(Bloomberg) – Chinese leader Xi Jinping told his German counterpart that a surge in Chinese clean technology exports has helped the world tackle inflation, as he pushed back against European and American pressure to rein in the country’s major industries.
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Xi’s comments to Chancellor Olaf Scholz during talks in Beijing suggest that China may not be swayed in any meaningful way by the German leader’s push for a reduction in what Western officials see as excess production capacity in the Asian country.
Tensions are rising between China, the European Union and the US over trade, leading to the threat of new trade barriers. The EU has launched an investigation into Chinese subsidies for electric vehicles and support for wind farms, and is about to launch an investigation into the purchase of medical equipment.
Read more: EU continues trade offensive on China after being ‘played’
“China’s exports of electric vehicles, lithium batteries and solar products have enriched supplies to the global market and alleviated inflationary pressures, and also made great contributions to global efforts to tackle climate change and green transition,” Xi told Scholz , according to Chinese state television.
He said China and Germany should look at the issue “objectively” and approach it from a market perspective. He also warned against protectionism.
Scholz is on the final leg of his four-day trip to his country’s most important trading partner, his second visit to China as chancellor. He previously warned Chinese officials to tackle overcapacity and treat foreign companies better. He will hold talks with Chinese Premier Li Qiang later on Tuesday.
“Both China and Germany are trading nations that benefit enormously” from World Trade Organization membership, Scholz told reporters during joint statements with Xi ahead of their talks.
“We are committed to strengthening global trade rules and developing them together with other WTO members,” he added.
US Treasury Secretary Janet Yellen said during a visit to China this month that the massive output of Chinese factories has become a global problem. The US will “take nothing off the table,” including the possibility of additional tariffs, to stem the flood of Chinese goods, she told CNN this weekend.
Beijing has dismissed as “baseless” accusations that the rapid growth of its EV industry was due to government subsidies, instead pointing to its innovative strength.
Read more: EU to launch China investigation into medical device procurement
While Scholz has ensured he was on good terms with his hosts, he has been more assertive about his country’s concerns than his predecessor, Angela Merkel, who prioritized business interests.
Scholz told an audience of university students in Shanghai on Monday that “competition must be fair.” He added that he would like to see “no dumping” and “no overproduction,” and that copyrights should be respected.
The criticism of China comes as Xi is leaning on his country’s vast manufacturing industry to revive economic growth, which has faced headwinds from a developing real estate crisis, deflationary pressures and subdued consumer demand.
China reported data on Tuesday showing first-quarter economic growth exceeded expectations as the industrial sector continued to develop, although a slowdown in activity in March indicated more support may be needed to maintain that momentum.
Scholz also said he would talk to Xi about “how we can contribute more to a just peace in Ukraine.” He added that Germany and China must work together to find solutions to halt climate change and master the transition to green energy in a socially just way.
Xi praised the importance of ties between China and Germany as the world faces “increasing challenges and risks.” He said the two nations should “join hands to inject more assurances internationally.”
Scholz’s trip also coincides with fears of a broader war in the Middle East, as top Israeli officials have reaffirmed that their country has no choice but to respond to this weekend’s Iranian drone and missile attack.
Europe has been dissatisfied with China since the fighting in Ukraine began in early 2022. Beijing has provided Moscow with diplomatic and political support, and trade between the countries reached a record $240 billion last year, cushioning the blow from Western economic sanctions.
On Monday, Scholz told reporters in Shanghai that he would urge China to stop supplying Russia with so-called “dual use” products that can be used for military and civilian purposes.
He called on all countries “not to circumvent the sanctions imposed by the international community” and to refrain from providing weapons to the Kremlin, including dual-use items. China has said it will not and will not try to profit from the war.
–With help from Ben Holland.
(Updates with additional Scholz quotes from seventh paragraph)
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