each other’s economies”, even if this comes with a price tag for consumers.
There is an urgent need to do so. The European Commission has identified 137 products essential to the European economy that have to be imported from other countries. Half of them come from China.
Ideally the UK wants this work coordinated more through the G7, coincidentally the UK’s best post-Brexit avenue of influence. Jake Sullivan, the US national security adviser, recently described the G7 as “the steering committee of the free world”, so there is alignment between Washington and London in selecting the G7 as the vehicle to defend liberal democracy.
But such ambition will require greater strategic burden-sharing between G7 states than seen so far. The Anglo-American approach to China is not fully shared in Berlin and Paris, where there seems a desire to relaunch dialogue with China after the breakdown in relations with Russia.
Germany going it alone
With his country’s economy heading for recession, the German chancellor, Olaf Scholz, seems determined to be the first western politician through the door after Xi won an unprecedented third term. Spurning a request even from Emmanuel Macron to travel to see Xi together in a show of Franco-German solidarity, Scholz is instead taking a large group of businesspeople on a delegation to China at the beginning of November before the G20 summit in Indonesia. The visit has irritated the EU and Scholz’s coalition partners, since it may preempt a German government review on its China policy due next year. And for China, Germany is what matters. As Kevin Rudd, the former Australian prime minister, pointed out this month: “When China looks at Europe they look primarily at Germany … don’t underestimate that.”
Scholz’s coalition partners in the Green party have reminded him that Russia’s energy blackmail disproved the central tenet of German postwar politics: that economic integration with non-democracies promotes peace, social opening and democratic change. In what could be seen as a rebuke to the US, Scholz is stubbornly resistant, telling Die Welt at the weekend: “The EU prides itself on being a union interested in global trade and it does not side with those who promote de-globalisation.” He talks more neutrally about diversification of suppliers.
It is partly that Germany is more heavily invested in China than any other European economy, a dependency that increased almost steadily until 2021, according to a study published in June by the Institute of German Economics (IW) in Cologne: “The Chinese sales market and the short-term profits there appear to be simply too attractive.”
A separate study by the Munich Ifo Institute for Economic Research said: “Almost half of all German companies in the manufacturing sector are currently dependent on important ‘upstream services’ from China. These can be individual parts, but also the assembly of products.” A decoupling of the EU and Germany from China, which would result in retaliatory measures from the latter, would cost Germany almost six times as much as Brexit.
Importance of Hamburg
The whole issue has been brought into sharp relief in the past fortnight by Scholz’s determination to let a Chinese state-controlled company, Cosco, take a 35% stake in the port of Hamburg container port, the largest in Germany, and the main entry point for Chinese imports. The row became a touchstone for the debate about the risks Germany runs by making itself dependent on an increasingly authoritarian China.
In mid-October, the German foreign minister, Annalena Baerbock, was telling Süddeutsche Zeitung: “The port of Hamburg is not just any port, but one of the key ports not only for us as an export nation, but for Europe as a whole.” With every investment in German critical infrastructure, the question must be asked: “What that could mean at the moment when China would oppose us as a democracy and a community of values?”
Scholz, a former mayor of SDP-run Hamburg, argues that China already has shares in ports all round Europe, including Rotterdam, Antwerp and the Greek port of Piraeus. An unhappy compromise has been reached whereby China takes a less influential 24.9% stake in the container terminal, instead of the planned 35%.
But Norbert Röttgen, the Christian Democrat foreign policy specialist, is scathing about Scholz’s historic error. “The contempt for human beings inside China is combined with China’s claim to global power. But we continue to pursue a mercantilist foreign policy that focuses on short-term gains and completely ignores the costs and dangers in the long term.” For Scholz, the port seems to have taken on the status of a gift he must provide to his host, Xi.
So when Britain talks about the need for the G7 to work more closely together if it is to form a global west, it is Germany that the UK has in mind; and, not for the first time, the British Conservative government finds itself in the ironic position of cheering on the German Greens.
