These developments have sparked a change of attitude. “German business used to want the government to get out of the way,” says Alexander Graf Lambsdorff, an MP from the liberal Free Democrats. “Now they find that reciting Hayek is no longer good enough.” Meanwhile Xi Jinping’s tightening grip on the Communist Party, and the party’s hold on industry, has squashed any lingering hopes that China might be brought into the Western fold.
In January these concerns found dramatic expression in a paper from the Federation of German Industries (BDI), Germany’s biggest business group. Where its members once saw a lucrative new market, they now see a “systemic competitor”. The paper contains dozens of recommendations for European leaders, from tax breaks for research to investment in digital infrastructure. Its overriding message is that Germany and Europe must give up hoping that China will change, and instead produce policies to respond to its rise.
And so they have. This week Peter Altmaier, Germany’s economy minister, and Bruno Le Maire, his French counterpart, unveiled a joint five-page industrial-policy manifesto “fit for the 21st century”. It made no mention of China, but the subtext was clear. The pair propose joint action to boost Europe’s capabilities in artificial intelligence, which Mr Altmaier’s department has called the most important innovation since the steam engine. They have pledged €1.75bn ($2bn) to fund next-generation battery-cell production. Most strikingly, France and Germany want to grant the EU’s governments power to overturn competition decisions made by the European Commission. The current rules, they believe, make it too hard for European firms to compete with Chinese state-backed giants.
Such proposals are nothing new in France, which once declared yogurt-making a “strategic” industry. But in Germany they are revolutionary. Its “ordoliberal” philosophy—that it is the job of the state to establish a framework for the private sector, including tight antitrust laws, and then let the market do its work—inspired the EU rules the government now seeks to rewrite. Little wonder Mr Altmaier’s proposals have caused a fierce backlash at home. Lars Feld, an economics professor at the University of Freiburg, speaks for many when he declares himself “strongly opposed to this kind of mercantilist thinking”.
