A few months ago, German companies felt how far the long arm of the major trading partner in the Far East reaches.

Little Lithuania, a country with a population of less than three million, had established diplomatic relations with Taiwan, a republic with just over 25 million citizens.

Not a big deal, one would think.

In any case, nothing that could cause large and globally active German corporations to falter.

Ralph Bollman

Correspondent for economic policy and deputy head of business and “Money & More” for the Frankfurter Allgemeine Sunday newspaper in Berlin.

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Marcus Theurer

Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.

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It wasn't like that.

Because the People's Republic of China, with its 1.4 billion people on the way to becoming the world's largest economy, claims Taiwan, the island off its coast, for itself - and punishes anyone who dares to formally disregard this claim.

As a result, German automotive suppliers like Continental were no longer allowed to deliver their products from Lithuanian plants to the People's Republic after diplomatic relations were established between Vilnius and Taipei - with the result that the plants of German car manufacturers in China were threatened with a brief production stop.

In this case, the shock only lasted for a short time, and the problem has already calmed down a bit.

But the incident showed how sensitive the economic model is, which has brought the Federal Republic of Germany reliable increases in prosperity in the recent past - and which was not least based on cooperation with two authoritarian regimes, namely on cheap energy imports from Russia and profitable exports to China, above all in automotive and mechanical engineering.

The third element, as US politicians and pundits in particular were fond of ridiculing, was extreme austerity in defense spending.

In the meantime, the federal government has announced that it will increase arms spending by a whopping 100 billion euros over the next few years.

And saying goodbye to Russian gas is basically a done deal, even if the timetable is still being debated.

Now politicians and experts are anxiously looking at the third pillar of the German prosperity model, which may also be crumbling: exports to China.

Crises have revealed weaknesses

If the leadership in Beijing supports Putin's war in Ukraine more openly than before, this could soon come to an end.

But even without such an escalation, business in the capitalist one-party state is becoming increasingly difficult - because of the growing tensions between China and the United States, because of the increasing striving for self-sufficiency on the part of the Beijing leadership, because of Germany's one-sided dependence.

There may soon be a similar rude awakening as in the case of Russia, where many German managers also denied any risk until the start of the war on February 24th.

In the meantime, they are even threatened with expropriation of their closed plants in Putin's empire.

How serious the problem is can be seen in the business expectations of the companies.

The corresponding index of the Munich Ifo Institute fell by 13.3 points in March, more than even in the first corona lockdown.

This primarily reflects the fear of energy shortages, but also the increasing geopolitical uncertainty beyond Russia.

And because of the growing tensions with the Far East, an EU-China summit has been scheduled for this Friday.

There is also alarm in Robert Habeck's Ministry of Economic Affairs.

"We are confronted with the question of whether Germany's economic system is sustainable enough in a geopolitically more difficult world," warns Franziska Brantner, Habeck's Green Party friend and Parliamentary State Secretary.

“Corona and the war in Ukraine have revealed weaknesses.

The next test case could be the heavy reliance on China, both in terms of exports and imports along the supply chain.”

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