Thread by @J_Jakobowski

This graph is quite old (2011), but the political implications are still valid - explaining a lot when it comes to 🇪🇺🇨🇳 relations

Germany is the central hub for European value chains network, the most important proxy of EU-China trade for most of Europe

Below, a few takeaways👇

1. That's a partial answer why Angela Merkel was most dovish in yesterday's summit, also why 🇩🇪 still pushes for CAI. German MNCs just manage a dominant chunk of EU's value added trade with China. Germany is also at the forefront of potential China's retalliation.

2. It's not that 🇩🇪 is blameless - its economy/society is benefiting enormously from this central position, and economic leaders (Chancellor Merkel, looking at you) decided to increasingly entangle Europe in this - now evident - toxic relationship with China

3. However, most of the EU (and especially V4) is in the same boat. Benefits from 🇨🇳🇩🇪 trade (partially) spill over to other economies. Also, potential sharp disengagement with China will hurt many other countries within the network.

4. I am convinced (as many Germans are) that the 🇪🇺🇨🇳 relationship is toxic, with increasing part of value-added unfarily sucked in from 🇪🇺 to 🇨🇳. The rebalancing of this relationship is one of EU's main goals now. We should diversify value chains, stop forced tech transfers etc

5. But the way out is only through collective action. This process is too fundamental for EU to leave it only to Germany to decide. Also, the EU should not leave 🇩🇪 alone it this, as it becomes (sorry to say that) too small and fragile to deal with China one on one.

6. I believe the new post-covid economic stimulus, the Green Deal, Next Gen EU, is a great opportunity to do so. Also, the new EU's connectivity agenda should enable us to diversify and involve other regions (Eastern Europe, India, Africa, Balkans) in our GVCs.

thanks!

Here's the source of the graph, a WB study on GVCs. Pretty sure the 'China bubble' looks much bigger now in 2020.

openknowledge.worldbank.org/handle/10986/2…