From CAI to Koalitionsvertrag

Watching China in Europe - December 2021

December 01, 2021

Welcome to Watching China in Europe, a monthly update from GMF’s Asia Program. Now more than ever, the transatlantic partners need clarity and cohesion when it comes to China policy. In this monthly newsletter, Noah Barkin—a senior visiting fellow at GMF and managing editor at Rhodium Group—will provide his personal observations and analysis on the most pressing China-related developments and activities throughout Europe. We hope you find it useful, but if you would like to opt out at any time please do so via the unsubscribe button below.

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One year ago, Chancellor Angela Merkel was pushing behind the scenes to get the EU-China Comprehensive Agreement on Investment (CAI) over the finish line and send a message about Europe’s commitment to dialogue and economic engagement with Beijing. As 2021 draws to a close, it is another lengthy document—the 177-page coalition deal between Germany’s Social Democrats, Greens and Free Democrats—that has the China crowd in Europe (and beyond) buzzing. That is because the new Koalitionsvertrag (coalition agreement) in Berlin has sent a very different message about where the relationship between Europe and China is heading.

It includes clear language on the reddest of Beijing’s red lines, touching on Taiwan, Xinjiang, Hong Kong, and the South China Sea. It signals a readiness to break down Berlin’s silos and develop a comprehensive approach to China that is embedded in a new national security strategy. It promises a push for a more unified European stance toward China and closer coordination with the United States and partners like Japan, India, and Australia. And it makes clear that the CAI, which Merkel and some EU officials have continued to champion despite China’s sanctioning of European lawmakers, is unlikely to be revived anytime soon.

The Cabinet

The government implementing this policy blueprint will include two leaders of the Greens, Annalena Baerbock and Robert Habeck, who have called openly for a break from Merkel’s dialogue-first approach to China. Habeck will share the title of vice chancellor with FDP leader Christian Lindner, who has turned into something of a China hawk himself in recent years. Sitting atop this government, however, will be a man who has shown little interest in moving on from Merkel’s approach.

Olaf Scholz, according to the people who know him well, is not convinced that criticizing China in public serves any purpose. He is a soft-spoken pragmatist whose international experience was shaped by his seven years as mayor of Hamburg, the German port city that lives from trade with China. Scholz won the German election in September by shrouding himself in a cloak of Merkelian caution. His rise in the SPD took place against the backdrop of an internal party reckoning with former Chancellor Gerhard Schröder’s Agenda 2010 economic reforms – policies that helped turn Germany from the sick man of Europe into an engine of growth but left the party deeply divided and ended Schröder’s political career. The lesson that Scholz could draw from the experiences of his two predecessors as chancellor is that boldness does not pay.

What to make of the confusing signals that this new coalition sends? And, more specifically, what can we expect from the next German government on China? No one knows for sure. But below is some food for thought, based on my conversations with politicians in the new coalition parties and diplomats in Berlin and other European capitals.

Scholz versus Baerbock

Under Merkel, foreign policy was made in the Chancellery. And there is no reason to believe that Scholz will eagerly relinquish the reins on China and Germany’s other important bilateral relationships to Baerbock, who during the election campaign described her approach to Beijing as “dialogue with toughness.” But if Baerbock plays her cards right, and works with other like-minded ministers, some believe her influence over the tone and substance of China policy could be substantial. “Baerbock is going to be a rock star,” one G20 ambassador in Berlin told me. “What Germany needs is someone who is unafraid to break a bit of crockery with China. If she does this, it will be difficult for Scholz not to back her.” A German diplomat said he expected a “perfect division of labor” on China in which Baerbock speaks loudly and clearly, and Scholz sends more moderate signals.

SPD officials familiar with Scholz’s thinking said they expect him to give his ministries a longer leash than Merkel did. On China, one told me, the goal was to create a whole-of-government approach in which Scholz meets with relevant ministers on a regular basis. Under Merkel, such meetings happened at the lower state secretary level and, by all accounts, had a limited impact on policy. “It will take political will to bring the ministries together and hammer out common positions,” one SPD official who was involved in the coalition negotiations told me. “But if that will is there, then it can work.” In other words, Scholz will need to own the vision that is set out in the coalition agreement.

The Advisers

Much will depend on the people he surrounds himself with. His chief of staff, trusted ally Wolfgang Schmidt, is already set. Beyond that, Jens Plötner, political director in the foreign ministry and a former chief of staff to Frank-Walter Steinmeier when he was foreign minister, is seen by diplomats in Berlin as a favorite to become national security adviser. A former ambassador to Greece, Tunisia, and Sri Lanka, Plötner is an experienced operator who has voiced support for closer cooperation with the United States on China but pushed back against the idea of economic decoupling and cautioned that, when focusing on China, the transatlantic partners should not lose sight of the risks emanating from Russia.

Other names that are circulating include Michael Clauss, Germany’s ambassador to the EU, who ruffled Chinese feathers with his frank talk during a previous posting in Beijing, and Helga Schmid, head of the OSCE, who helped write the EU’s March 2019 Strategic Outlook on China in her previous position as Secretary General of the European External Action Service (EEAS). Markus Ederer, EU ambassador to Russia and a former envoy to China, is another veteran German diplomat who could be lured back to Berlin.

European Unity Push

Regardless of the personnel, what does seem clear is that the new government will be pushing for a more unified European approach to China—a goal that Merkel paid lip service to but never pursued in earnest. This could involve bringing EU commissioners and ministers from other EU countries into its annual consultations with China and pushing for a more structured dialogue on China at the foreign minister level, I was told. “We are signaling to China that this is not going to be a purely bilateral discussion going forward,” the SPD official said.

What is less clear is whether a Scholz government—recent comments by the chief of the German Navy and Air Force notwithstanding­—will embrace the idea of German military deployments in the Indo-Pacific, a policy championed by outgoing Defense Minister Annegret Kramp-Karrenbauer with the sending of a German frigate this year. The SPD official expressed doubts about whether that move, which was applauded by Germany’s Indo-Pacific partners, had achieved much. “Scholz’s focus will be on the economic, trade, and technology links to the region, not the military side,” the official said.

This approach is also likely to apply to Taiwan. The foreign ministry has been preparing recommendations for the new government that envision a gradual ramping up of ties after decades in which the relationship was downgraded in deference to Beijing. The issue has risen to the top of the transatlantic agenda in recent months and is expected to be a main focus of China discussions this week in Washington between Deputy Secretary of State Wendy Sherman and EEAS Secretary-General Stefano Sannino. Taiwan is an issue where Baerbock could show early leadership, members of the Greens told me.


The political changes in Berlin are being watched closely in Brussels, where officials are poised to re-engage with Beijing. A virtual EU-China summit, which had been expected by the end of 2021, is now likely to take place in mid-January. Although no joint statement is expected, I was told the meeting would have a few deliverables in specialized sectors that one official described as “economically useful”.

China has been sending conciliatory signals of late in what some European diplomats see as an attempt to move beyond the exchange of sanctions last March that put ratification of the CAI on hold. A veteran Chinese diplomat, for example, recently reached out to MERICS, the Berlin think tank that was sanctioned by Beijing earlier this year. But if unfreezing the CAI is the goal, then the prospects are dim. The new coalition agreement makes clear that the sanctions are only part of the problem. “The sentence on the CAI gives us a lot of space to block this, even if the sanctions were removed,” one member of the Greens told me.

A series of new regulatory measures being prepared by the European Commission could also complicate discussions with Beijing. China’s normally mild-mannered ambassador to the EU warned the bloc last month against taking what he called “discriminatory” trade steps. After repeated delays, the EU is set to unveil a new proposal that would force companies operating in the EU to vet their supply chains for human rights violations. A separate proposal for an anti-coercion instrument is due next week. Both are primarily (if not explicitly) aimed at China.

Global Gateway

The EU’s new plan to respond to China’s Belt and Road Initiative (BRI) by super-charging its infrastructure investments in third countries will be unveiled later today after months of institutional wrangling. It carries an eye-popping headline funding number of 300 billion euros and acknowledges that future projects will be decided based on the EU’s “strategic interests”, not simply old-school development aid criteria. It warns against “unwanted dependencies” and “economic coercion for geopolitical aims”—indirect references to China. And it includes clear mechanisms to monitor implementation, with a first stock-taking meeting planned for June 2022. After many months of behind-the-scenes cajoling from a handful of European officials – including German Ambassador Michael Clauss and MEP Reinhard Bütikofer – this is a promising result.

But there are also reasons for caution. The communication published on Wednesday was the product of a mad last-minute scramble by Commission President Ursula Von der Leyen’s cabinet to cobble together something convincing and presentable. Just two weeks ago, the Global Gateway strategy, outsourced to the EU’s development arm INTPA, was in such poor shape that its release had to be pushed back for a second time. That version carried an underwhelming headline figure of 40 billion euros. One senior EU diplomat described the months-long process to put the joint communication together as a “complete catastrophe.” The EU still has much work to do to identify strategically relevant infrastructure projects. And there are big questions about who will own this strategy and drive it forward in the months ahead. All’s well that ends well. But we are not there quite yet.