Germany's foreign ministry plans to tighten rules for companies closely linked to China, forcing them to disclose more information and possibly conduct stress tests on geopolitical risks, Reuters reported, citing a confidential draft document.

The proposed measures are part of a new business strategy toward China being developed by Chancellor Olaf Scholz's government as it seeks to reduce its dependence on the Asian economic superpower.

The goal is to change the incentive structure for German companies with the tools of a market economy so that reducing dependence on exports is more attractive, the document said, highlighting the chemical and automotive industries.

The draft, prepared by the foreign ministry led by Annalena Berbock of the Greens, has yet to be coordinated with other ministries. A final decision on China's strategy is expected early next year.

Deep trade ties link Asia's and Europe's largest economies, and rapid Chinese expansion and demand for German cars and equipment have fueled its own growth over the past two decades. In 2016, China became Germany's largest trading partner.

But the relationship has come under scrutiny since the war in Ukraine, which led to an end to energy relations with Moscow and forced many companies to give up their local businesses.

Among the steps outlined in the 65-page document is tightening regulations for companies operating in China to ensure geopolitical risks are taken into account. 

The document says investment guarantees will be subjected to more rigorous scrutiny to take into account environmental impacts, labor and social standards, and avoid forced labor in the supply chain. To avoid cluster risks, investment guarantees should be limited to 3 billion euros per company in each country.

The government also plans to tighten export credit guarantees to avoid unwanted technology transfers, particularly sensitive dual-use technologies and those that can be used for surveillance and suppression, the document said. The new strategy marks a departure from Berlin's policies under former conservative Chancellor Angela Merkel.