(Bloomberg) -- German Chancellor Olaf Scholz warned Chinese officials to address overcapacity and treat foreign firms better, reinforcing criticisms delivered by the US Treasury Secretary in Beijing last week.

“Competition must be fair,” Scholz told an audience of university students on Monday in Shanghai, on the second leg of his four-day trip to the Asian nation.

“We want a level playing field, of course we want our companies to have no restrictions,” he added, identifying dumping, overproduction and copyright infringement as key areas of concern.

Scholz, who is traveling with senior managers from German companies including Siemens AG, BMW AG and Mercedes-Benz Group AG, is in China to deliver a delicate message that if Beijing doesn’t heed European warnings to end discriminatory business practices, Brussels will have no choice but to escalate trade defense mechanisms.

He is also expected to raise Russia’s war in Ukraine, possibly calling on China to use its influence over Moscow to seek a resolution.

The German leader’s criticism of Beijing’s industrial policy bolsters the message telegraphed by US Treasury chief Janet Yellen this month, that the vast output of China’s factories has become a global problem.

That one-two punch by a pair of Group of Seven nations within a matter of weeks comes as President Xi Jinping puts his nation’s massive manufacturing industry at the center of a drive to reinvigorate economic growth. Determination in Beijing to boost the same green sectors that European and US policymakers are seeking to expand has raised tensions with key trade partners.

“I’ve been very clear in my discussions with them that this is a concern not only to us, but also to other countries, to Europe, to Japan, and even to emerging markets,” Yellen said in a CNN interview broadcast Sunday. The US won’t take “anything off the table,” including the possibility of additional tariffs, to stem the flood of Chinese goods, she added. 

The topic is also starting to resonate more broadly, with French Finance Minister Bruno Le Maire saying on Monday that Europe needs a new economic strategy.

“Europe must assert its economic interests between an increasingly protectionist US and China’s industrial over-capacity that risks overflowing into the European market,” he told reporters ahead of his planned to trip to the IMF-World Bank meetings in Washington later this week.

Scholz kicked off his second visit as chancellor to Germany’s main trading partner on Sunday, where the German delegation raised the issue of Chinese overcapacity in a meeting with the party secretary general of the southwestern city of Chongqing.

According to one participant, the Chinese side dismissed German criticisms as “fake questions,” saying they were based on what Communist Party officials regard as “fake news” or “false information.”

Such questions “are of great importance for us,” Scholz said at a press conference in Shanghai, adding that the issue of a level playing field was among topics he planned to discuss with Xi and Premier Li Qiang during talks Tuesday.

Germany wants China to ensure that “the rights of companies are guaranteed, that there are fair conditions for competition, also with local firms who operate here, and that there is also access to public tenders,” Scholz told reporters.

The European Union formally launched an anti-subsidies probe into electric vehicles manufactured in China last year, alleging companies such as BYD Co. have thrived on the back of huge state subsidies. Beijing disagrees, saying that its complete supply chain allows Chinese firms to produce high-quality, low-price cars.

The bloc is also set to launch an investigation into China’s procurement of medical devices as it seeks to address concerns that Beijing’s policies are unfairly favoring domestic suppliers.

The probe may be announced as early as mid-April and could result in the bloc curtailing Chinese access to its tenders, people familiar with the matter told Bloomberg.

Read More: EU Is Set to Launch China Probe on Medical Device Procurement

It would constitute a first wielding of the EU’s so-called International Procurement Instrument, or IPI, a 2022 law that’s meant to promote reciprocity in access to public procurement markets.

Scholz’s visit to China has been overshadowed somewhat by Iran’s attack against Israel. On Monday, Scholz reiterated a warning to Tehran to not escalate the conflict, and flicked at the EU’s desire to see Xi step up efforts to bring a peaceful resolution to the war in Ukraine.

“Russia’s war against Ukraine is not only a problem for Europeans,” Scholz said. “It’s something that everyone in the world needs to worry about.”

The German leader was also asked what he expects from China regarding its policy on supplying so-called “dual use” products to Russia that can be used for military rather than civilian purposes.

He called on all nations “not to circumvent the sanctions imposed by the international community,” and to refrain from providing the Kremlin with weapons, including dual-use goods.

--With assistance from Colum Murphy and William Horobin.

(Updates with Le Maire comments starting in ninth paragraph)

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