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Baiting the Dragon

German Business Warns of Pushing China too Far

German business leaders are warning that Western criticism of China's policy in Tibet could have nasty repercussions. With over 200,000 jobs in Germany directly dependent on exports to the Asian powerhouse economy, industry leaders argue that calm dialogue is preferrable to calls for boycotts and sanctions.

As calls increase for a boycott of the Beijing Olympic Games ceremonies and sanctions against China, German business leaders are starting to worry about the possible effect on their business dealings in China.

Protests in many European cities against China's crackdown in Tibet a month ago and German Chancellor Angela Merkel's insistence that she would be prepared to meet with the Dalai Lama again have given German industry leaders the jitters; they worry that Beijing may start having second thoughts about doing business with German companies.

On Friday, the head of the Association of German Chambers of Industry and Commerce (DIHK), Martin Wansleben, warned that although no contracts had been cancelled yet, the mood was extremely tense. Any further escalation in the protests from Europe against China's human rights records could have serious consequences, he told the regional newspaper Neue Osnabrücker Zeitung.

Wansleben said that "the discussions in Europe about anti-Chinese boycotts is just feeding" calls in China for boycotts of Western goods. He called for a calm discussion with China, particularly as German industry is interested in a stable and long-term relationship with its most important trading partner in Asia.

The stakes are indeed high. Over 200,000 jobs in Germany are directly dependent on exports to China. In 2007, German products worth €55 billion were exported to China, accounting for 7 percent of German exports. There are more than 3,000 Germany companies investing in China, to the tune of €1.5 billion.

The fact that Chancellor Merkel has been vocal in highlighting China's human rights record and that she decided to meet with the exiled Tibetan spiritual leader the Dalai Lama last September, has served to cool political relations between Berlin and Beijing recently. Her stance has met with some criticism from within her own coalition government, particularly from her foreign minister, Frank-Walter Steinmeier, with critics saying she is risking damaging German interests. Nevertheless, Merkel said last weekend that she would be prepared to meet the Dalai Lama again.

German industry is now clearly fearful of how China will react to the increased volume of criticism from the West. Already on Monday, Jürgen Hambrecht, CEO of the chemical giant BASF, warned that calls for boycotting the Olympic Games and sanctions may hurt the German economy. Speaking as chairman of the APA group of German companies with ties to the Asia-Pacific region, Hambrecht told the Handelsblatt newspaper that restricting business ties with China "would be a painful blow to the German economy -- and therefore to all of us -- in an important growth market."

Speaking after the APA held an extraordinary meeting to discuss the issue, he said there was a risk that China might start to give contracts for big projects to firms from less critical countries. And there was also concern that the image of German products, which have been extremely popular with Chinese consumers, could be tarnished.

His fears may turn out to be well-founded. The Olympic torch protests in Paris and other Western cities infuriated many Chinese people. Now Internet users in the country have started calling for a boycott against the French supermarket chain Carrefour and products from France such as Peugeot cars and L'Oreal cosmetics.

smd/ddp/afp