Angela Merkel, the German chancellor who has been one of the staunchest supporters of engaging China through a so-called “change through trade” (“Wandel durch Handel”) policy, has stepped down. Under the new chancellor Olaf Scholz, whose Social Democratic Party (SPD) defeated Merkel’s Christian Democratic Union (CDU) in the September election, there are both internal and external drivers that could lead to a potential shift in Germany’s China policy. This could then create new opportunities for Taiwan, especially considering that both of the SPD’s coalition partners—the center-left Greens and the center-right Free Democratic Party (FDP)—expressed support for Taiwan in their election manifestos. Regardless of whether the policy shift is substantive or rhetorical, the new governing coalition is unlikely to follow Merkel’s business-oriented approach—at least not in its previous form.
Germany’s Evolving China Policy: Continuity or Change?
Germany’s relations with Taiwan are conditioned by the “One-China Policy” as defined by the PRC.  However, in an era of China’s increasing assertiveness in both domestic and foreign affairs, Merkel’s China policy—which was based on the well-established practice of compartmentalization, or separating economic ties from security and human rights concerns—started drawing criticism from both outside and inside her own party.
The China policy divisions within the Christian Democratic Union were best captured by the debate over whether Huawei (華為) should be allowed to participate in building Germany’s 5G infrastructure. Whereas the former Minister for Economic Affairs and Energy Peter Altmaier defended inclusion of Huawei on economic grounds, Norbert Röttgen, who chairs the outgoing German federal parliament’s (Bundestag) Committee on Foreign Affairs, opposed it due to security concerns. Others within the previous coalition government of center-right Christian Democrats and center-left Social Democrats took a more critical stance on China—at least on certain occasions. Among these was the former Minister of Defense Annegret Kramp-Karrenbauer, who was a driving force behind the proposal to deploy a German frigate to the South China Sea in August 2021, which was seen as a step by Germany to take a tougher stance against China. However, Merkel’s office agreed to the freedom of navigation exercise only on the condition that the frigate would not sail through the Taiwan Strait. The plan was additionally modified to include a stopover in Shanghai, which prompted critics to argue that the deployment may strengthen, rather than challenge, China’s territorial claims, although the stopover was later denied by Beijing.
Merkel’s emphasis on cooperation over rivalry with China was rooted in the CDU’s pro-business orientation. Big corporations, especially in the automotive industry, have long been criticized for their overreliance on the Chinese market, with Volkswagen and BMW generating one-third or more of their profits in China. At the same time however, the voices opposing Merkel’s approach gained prominence in 2016, when the Chinese Midea Group (美的集團) acquired German robotics manufacturer Kuka. This triggered a significant pushback against China at both a national and EU level, with the federal government tightening its own investment rules while simultaneously pushing for an EU-wide investment screening mechanism. Another wake-up call came in 2019, when the Federation of German Industries (BDI) published a report describing China as a “systemic competitor.” The report was pushed through by German small-and-medium-sized enterprises (SMEs), overriding the concerns of big corporations, and followed by the European Commission’s three-layered description of China as a “negotiating partner,” “economic competitor,” and a “systemic rival.” The BDI’s 2021 report further reiterated the federation’s China-critical stance, calling the Belt and Road Initiative (BRI, formerly known as “One Belt, One Road,” 一帶一路) a “hegemonic policy” and proposing a way of connecting business with values-based politics.
Merkel’s successor will therefore face a variety of internal and external pressures, including increasingly China-critical positions across party lines, business sectors, and among the German public, as well as among leading political figures in the United States and other like-minded countries. These pressures will curtail—at least to some extent—attempts to continue Merkel’s engagement-first approach in Germany’s relations with China. After all, German-China relations in 2021 are in a profoundly different state compared to when Merkel took office in 2005.
The Traffic Light Coalition and Prospects for an Independent German Policy on Taiwan
Following the CDU’s defeat, a “traffic light” coalition (so called due to the colors of the three parties) was established between the Social Democrats, Greens, and Free Democrats. Nevertheless, it was not until about a month prior to the election that the SPD’s Olaf Scholz overtook the CDU’s Armin Laschet as the main contender for the post of chancellor. Laschet, a former Minister-President of North Rhine-Westphalia—where the city of Duisburg serves as a European end point to China’s BRI—was believed to strongly subscribe to a Merkelian China policy. Scholz—the former Mayor of Hamburg—may find himself in a similar predicament, as Hamburg is another example of structural constraints the new government will face when trying to diversify Germany’s supply chains away from China. Indeed, Scholz cautioned against economic decoupling throughout his election campaign. Although the SPD’s manifesto condemned China’s human rights violations in Xinjiang and Hong Kong, it did not voice support for Taiwan—mentioning only the party’s concern about China’s increasing military pressure. While Nils Schmid, the SPD’s Bundestag spokesperson on foreign affairs, repeatedly criticized Merkel’s “change through trade” approach, a recent analysis by MERICS shows that the Bundestag members, irrespective of their party affiliations, have always been more critical of China than cabinet ministers. Indeed, the Bundestag’s criticism of China’s human rights record had limited influence on the previous government’s day-to-day dealings with China, and it is unclear to what extent this will differ under the new coalition.
Advocating for the centrality of human rights, the Greens have long been the fiercest critics of Merkel’s approach. Indeed, it was the possibility of a Greens-led coalition that has been most frequently associated with prospects for a substantive shift in Germany’s China policy. As the peaceful resolution of cross-Strait relations and support for Taiwan’s participation in international organizations are supported—at least implicitly—across party lines, it was the inclusion of Taiwan among Germany’s Indo-Pacific partners and the call for deeper political ties that made the Greens’ manifesto stand apart. The European Parliament has provided an additional platform for the Greens to push for stronger ties between Taiwan and Europe. Reinhard Bütikofer, who chairs the Delegation for Relations with the PRC, co-authored an op-ed in September 2020 calling for a re-evaluation of the EU’s “One-China Policy.” Citing China’s disruption of the status quo, the op-ed calls for greater EU support for Taiwan, ranging from upgrading economic relations to opening dialogue with Taiwan’s political figures. As a rapporteur, Bütikofer advocated for the inclusion of Taiwan in the EU-Asia Connectivity Strategy—especially when it comes to digital and health infrastructures—and the start of negotiations for an EU-Taiwan Bilateral Investment Agreement (BIA). The parliament’s recent resolutions on a new EU-China strategy and EU-Taiwan political relations and cooperation provide further support for the BIA, the latter being the parliament’s first ever standalone report on Taiwan, which was followed by an unprecedented visit to Taiwan by delegates from the Special Committee on Foreign Interference and Disinformation.
Similar to the Greens, the Free Democrats (FDP) took a more assertive stance on China within their manifesto—in fact, a tougher line in Germany’s China policy is one of the few things the two parties agree on. The FDP juxtaposed Taiwan’s democratic system of governance with China’s authoritarian system, while supporting the development of a joint strategy between Germany and its allies to prevent China from invading Taiwan. The party even went a step further by removing the “One-China Policy” clause from its election program. However, what is particularly noteworthy about the FDP is the fact that despite being a pro-business party like the CDU, its manifesto was arguably the most critical of China and supportive of Taiwan. Indeed, when asked about this discrepancy, the FDP’s Gyde Jensen, who chairs the outgoing Bundestag’s Committee on Human Rights and Humanitarian Aid, emphasized the fact that industry itself is becoming more critical of China, as seen in the case of the BDI’s reports.
According to MERICS Senior Analyst Roderick Kefferpütz, the main question going forward is whether Germany’s China policy remains the chancellor’s policy. The chancellery has, under Merkel, seized control of all important aspects of Germany’s foreign policy, including the country’s relations with China. If this trend persists under chancellor Scholz, the fact that the Greens are now in charge of the Foreign Office will not matter, as the new course in the country’s China policy will be decided by the chancellor—who preached continuity in foreign policy throughout his election campaign. In this case, a shift in Germany’s China policy could still occur, but it would be predominantly rhetorical in nature. On the other hand, returning some of the decision-making powers—if not all of them—to the Foreign Office could help develop a less reactive, more strategic thinking in Germany’s foreign policy, which could enhance the country’s role in international affairs. As Scholz will most likely be a less powerful chancellor than Merkel, and with the Greens’ Annalena Baerbock becoming the new foreign minister, a more substantive shift in Germany’s China policy may indeed occur. However, the structural constraint of German dependence on the Chinese market will limit its extent.
What Comes Next?
Whether the inclusion of the Greens and the FDP in the new government amounts to a substantive shift towards a values-based China policy or becomes limited to cosmetic adjustments will depend on which office decides the country’s foreign policy. A foreign ministry held by the Greens is likely to produce a genuine shift in Germany’s China policy. On the other hand, if the decision-making powers remain within the chancellery, changes to the country’s China policy will be more subtle, as Scholz may be more inclined to insist on business as usual. Nevertheless, the shift will still occur—albeit to a smaller extent—as Scholz is unlikely to withstand the multitude of internal and external pressures Germany faces. The increasing criticism of China and support for Taiwan by both political elites and the German public is one such pressure. What is more, the SPD’s powers will be limited by its junior partners, neither of whom is keen to continue a Merkelian China policy. The administration of President Tsai Ing-wen (蔡英文) should therefore seize this window of opportunity to promote German-Taiwanese cooperation, especially in areas that are of relevance to both countries, such as semiconductors, renewable energy, and SMEs.
The main point: Germany’s new coalition is set to rethink the country’s China policy, although we have yet to see whether this will take the form of a more substantive or rhetorical change. Even if the decision-making powers about the country’s foreign policy remain within the chancellery, Scholz will be unable to continue Merkel’s China policy in its previous form due to both internal and external pressures.
 Gunter Schubert, “The European Dimension of German-Taiwanese Relations – A Critical Assessment,” Conference paper presented at Hong Kong Baptist University, June 22-23, 2001, p. 1-23.