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Europe Must Cut Down on Its Dependence With China, Baerbock Says

(Bloomberg) -- German Foreign Minister Annalena Baerbock said that the European Union must reduce its reliance on China and that she supports the EU’s investigation into the subsidies Beijing supplies its electric-vehicle industry.

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“If you are bound too closely it can endanger yourself,” Baerbock said in a Bloomberg Television interview on Sunday. She added that “cutting down on our dependency” was necessary with a country like Russia that invaded Ukraine, “but also now with regard to China.”

The European Commission, the EU’s executive arm, announced the anti-subsidy probe this past week, which could lead not only to tariffs on made-in-China EV imports, but retaliation from Beijing as well. It would be a dangerous escalation for the EU, whose auto sector accounts directly or indirectly for nearly 14 million jobs — or 6.1% of the bloc’s workforce.

Tensions between China and the EU have been simmering for months. The transition to cleaner technologies is a particular point of contention, with the bloc’s industrial core at risk of losing share to faster Chinese companies.

Separately on Monday, Chinese foreign ministry spokeswoman Mao Ning criticized Baerbock over comments she made last week in an interview with Fox News, in which she called Chinese President Xi Jinping a “dictator.”

According to the transcript of the interview, Baerbock reiterated Germany’s pledge to support Ukraine “as long as it takes,” before adding: “Because, if Putin were to win this war, what sign would that be for other dictators in the world, like Xi, like the Chinese president?”

Mao called the remarks “preposterous and extremely irresponsible” and said China had made “solemn representations through diplomatic channels.”

“They run counter to basic facts and constitute a grave breach of diplomatic protocol, a serious affront to Chinese political dignity and a blatant political provocation,” Mao said.

Germany in particular would be exposed if tit-for-tat trade retaliations over EV subsidies turned into a full trade war. German automakers Volkswagen AG, Mercedes-Benz AG and Bayerische Motoren Werke AG have built dozens of factories in China and all three manufacturers now sell more vehicles in China than in any other market.

The EVs probe, which is of strategic importance for Europe, will be discussed with Chinese officials during a high-level visit to China next week, the EU’s trade chief, Valdis Dombrovskis, said on Saturday.

Baerbock said that Europe should seek to de-risk with China, but not decouple, “because you can’t decouple in an interconnected world.”

The EU’s investigation marks the first concrete step to beat back rival state support for green technologies after more than a year of ever-larger subsidies in the US, China, the UK and Europe. Depending on the results, it could move the trading partners toward tit-for-tat protectionist measures.

“Being a partner in climate issues, being a competitor with China when it comes to new technologies, but also seeing that we are systematic rivals and that we have to protect our own vulnerabilities,” she said. ‘But we should be able to defend ourselves and not be naive.”

--With assistance from Colum Murphy and Iain Rogers.

(Updates with Chinese foreign ministry spokeswoman starting in fifth paragraph)

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