Mercedes-Benz chief says cutting China ties would be ‘unthinkable’

Cutting ties with China would be “unthinkable for almost all of German industry”, the chief executive of automaker Mercedes-Benz has said, as Europe’s largest economy grapples with its deep reliance on Beijing.

Ola Källenius said cutting ties with China was impossible and “not desirable”.

“The major players in the global economy — Europe, the USA and China — are so closely intertwined that disengaging from China makes no sense,” Källenius told the German newspaper Bild am Sonntag. “It’s about win-win on growth and climate protection, not conflict.”

The economic reverberations of Russian president Vladimir Putin’s war in Ukraine have triggered a wave of anxiety in Europe about the continent’s even greater dependency on China.

But there is heated debate in German political and business spheres about the best approach to the country’s deep economic ties to China, which was Germany’s most important trading partner for the seventh consecutive year in 2022.

An agreement by Chancellor Olaf Scholz’s three-way coalition in 2021 struck a critical tone on China. But deep divisions have subsequently emerged between Scholz, who is cautious about calls for drastic changes in Berlin’s relationship with Beijing, and his Green party partners who have long been more hawkish in their approach.

Concerns about the threat posed by China to Germany’s critical infrastructure have prompted recent re-evaluations of the role of Chinese telecoms company Huawei in the country’s communications networks. The government is also being forced to re-examine a contentious decision to sell a stake in a Hamburg port terminal to the Chinese shipping conglomerate Cosco.

Many of Germany’s largest companies, meanwhile, are not wavering in their commitments to the world’s biggest and most important destination for consumer goods.

China was the most important global market for Mercedes cars last year, with a 37 per cent market share — compared with 31 per cent for Germany and other European markets and 15 per cent for the US.

Källenius insisted that his company was “not naive” about the threats posed to business by the mounting tensions between Washington and Beijing — and the risk of an invasion of Taiwan.

“Of course, we see the political differences and tensions,” he said. “The [coronavirus pandemic] showed how fragile supply chains are. We have to become more resilient here and more independent of individual states in the case of lithium batteries, for example.”

He added, however, that “decoupling from China is an illusion, and also not desirable”.