It looked like a turning point.

In August, the German Foreign Office summoned the Chinese ambassador to Germany, accusing Beijing of conducting a cyberattack against the state cartography agency. It was the first time that Germany had summoned China’s ambassador since the Tiananmen Square crackdown in 1989.

Germany has woken up to the China challenge. The current government demonstrates a new understanding and willingness to act against Chinese threats. And yet, many decisions continue to reflect a business as usual – and business first – approach. New elections planned for February are unlikely to lead to a significant course correction, even if Donald Trump will be impatient with Berlin’s meandering.

German intelligence agencies have broken with their insular and reticent tradition and are now confronting China. At a 2022 parliament hearing, German spy chiefs warned that while everyone is paying attention to Russia’s disinformation, hacking and espionage, the much greater long-term challenge comes from China. Russia represented “the storm,” they said. China is “climate change.”

Leaked data from a Chinese cyber-attack contractor confirmed this year for the first time that Chinese government contracts sustain a dangerous hacking-for-hire industry. The Chinese government collects weaknesses in code and funnels them to hackers. Before publishing the data,the domestic Verfassungsschutz intelligence agency shared the story in German media.

Political leaders ignore these intelligence warnings. Consider the debate over the inclusion of Chinese vendor Huawei’s equipment in Germany’s 5G networks. In 2019 and again in 2022, the head of the German foreign intelligence agency BND warned of indiscriminate and naïve use of Chinese technology in 5G networks. Although the Foreign Ministry advocated a ban on Chinese 5G technology, the Interior Ministry presented a compromise that would restrict, while not ruling out, Chinese participation. German telecommunications providers lobbied that they could not afford to rip and replace Chinese equipment. The final decision forbids only a small amount of Chinese telecom equipment, even allowing Huawei to continue supplying crucial radio network access hardware.

Amid this fierce debate, Chancellor Olaf Scholz remains cautious. He reportedly requested that the intelligence agencies slow-roll the arrest of suspected Chinese spies until after his visit this year to Beijing. Scholz also insisted that Germany vote against the EU tariffs on Chinese electric vehicles.

Allies are becoming impatient. After being encouraged by the seeming German U-turn on China, the Biden administration grew frustrated that the strategy was too vague, allowing companies and ministries to justify additional engagement with Beijing.  

The cleavage over China reflects differences within the German government. The Foreign Office and intelligence services want to crack down, citing security risks. The Chancellor and the Digital and Transport ministries want to deepen ties, citing economic opportunities. Going forward, expect continued warnings by intelligence agencies without a fundamental policy shift. When decisions would be costly to German businesses, the government prefers a business first approach.

Although this approach arguably served Germany well over the last two decades, it is unlikely to do so in the future. Germany and China were complementary economic partners, with Germany providing technology, machines, and experience with manufacturing, while China provided cheaper labor, good infrastructure, and favorable conditions on land sales and tax rates, often negotiated with local governments. Volkswagen, for example, in 2018, sold roughly 40% of its global car sales in China.

As China ascends value chains, this complementarity can no longer be taken for granted. Volkswagen is down to 33% of its cars sold in China, with profits falling.

The upcoming German elections are unlikely to lead to a fundamental re-think. While the main opposition Christian Democrat party criticizes current China policy, the party’s chancellor candidate Friedrich Merz opposed the EU’s electric vehicle tariffs. Germany’s China policy will likely continue to meander.

A second Trump term will be less patient than the current Biden administration. While Biden has imposed unilateral measures on occasion, these followed extensive negotiations. The Foreign Direct Product Rule on ASML’s advanced machines, which are needed for chip manufacturing, is a good example. When the US implemented export restrictions in 2022, ASML machines remained unaffected. The US then spent a year negotiating with the Dutch government, and only in October 2023 – when the result of negotiations proved unsatisfactory – did the US implement rules to restrict ASML’s sales to China. While the US pushed Germany on 5G under Biden, it has so far held back from carrying out threats to stop sharing intelligence. A Trump government is less likely to be accommodating.

If Germany continues to pursue a business as usual approach, it risks ending up isolated. The EU will make future decisions about China without Germany. The European Commission already pushed through the electric vehicle tariffs despite intense German lobbying.

Berlin enjoys a privileged position with Beijing thanks to strong economic ties and its influence in Europe. Both advantages are now under attack. China’s car industry threatens the German economic pillar. If Chinese leaders see that Germany cannot sway EU partners, they may court more friendly voices such as Hungary’s Victor Orban – and lose interest in Germany.

Antonia Hmaidi is a Senior Analyst at the Mercator Institute for China Studies. She studies China’s pursuit of tech self-reliance (especially in areas such as semiconductors, operating systems, and internet infrastructure), China’s cybersecurity, and hacking campaigns. She gained experience as a project manager at the Bertelsmann Stiftung, worked at the German Corporation for International Cooperation (GIZ), as a journalist in Asia, and at the German Institute for International and Security Affairs (SWP).

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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