Scholz Vows Stronger India Trade to Curb China Dominance

(Bloomberg) -- German Chancellor Olaf Scholz called for further diversification of the nation’s trade as he looks to reduce the economy’s dependence on China in favor of India.

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“We must avoid one-sided dependencies, particularly in areas of strategic importance – critical raw materials and certain technologies, for instance,” Scholz said at the Asia-Pacific Conference of German Business, which he opened alongside Indian Prime Minister Narendra Modi in New Delhi on Friday.

Scholz said Germany is pushing for the European Union and India to finalize their free trade agreement soon, and “this could happen in months rather than years.”

Germany is trying to cultivate India as a source of trade and geopolitical support as its deteriorating relations with China cast a pall over the country’s economic future. Scholz, who is on a three-day visit to India with a large delegation of ministers and business executives, touted the country as “an anchor of stability” in the region. Modi highlighted the economy’s large population, rapid growth and infrastructure revamp as advantages.

The two sides signed several agreements on Friday, including for the protection of classified information, a joint declaration on the exchange of labor, and also a roadmap for green hydrogen, technology and innovation.

Modi said there’s been new momentum to the relationship between the two countries under Scholz, and that increasing cooperation in defense and security is a sign of trust.

India has been looking to diversify its supplies of military hardware since Russia, its biggest source of weapons, invaded Ukraine in 2022 and became entangled in a web of Western sanctions. Modi was in Russia to attend the BRICS leaders summit this week and maintains close ties with Russian President Vladimir Putin, who he met on Tuesday.

Scholz said at a joint briefing with Modi that he supports “explicitly that India works for a lasting and fair peace in Ukraine.” He added that “I’m happy about the readiness to use the reliable relations to all parties involved to contribute to a just solution of this conflict.”

Earlier, Modi said India offers trading partners like Germany policy stability, political continuity and abundant labor. “Today, India is the center for diversification and de-risking,” he said.

Scholz also referred to the need for “de-risking,” saying it doesn’t mean less trade or less openness. “For us, de-risking means diversification.”

--With assistance from Preeti Soni.

(Updates with details on agreements signed.)

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