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Germany's chancellor is under pressure to reduce economic dependence on China

JUANA SUMMERS, HOST:

Germany's chancellor, Olaf Scholz, is headed to China this week. He'll be the first Western leader to sit down with President Xi Jinping in over two years. Scholz is under pressure to rethink Berlin's relationship with Beijing, as Esme Nicholson reports from Hamburg.

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ESME NICHOLSON, BYLINE: Home to one of Europe's largest ports, Hamburg has excelled at trade since the Middle Ages. Back then, it clubbed together with other port cities in the region, and together, they dominated commerce. Now the city's port is joining forces with COSCO. The Chinese shipping giant is about to buy a stake in a container terminal here. Jorg Helmund, a Hamburg native waiting to board a harbor ferry, doubts there's anything mutually beneficial about this alliance.

JORG HELMUND: (Through interpreter) Letting China invest in a port here is the last thing we should be doing considering the state of the world right now. Sure, Scholz is trying to keep both the German industry and Beijing happy, but he has to strike a balance.

NICHOLSON: Striking a blow instead, Scholz pushed the COSCO deal through his cabinet last week despite opposition from six key ministries. The chancellor addressed their concerns about selling off critical infrastructure by reducing COSCO's stake from 35% to 24.9%. But the deal still has little political support, even though China has been Germany's largest trading partner for more than half a decade. Germany's lawmakers are afraid of making the same mistakes with Beijing that they made with Moscow. Domestic Intelligence Chief Thomas Haldenwang says this is exactly the issue.

THOMAS HALDENWANG: (Through interpreter) If Russia is the storm, China is climate change. And we need to prepare for this.

NICHOLSON: The timing of the Hamburg-COSCO deal has also raised eyebrows.

NOAH BARKIN: The optics are not great. It appears that Scholz, shortly before heading to Beijing, is offering the Chinese government a gift.

NICHOLSON: Noah Barkin is an analyst with Rhodium Group. He says this apparent offering undermines previous policy pledges on China.

BARKIN: Scholz's government came in promising a new, tougher stance, and Scholz is sending signals in the opposite direction. So there are big questions abroad about where Germany really stands on China.

NICHOLSON: None more so than in Washington, where ties with China have fractured over the last few years. Marcel Fratzscher, president of the German Economic Research Institute (ph), says deals like the one with COSCO also pose a risk to the rest of Europe.

MARCEL FRATZSCHER: Our neighbors have accused Germany of assuming a very mercantilist approach with the short-term economic gain being top priority. And I think that is a fair criticism.

NICHOLSON: Federal Foreign Minister Annalena Baerbock agrees.

ANNALENA BAERBOCK: (Through interpreter) It's vital that we never again make ourselves so existentially dependent on a country that doesn't share our values. If China continues to become more authoritarian, then our policy and economic relations must change.

NICHOLSON: But with a recession looming, German industry has no intention of cutting ties with their largest market. Instead, a delegation of industry bosses is accompanying Scholz to Beijing. One of them is from the chemicals giant BASF, which is shifting production to China because of high energy costs in Europe. Noah Barkin says doubling down is unwise.

BARKIN: There is a risk of a conflict in the Taiwan Strait. If that were to happen, German firms with a heavy presence in China would be incredibly vulnerable.

NICHOLSON: Barkin suggests that German companies rebalance their global footprints and over the coming years, start to reduce their industrial economic reliance on China.

For NPR News, I'm Esme Nicholson in Hamburg. Transcript provided by NPR, Copyright NPR.

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