Europe's geopolitical balancing act is a masterclass in complexity. While the US pursues "decoupling" from China, European leaders prefer the term "de-risking." This linguistic difference reveals a deeper struggle: how to balance economic efficiency with strategic autonomy. The German experience shows just how hard that is.
In November 2022, as the US was imposing strict export controls on semiconductors, German Chancellor Olaf Scholz visited Beijing with a delegation of major business leaders. The message was clear: Germany and China are deeply intertwined.
+ Economic dependence: German industrial giants like Volkswagen, BMW, and BASF are heavily invested in the Chinese market. For example, VW sells over 3 million cars in China annually and operates 33 plants there.
+ Personal insight: As part of my EMBA program, I saw this firsthand during a visit to a SAIC Volkswagen plant in Shanghai. The scale of their operations shows just how established and integral they are to China's auto industry.
+ Political concessions: To ensure a smooth visit, Scholz overrode concerns at home and approved a deal allowing Chinese state-owned enterprise Cosco to invest in a container terminal at the Port of Hamburg. It was an undisputed globalization win for Beijing.
This push-and-pull is no accident. China has long played a "divide-and-defuse" strategy, using economic concessions to prevent a united front against it.
As German economic thinkers are now recognizing, this is a dangerous game. "The German economy is much more dependent on China than the other way round," says Juergen Matthes of the German Economic Institute. Like its former reliance on Russian energy, Germany's trade ties with China have become a strategic vulnerability.
The reality for Europe's economies is what economists call the "impossible trinity": They cannot simultaneously maintain close economic ties with China, security dependence on the United States, and strategic autonomy from both.
Can Europe truly "de-risk" without "decoupling?" Or is it just a more polite way of describing a precarious and increasingly risky balancing act?
-Marc
