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Germany sees a new tougher line on China and Russia as Merkel leaves the political stage

Putting trade and business interests first has always been the German government’s mantra when it comes to the country’s relationship with China and Russia. With “Wandel durch handel,” which translates as “change through trade” in the case of China, German officials have effectively been trying to use its economic ties to push Beijing into making progressive reforms. With Russia there has been the “Modernisierungspartnerschaft,” which means “partnership for modernization.” But both have more or less failed.

Relations with Russia, which Germany relies on heavily for energy, have recently touched another low after the poisoning of opposition leader Alexei Navalny, who flew to Berlin for treatment against the will of the Kremlin.

“It is impossible given these developments to go back to the old policy approach which basically entailed a lot of understanding for Russia,” Daniela Schwarzer, director of the German Council on Foreign Relations, told CNBC in a phone interview.

With China, it’s becoming increasingly clear that there will be no “political change” through trade. But many say it’s high time for Germany to be stricter with Beijing, be it on acquisitions, technology or human rights issues.

“There is a great deal of pressure to be stricter with China,” Noah Barkin, a managing editor with the research firm the Rhodium Group, told CNBC in a phone interview. “Under Merkel, Germany did not really have red lines. That needs to change. Europe needs to develop stricter boundaries with China.”

China is both a rival and a partner for Germany in many respects. Companies in the European powerhouse rely on its huge consumer market to sell their products. The main problem with China is that there isn’t a level playing field for foreign firms, as it keeps its market tightly regulated, if not closed, for outsiders.

Germany sees a new tougher line on China and Russia as Merkel leaves the political stage, CNBC, Feb 1

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