Scholz plays down need for policy to spur ‘de-risking’ from China

German Chancellor Olaf Scholz on Friday played down the need for government policy to encourage companies to de-risk from China, saying many firm were already diversifying their supply chains, investments and exports.

Germany on Thursday published its first China strategy which urged companies to reduce their reliance on Asia’s rising superpower and said the government was examining if its current toolbox was sufficient to encourage this.

Scholz, a Social Democrat, has said in the past de-risking is largely a matter for companies rather than the state, putting him at odds with his more junior coalition partner the Greens as well as other policymakers around Europe.

Asked by a Reuters reporter what new measures companies could expect, Scholz said the strategy was comprehensive and many companies had already adjusted to this new world view.

“Many companies will continue to invest heavily in China and export to China … but they will also use the opportunities they have to invest, build up supply chains and export elsewhere,” he told a broad-ranging 90-minute summer news conference.

“So I see great concordance between the changed investment strategies of the companies and what this government wrote up.”

The China strategy was long-delayed due to wrangling between the SPD and the Greens over how far to toughen the stance on China. Drafts from the Greens-run foreign and economy ministries leaked last year had included stricter proposals for firms such as regular stress tests.

Separately, asked if Scholz had a game plan for funding Germany’s shift towards a more assertive foreign policy with a stronger military in the long run, he simply pointed to what the government had done this year.

Germany has come under criticism for announcing ambitious plans to upgrade the military and shift towards a carbon neutral economy without showing how it will finance this beyond short-term funds created to that end.

The finance ministry, run by the fiscally hawkish junior coalition partner the Free Democrats, has insisted on the return to a more balanced budget, a stance Scholz has backed.