Michael Schumann, Chairman of the Federal Association for Economic Development and Foreign Trade (BWA), argues that German companies should not disengage from China’s technological development.

How are discussions developing in companies on the subject of China, which has been the subject of increasingly heated political debate in recent months?

The discussion has evolved in recent months. What we are seeing is an increasing differentiation in the debate. While the political environment and media coverage are often characterized by challenges, our discussions with medium-sized and large German companies show us that for many of them, actual business on the ground continues to run smoothly. Many companies continue to see China as a strategically important market, particularly in view of the country’s growing innovative strength and the size of its middle class. We are also seeing that China is becoming increasingly important not only as a production location and sales market, but also as a place for developing future technologies. This perspective is often lost in the general discussion.

It’s not about ignoring problems, but about solving them through pragmatic and cooperative approaches. Foreign trade is a form of diplomacy

What are your expectations of politics or of the associations whose members are successful in business with China?

Our clear demand of politics is to constructively shape the dialog with China and to separate economic interests from political disputes. It is not about ignoring problems, but about solving them through pragmatic and cooperative approaches. Foreign trade is a form of diplomacy, and in these heated times, entrepreneurs are sometimes the better diplomats. Furthermore, the economy needs stable and predictable framework conditions. Associations should not just tell politicians what they want to hear, but should support their members in recognizing and seizing opportunities in an increasingly complex global environment. At least, that is what we do at BWA. We also believe that cooperation between German and Chinese companies can build a bridge that creates long-term trust – even in these times.

How do you assess the impact of the trade policy discussions about and with China? What are your expectations for the coming years?

Trade policy discussions are a reality that we cannot ignore. However, they must not create the impression that economic cooperation with China has no future. On the contrary, the resurgence of numerous delegation visits from China following the pandemic and the desire of German entrepreneurs to travel to China after visa liberalization at the beginning of last year have shown that both German and Chinese companies continue to have a strong interest in deepening cooperation. For the coming years – especially with a view to 2025 – I expect pragmatic solutions to be found to reduce trade barriers and improve access to markets on both sides. The support announced by China to revive domestic consumption, but also for further steps to open up to foreign companies, are positive signals that we should take seriously and appreciate.

The revival of domestic consumption and the opening up to foreign companies are positive signals from China.

How do you assess the openness to investment in both directions?

China’s openness to investment has indeed improved noticeably in recent years. The reforms and increasing liberalization in many sectors that were traditionally considered sensitive are clear signs, although the issue of “national security” is also the subject of much debate there. In Germany, on the other hand, there is increasing reluctance on the part of politicians to support investments by Chinese companies. This skepticism may be justified in some cases, but often leads to a distorted picture. We should be aware that openness to investment is not a one-way street. A fair, mutual exchange – a true “level playing field” – is also crucial for investments in order to build trust and ensure long-term economic success. We need to strike the right balance between the demands of our security and our commitment to a market economy, which has long been the basis of our success in Germany.

Is it even possible to disentangle the value chains? Does it make sense technologically and economically, especially in view of the climate challenges?

A complete disentanglement of global value chains is neither realistic nor desirable. International cooperation is indispensable, especially in areas such as climate protection and technological innovation. China plays a key role in the production of future technologies such as batteries or solar panels, which are essential for the energy transition. But China is also making impressive progress in the development and application of artificial intelligence. Instead of talking about decoupling, we should think about how we can make our cooperation more sustainable and resilient. The aim is to create common standards and learn from each other in order to effectively address global challenges.

Michael Schumann: Short interview at the Invest in China conference, Stuttgart, April 2024

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The interview was conducted in January 2025. It will be published with more than 30 other interviews in the 2024/2025 annual report of the investment agency CIIPA.