Germany's car industry could face stricter rules on its relations with China
The Ministry of Foreign Affairs of Germany plans to tighten rules for companies, including automotive industry deeply exposed to China, forcing them to disclose more information and possibly conduct stress tests for geopolitical risks, a confidential draft document revealed by Reuters said.
The proposed measures are part of a new business strategy towards China being drawn up by Chancellor Olaf Scholz's government as it seeks to reduce its dependence on Asia's economic superpower.
"The aim is to change the incentive structure for German companies with market economy instruments so that reducing dependency is more attractive," the document said, singling out the chemical and automotive industries.
China is a key market for German car manufacturers, including Volkswagen, BMW and Mercedes-Benz.
A Foreign Ministry spokesman declined to comment.
The draft, prepared by the Foreign Office, led by the Green Party's Annalena Baerbock, still needs to be agreed by other ministries. A final decision on the China strategy is expected early next year.
Deep trade ties bind the major economies of Asia and Europe, with rapid Chinese expansion and demand for Germany's cars and machinery fuelling its own growth over the past two decades. China became Germany's largest trading partner in 2016.
However, the relationship has come under close scrutiny since Russia's invasion of Ukraine in February, which led to the end of a decade-long energy relationship with Moscow and caused many companies to leave their local operations.
"We must not make that mistake again. This is the responsibility of politicians and companies," the document said.
Among the steps outlined in the 65-page document, some of which have already been mentioned, is the tightening of rules for companies operating in China to ensure that geopolitical risks are taken into account.
"We intend to require companies that are particularly exposed to China to identify and summarise relevant developments and data relating to that country, for example in the form of a separate disclosure obligation under existing disclosure requirements," the document said.
"On this basis, we will assess whether affected companies should conduct regular stress tests in order to identify China-related risks at an early stage and take corrective action."
Investment guarantees will face greater scrutiny to take into account environmental impacts, labour and social standards and to avoid forced labour in the supply chain, the document said. To avoid risks, investment guarantees should be limited to 3 billion euros ($3.07 billion) per company per country, it added.
The government also plans to strengthen export credit guarantees to avoid unwanted technology transfer, particularly sensitive dual-use technologies and those that can be used for surveillance and repression, the document said.
The new strategy, pushed hard by the Greens in the coalition, led by the Social Democrat Scholz and the pro-business Free Democrats, marks a departure from Berlin's policies under former conservative Chancellor Angela Merkel.
