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German chancellor visits China after 'de-risking' push

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West and China clash over trade, Chinese overcapacity

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Germany to press China on business climate

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Two-thirds of German companies feel uneven playing field:

survey

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Chinese support for Russia is hurting reputation, Germany

says

(Adds details from German government briefing, new analyst

quote on overcapacity, bullet points)

By Andreas Rinke and Laurie Chen

BERLIN/BEIJING, April 12 (Reuters) - Last year Germany

launched a strategy to "de-risk" from China, but on Saturday

Chancellor Olaf Scholz starts a high-stakes visit there hoping

to shore up ties at a delicate point with the U.S. and EU

threatening to hammer Chinese goods in subsidy rows.

With the German economy in the doldrums, its companies are

pressing for fairer access to a Chinese market which they say

still favours local firms despite promises to the contrary.

At the same time, China is likely to press Berlin not to

back threatened European Union measures against its cars, solar

and wind park equipment that Brussels feels are being dumped on

its market too cheaply.

China's own economy is also struggling, hit by another

ratings outlook downgrade this week and with its factories

blamed for producing more goods than they can sell locally.

Looming over the visit is the prospect of the return of

Donald Trump to the White House, who has threatened to hike

trade tariffs on all countries including Germany.

With U.S. aid to Kyiv looking potentially shakier, Scholz

will press China on its support for Russia's wartime economy two

years into its invasion of Ukraine.

"The Europeans urgently need to clarify how they can

position themselves as a pole between the USA and China and not

be crushed between their conflicts," said Maximilian Butek, the

head of the German Chamber of Commerce in eastern China.

In blunt language, German officials on Friday said Beijing's

support and exports to Russia were enabling Moscow to wage a war

of aggression in Ukraine and causing a "growing loss of

reputation for China" in Europe and beyond.

However, they also said Beijing could play a positive role

in cooling tensions in the Middle East.

While insisting it does not want to "decouple", Scholz's

government has become wary of tethering Germany to the Chinese

economy after the invasion of Ukraine exposed Europe's reliance

on Russian gas and fuelled a cost-of-living crisis.

Germany coordinated the visit with the United States, France

and the European Commission.

Scholz is set to press China to make good on its pledge to

level the playing field for companies, who say they are still

waiting for concrete steps, and three studies published this

week highlight concerns.

One study showed nearly two-thirds of companies feel

discriminated against in the Chinese market.

A second by the Kiel Institute estimated China's subsidies

for its firms range between three to nine times that of other

major economies.

And yet efforts to diversify from China have been patchy, a

third study showed, and other measures, such as moves by Berlin

to curb use of Huawei equipment from German networks,

have yet to materialise.

Scholz's government last July produced a 64-page strategy

document outlining China's increasing assertiveness, "unfair

practices" and the risks to supply chains in a potential

conflict over Taiwan.

"The Americans and the Europeans are loading the gun,

meaning they're preparing for dumping cases and so forth," said

Joerg Wuttke, former president of the EU Chamber of Commerce in

China.

"I think Scholz will mention it, I think the Chinese

response will be: thank you very much, but there is no

overcapacity. And nothing gets resolved."

BUILDING TRUST

Scholz takes with him CEOs of some leading companies, such

as Siemens, and three cabinet ministers, underscoring

Beijing's importance.

Shi Yinhong, Professor at the School of International

Studies, Renmin University of China said it was important for

Beijing to win over Germany in the face of an EU push to curb

China's green energy exports.

"Making Germany - which has been inclined to follow its

allies in China-related trade restrictions but is still quite

hesitant and slow - oppose it in this period is really important

for China's rearguard actions."

Scholz will travel to Shanghai, Chongqing, and Beijing,

where he will meet President Xi Jinping and Premier Li Qiang.

Mikko Huotari, head of the Merics Institute in Berlin, calls

it a "re-engaging" and stabilising of relations. He urged Scholz

to emphasise that Germany has a special role within the EU and

does not want Brussels to take tough action in trade disputes.

Economy Minister Robert Habeck and Foreign Minister Annalena

Baerbock, who last year angered Beijing by calling President Xi

a "dictator", are likely to visit China next.

While German businesses are wary of the impact an escalating

trade war could have on their own investments' in the world's

second biggest economy, the EU also faces a dilemma. Cheap

Chinese solar and wind imports, for example, could help it

achieve its climate goals, but damage local industries.

"I think all sides are lacking trust, so the visit is seen

as a good sign from the Chinese," German Chamber of Commerce's

Butek said.

"We insist on open markets because this is essential to our

survival. The price of losing the market here is way too high

than what we gain from import tariffs on Chinese goods."

(Writing by Matthias Williams; Editing by Muralikumar

Anantharaman and Tomasz Janowski)