Scholz warns Iran as attacks on Israel overshadow China trip

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By Andreas Rinke and Sarah Marsh

CHONGQING/BERLIN (Reuters) -Chancellor Olaf Scholz warned Iran against further attacks on Israel on Sunday as the escalating conflict in the Middle East overshadowed the start of his three-day tour of China.

Scholz is visiting the southwestern town of Chongqing as well as Shanghai and Beijing as part of a visit to shore up ties with Germany's top trade partner while addressing growing rifts over issues including Chinese trade practices and its support for Russia.

But Iran's attack on Israel looks set to redefine the agenda and tone of the visit. Scholz will for example participate from his hotel in a video meeting of G7 leaders on Sunday to discuss Iran's attack on Israel, a German delegation source to Reuters.

German officials had also expressed hope before the trip that Beijing could play a positive role in cooling the growing tensions in the Middle East, despite their critical assessment of its support for Russia in its invasion of Ukraine.

China played a mediating role between Iran and Saudi Arabia last year, and Reuters reported China had asked Iran to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis, or risk harming business relations with Beijing.

Scholz, who is traveling with several German CEOs, is set on Tuesday to meet Chinese President Xi Jinping and Premier Li Qiang.

"We will do everything to stop a further escalation," Scholz told reporters. "We can only warn everyone, especially Iran, against continuing this way."

Upon arrival, Scholz had condemned the Iranian strikes on Israel "in the strongest possible terms," his spokesperson said. Scholz was kept informed of developments in the Middle East on the flight, government sources said.

The chancellor earlier on Sunday visited German auto supplier Bosch's hydrogen fuel cell plant in Chongqing, putting in the spotlight on an area of rising tensions.

The EU is carrying out several probes into whether Chinese green tech exports like battery EVs that it says have benefited from state subsidies and which could harm local producers.

Germany's car industry fears these probes could lead to a trade war that could damage their prospects in the world's biggest car market. Scholz's visit is being watched for signs of how much Germany backs the EU probe and is willing to go against the wishes of a key national industry.

Scholz said on Sunday the plant showed the importance of cooperation to tackle big challenges facing the world like climate change.

Berlin's overall stance on China has become more critical since the war in Ukraine.

Last year, Germany also published its first China strategy, describing "unfair practices" and the risks to supply chains in a potential conflict over Taiwan, and urging "de-risking". However, efforts to diversify away from China are so far patchy.

During his visit, Scholz is also expected to address China's support for Russia. German officials on Friday bluntly 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.

"It is about China not supporting Russia in waging a brutal war against its neighbor Ukraine," Scholz wrote in a post on social media platform X on Saturday.

(Reporting by Andreas Rinke in Chongqing and Sarah Marsh in Berlin; Editing by Antoni Slodkowski and Miral Fahmy, William Maclean)