During his visit to South Korea on Thursday, German Economy Minister Robert Habeck expressed that the common goal of both South Korea and Germany is to break away from China, expand the supply chain of raw materials, and reduce dependence on China in key products.
Habeck stated during his visit to Seoul that “South Korea’s economic policy is similar to Germany’s, focusing on trade, relying on market openness, and trying to suppress protectionist tendencies as much as possible.”
The desire of Germany to reduce economic dependency on China has been longstanding. Chancellor Schultz pledged upon taking office in 2021 to change Germany’s relationship with China, aiming to break free from economic reliance on China. However, three years later, little progress has been made. Many German companies have been urging for equal access to the Chinese market. These companies have substantial business operations in China and not only wish to maintain their business but also seek opportunities to expand in many cases.
According to a report by The New York Times on April 17th, German companies invested 10.4 billion euros (approximately 80 billion yuan) in China last year. Unlike Japanese and American companies, German companies showed little sign of weakening their investments in China.
Furthermore, as reported by Voice of America on February 24th, the European Union also introduced a de-risking strategy last year to reduce economic reliance on China. However, the latest data indicates that Germany’s direct investment in China in 2023 reached a new high, contradicting the EU’s de-risking strategy.
In general, foreign investment is a complex and multi-dimensional economic phenomenon involving various economic factors and dynamics such as technology transfer, brand building, and managerial improvement, which cannot simply be categorized as import or export. However, the continuous increase in German investments in China objectively deepens Germany’s reliance on the Chinese market.
Despite China being South Korea’s largest trading partner, Seoul’s relationships with the United States and other wealthy democratic countries are becoming increasingly close, showing great interest in countering Beijing’s economic threats.
Last year, South Korea was invited by Japan to participate as a non-member in the Group of Seven summit composed of the United States, United Kingdom, Canada, France, Germany, Italy, and Japan from May 19th to 21st. In a joint statement, the summit declared its aim to “enhance economic resilience” and combat Beijing’s “economic threats” and “malicious practices” by “reducing risks and diversifying.” Another statement issued by the summit aimed to make countries attempting to weaponize economic dependence face consequences, without naming any specific country.
For Habeck, South Korea is the first stop on his Asian tour, and he is expected to visit Beijing next to discuss issues related to China and Russia and help address the implications of the escalation of the EU-China electric vehicle tariff dispute.
Habeck urged South Korea to stop the construction of liquefied natural gas ships for Russia based on a contract reached between the two countries before Russia’s full-scale invasion of Ukraine in 2022.
“These ships are unlikely to be delivered because it would serve the interests of all countries imposing sanctions on Russia,” said Habeck.
Habeck’s visit coincides with Russian President Vladimir Putin’s visit to North Korea, and the milestone military aid agreement reached between Russia and North Korea, as well as the deepening defense cooperation between the two countries, have raised concerns in Washington and Seoul.
Habeck expressed his concerns stating, “The militarization of North Korea and the cooperation with Russia to circumvent sanctions are worrying, not only to me but to the entire world.”
Leading a delegation composed of small and medium-sized enterprises from various industries in Germany, Habeck initially held a German-Korean entrepreneurs’ roundtable meeting.
“Half of the companies have already established branches in South Korea, while the other half are eager to explore the Korean market, understand how the Korean system operates, and identify market opportunities,” Habeck mentioned.