For the first time, a Chinese intelligence agency employee has been arrested in Germany. The accused, Jian G., was not simply recruited to spy for China. According to the German Federal Public Prosecutor’s Office, he is a member of a Chinese intelligence agency – a trained agent who even acquired German citizenship some time ago.
G. is an employee of the MEP of the right-wing German AfD party, Maximilian Krah, which gave China’s intelligence agency direct access to the inner workings of the EU Parliament. He also opened all kinds of doors for Krah in China. Despite everything, it comes as no surprise, as Marcel Grzanna analyzes. G. already caught the attention of investigators months ago. And the Office for the Protection of the Constitution has warned of the dangers of Chinese espionage activities for some time.
What is surprising, however, is the assessment of Jochen Siebert, a long-time expert on China’s car market: In an interview with Felix Lee, he recommends Volkswagen to close its plants in the People’s Republic. He says that with the 39 plants it jointly operates with its partners across the country, VW has created overcapacity in the People’s Republic – and has thus taken on too much. SAIC, one of VW’s joint venture partners, is already urging capacity reduction.
Just one day after three German businesspeople were arrested on charges of spying for China, an employee of MEP Maximilian Krah from the right-wing German AfD party, Jian G., was arrested on Wednesday. According to the allegations, however, G. was not simply recruited to spy for China. According to the Federal Public Prosecutor’s Office, the Chinese native is even an employee of a Chinese secret agency – meaning he is a trained agent who recently acquired German citizenship.
German politicians reacted correspondingly outraged to the news on Tuesday morning. “If the accusation is confirmed, it strikes at the heart of our democracy,” said Federal Minister of Justice Marco Buschmann. Federal Minister of the Interior Nancy Faeser took a similar view, speaking of an attack “from within on European democracy.” And Economy Minister Robert Habeck told the German news portal t-online: “Germany and our economy are in the spotlight.” The world is “not just friendly to Germany.”
However, the government members were probably not entirely surprised that the investigating authorities presented multiple results in such a short time. After all, the Federal Office for the Protection of the Constitution (BfV) had already warned of a “serious threat to Germany” posed by Chinese espionage activities in mid-2023. Faeser emphasized that counter-espionage measures had been stepped up in recent months.
“The case of G., if confirmed, shows how long-term and patiently Chinese secret agencies think, plan and act,” said Ralph Weber from the University of Basel, who researches China’s influence exerted by the United Front of the Communist Party (UFW) or the Ministry of State Security. Thanks to his German citizenship and his many activities in China, G. had gained a trustworthy cover that allowed him to use it in his areas of influence.
Weber had already warned against naivety in an interview with Table.Briefings last October, after Jian G. and his role came to public attention for the first time when a British MP was arrested in the UK at the same time. “All these cases show that parliaments of Western democracies are a focus for Chinese intelligence activities. It would be naive to believe that Beijing would not also try to establish spies in and around the German parliament,” Weber said at the time.
It became clear yesterday that the employee of the British parliament will have to answer to a court. A British scientist has also been charged with spying for China. According to the Office for the Protection of the Constitution, agents always use the same methods to recruit employees to spy for them – they first sound out who “offers interesting opportunities or knowledge and offers starting points for the development of intelligence cooperation.” Next, members of the intelligence agency who have undergone psychological training establish contact with the targets, “for example during an exhibition or a conference.”
German intelligence services fear not only traditional espionage by agents but also the theft of technology and secrets through cyber espionage. Volkswagen’s example shows how ruthless China is in this regard. Chinese hackers have been spying on the German car manufacturer for years, even though the German company has been investing billions and billions of euros in the People’s Republic for decades and has passed on vast amounts of its own know-how in the process.
However, 42-year-old Jian G. had been suspected of working for the government of the People’s Republic of China for some time. Apparently, G. also infiltrated several democratic movements in Germany. He was a board member of the German Democratic Front (DFL) and General Secretary of the “Chinese Republican Party,” all of which operate under the radar in order to make the exile opposition heard. However, outsiders cannot really measure the effect of his work.
However, the fact is that Maximilian Krah has repeatedly attracted attention in recent years by defending China’s repressive policies in Xinjiang or Hong Kong or by referring to Taiwan as part of Chinese territory, in line with Beijing’s linguistic rules.
On Tuesday, Krah expressed surprise at the arrest of his employee, although the allegations had been rumored for months. He announced that he would terminate G.’s employment if the allegations proved to be true. Opinions within the AfD parliamentary group are divided. The “blue bubble,” as one member calls the party hardliners to Table.Briefings, considers the affair to be “nasty accusations” against “poor Max.”
Party members who are less close to Krah, however, are not at all surprised by the arrest. They say that Krah worked to present China in a positive light; he is known for his ties to the autocracy. In his book “Politics from the Right. A Manifesto,” he calls for the abolition of economic sanctions against China and relativizes human rights violations in the country.
Meanwhile, current events have caught up with the Chinese embassy in Berlin. The day before, it criticized Germany’s espionage allegations against two men and a woman as politically manipulating the reputation of China and slandering. The Federal Public Prosecutor’s Office accused the trio of passing on confidential information to the People’s Republic via a contact in Beijing. Specifically, the information concerned research work on the status of ship propulsion systems and laser technology. There was initially no comment on G.’s arrest on Tuesday. Contribution: Franziska Klemenz
VW is capable of manufacturing six million cars per year in China, but only sells three million. A fierce debate is raging in Europe regarding the many Chinese EVs that could soon flood the world due to the country’s overcapacity. Is Volkswagen contributing to this overcapacity in China?
When we in Europe talk about overcapacity, we mean Chinese car manufacturers who want to sell their numerous e-cars at predatory prices in Europe because they can’t get rid of them in their own country. VW will not ship its cars made in China to Europe. But, indirectly, you are correct, of course. VW has too many plants in China and none of them are fully utilized. When there is a price war in China, VW has no choice but to join in. The Chinese market is broken. The overcapacity means that nobody is earning money anymore. The Chinese car manufacturers go where it makes more sense, which is very much to Europe, but also to Australia or South America.
What does this mean for VW in China?
SAIC, one of Volkswagen’s two major joint venture partners, clearly states: Yes, we have problems with capacity utilization. They don’t mean themselves, because they sell overseas. But the capacity utilization of the SAIC-VW plants is not good. SAIC urges capacity reduction. They are not yet calling for plant closures, but want to reduce shifts first. VW has not yet commented on this.
What would have to happen?
VW has created production capacities of six million units. A capacity utilization rate of 80 percent would make the plants profitable, meaning that 4.8 million cars would have to be sold annually. However, that is almost two million more than VW currently sells. Contrary to its own claims, VW is already making huge losses in China. That is because all the write-offs for the underutilized plants have not been fully taken into account. I believe that VW must close plants in China. There is no way around it. Others are doing the same. Honda will probably close a plant, Hyundai has already closed three out of five factories and may even leave the Chinese market altogether. Nissan will also close one or two plants.
VW executives firmly believe that after a lean period of around two years, they will technically catch up with the Chinese competition and Volkswagen will return to the sales figures it once had.
I’m not buying it.
Why not?
China’s population will shrink from 1.4 billion to less than one billion by 2050. But demand for new cars will also decline significantly for another reason. In 2022, 22 million cars were sold in China, and the market is expected to grow to around 30 million by 2030, according to car market experts. However, many will buy used cars. The used car market is currently still roughly the same size as the new car market. However, it will double in volume, a development that has occurred in all developed countries. The used car market in Germany is also twice the size of the new car market today.
And yet, VW seems to be investing in more and more plants.
I don’t quite understand why. Well, VW is super complicated – including in China. There are the two traditional joint ventures, one with SAIC in Shanghai, the other with FAW in Changchun, both with an incredible number of plants. For some time now, there has been a third joint venture in Hefei, where VW owns a majority stake. VW wants to invest heavily in a proper research and development center there. Hefei is also where the cooperation with Xpeng regarding the Human Machine Interface, autonomous driving and other high-tech applications will be developed. In the future, this will all happen in China and no longer in Wolfsburg (Volkswagen’s headquarters). Hefei, in the formerly underdeveloped province of Anhui, will become VW’s new hub. The company actually wants to move away from the other two joint ventures. But that’s not so easy, of course.
In light of the quarrels, it seemed as if SAIC and FAW were the ones who no longer wanted the joint ventures with Volkswagen.
SAIC has indeed already stated its dissatisfaction and would not mind if VW came up with a plan: ‘Hey, let’s close this and that plant.’ SAIC belongs to the province of Shanghai. And Shanghai doesn’t really care if there is still a car plant in the city. The situation is completely different for FAW in Changchun. If plants are closing down up there in the far northeast of the country, there won’t be much else in the region. That is why it will be much harder for VW to close plants in the joint venture with FAW. Although Wolfsburg could then say: ‘Then let’s at least close the plants that are not in Changchun – instead close the ones in Chengdu or Foshan in the south of China.’
China’s original goal with joint ventures was to learn from foreign companies until they were good enough themselves and no longer needed them. That never worked with combustion engines. German cars were always superior. With electric cars, things now look different.
I don’t share this assessment. In my view, electric cars are a ruse and China has no intention of abandoning the combustion engine. On the contrary: In December, the Chinese Ministry of Commerce published its eagerly awaited roadmap for the development of the automotive industry through 2060. And it explicitly states that the combustion engine will continue to play an important role for a long time to come. And then it goes on to list in detail what kind of ideas they have, including all sorts of synthetic fuels. With electric, China was mainly concerned about energy security. Now, it is all about creating a bargaining chip with the USA and Europe. China is a leader in battery technology and has created dependencies. Now that this goal has been achieved, the Chinese leadership no longer seems all that interested in electric cars.
The question is: Does China still need VW?
Let’s not kid ourselves: That is a thing of the past. It served its purpose. China no longer needs VW. VW no longer has much to offer, apart from the combustion engine. That is what VW is good at. But can VW build excellent electric cars suitable for the Chinese market? There are others who can do that, too. Can VW put excellent karaoke functions into the car? Nope. Is VW very close to the Chinese end customer? Probably not. VW is only needed as an important employer in a structurally weak region, namely Changchun.
You could also see it in a positive light: FAW in Changchun guarantees that Volkswagen can stay in China.
Yes, but this is awkward cooperation, partly because FAW has about 50 joint ventures with suppliers. And it is only ever considered these suppliers. This stifles innovation and is inefficient. VW has bitten off more than it can chew in China, and this is now costing Wolfsburg dearly.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
The 25th Zhoushan International Sand Sculpture Festival in the eastern Chinese province of Zhejiang coincides with the upcoming May Day holiday. Many of the numerous sand sculptures are inspired by the ancient work of Shan Hai Jing (山海经), the “Classic of Mountains and Seas.”
For the first time, a Chinese intelligence agency employee has been arrested in Germany. The accused, Jian G., was not simply recruited to spy for China. According to the German Federal Public Prosecutor’s Office, he is a member of a Chinese intelligence agency – a trained agent who even acquired German citizenship some time ago.
G. is an employee of the MEP of the right-wing German AfD party, Maximilian Krah, which gave China’s intelligence agency direct access to the inner workings of the EU Parliament. He also opened all kinds of doors for Krah in China. Despite everything, it comes as no surprise, as Marcel Grzanna analyzes. G. already caught the attention of investigators months ago. And the Office for the Protection of the Constitution has warned of the dangers of Chinese espionage activities for some time.
What is surprising, however, is the assessment of Jochen Siebert, a long-time expert on China’s car market: In an interview with Felix Lee, he recommends Volkswagen to close its plants in the People’s Republic. He says that with the 39 plants it jointly operates with its partners across the country, VW has created overcapacity in the People’s Republic – and has thus taken on too much. SAIC, one of VW’s joint venture partners, is already urging capacity reduction.
Just one day after three German businesspeople were arrested on charges of spying for China, an employee of MEP Maximilian Krah from the right-wing German AfD party, Jian G., was arrested on Wednesday. According to the allegations, however, G. was not simply recruited to spy for China. According to the Federal Public Prosecutor’s Office, the Chinese native is even an employee of a Chinese secret agency – meaning he is a trained agent who recently acquired German citizenship.
German politicians reacted correspondingly outraged to the news on Tuesday morning. “If the accusation is confirmed, it strikes at the heart of our democracy,” said Federal Minister of Justice Marco Buschmann. Federal Minister of the Interior Nancy Faeser took a similar view, speaking of an attack “from within on European democracy.” And Economy Minister Robert Habeck told the German news portal t-online: “Germany and our economy are in the spotlight.” The world is “not just friendly to Germany.”
However, the government members were probably not entirely surprised that the investigating authorities presented multiple results in such a short time. After all, the Federal Office for the Protection of the Constitution (BfV) had already warned of a “serious threat to Germany” posed by Chinese espionage activities in mid-2023. Faeser emphasized that counter-espionage measures had been stepped up in recent months.
“The case of G., if confirmed, shows how long-term and patiently Chinese secret agencies think, plan and act,” said Ralph Weber from the University of Basel, who researches China’s influence exerted by the United Front of the Communist Party (UFW) or the Ministry of State Security. Thanks to his German citizenship and his many activities in China, G. had gained a trustworthy cover that allowed him to use it in his areas of influence.
Weber had already warned against naivety in an interview with Table.Briefings last October, after Jian G. and his role came to public attention for the first time when a British MP was arrested in the UK at the same time. “All these cases show that parliaments of Western democracies are a focus for Chinese intelligence activities. It would be naive to believe that Beijing would not also try to establish spies in and around the German parliament,” Weber said at the time.
It became clear yesterday that the employee of the British parliament will have to answer to a court. A British scientist has also been charged with spying for China. According to the Office for the Protection of the Constitution, agents always use the same methods to recruit employees to spy for them – they first sound out who “offers interesting opportunities or knowledge and offers starting points for the development of intelligence cooperation.” Next, members of the intelligence agency who have undergone psychological training establish contact with the targets, “for example during an exhibition or a conference.”
German intelligence services fear not only traditional espionage by agents but also the theft of technology and secrets through cyber espionage. Volkswagen’s example shows how ruthless China is in this regard. Chinese hackers have been spying on the German car manufacturer for years, even though the German company has been investing billions and billions of euros in the People’s Republic for decades and has passed on vast amounts of its own know-how in the process.
However, 42-year-old Jian G. had been suspected of working for the government of the People’s Republic of China for some time. Apparently, G. also infiltrated several democratic movements in Germany. He was a board member of the German Democratic Front (DFL) and General Secretary of the “Chinese Republican Party,” all of which operate under the radar in order to make the exile opposition heard. However, outsiders cannot really measure the effect of his work.
However, the fact is that Maximilian Krah has repeatedly attracted attention in recent years by defending China’s repressive policies in Xinjiang or Hong Kong or by referring to Taiwan as part of Chinese territory, in line with Beijing’s linguistic rules.
On Tuesday, Krah expressed surprise at the arrest of his employee, although the allegations had been rumored for months. He announced that he would terminate G.’s employment if the allegations proved to be true. Opinions within the AfD parliamentary group are divided. The “blue bubble,” as one member calls the party hardliners to Table.Briefings, considers the affair to be “nasty accusations” against “poor Max.”
Party members who are less close to Krah, however, are not at all surprised by the arrest. They say that Krah worked to present China in a positive light; he is known for his ties to the autocracy. In his book “Politics from the Right. A Manifesto,” he calls for the abolition of economic sanctions against China and relativizes human rights violations in the country.
Meanwhile, current events have caught up with the Chinese embassy in Berlin. The day before, it criticized Germany’s espionage allegations against two men and a woman as politically manipulating the reputation of China and slandering. The Federal Public Prosecutor’s Office accused the trio of passing on confidential information to the People’s Republic via a contact in Beijing. Specifically, the information concerned research work on the status of ship propulsion systems and laser technology. There was initially no comment on G.’s arrest on Tuesday. Contribution: Franziska Klemenz
VW is capable of manufacturing six million cars per year in China, but only sells three million. A fierce debate is raging in Europe regarding the many Chinese EVs that could soon flood the world due to the country’s overcapacity. Is Volkswagen contributing to this overcapacity in China?
When we in Europe talk about overcapacity, we mean Chinese car manufacturers who want to sell their numerous e-cars at predatory prices in Europe because they can’t get rid of them in their own country. VW will not ship its cars made in China to Europe. But, indirectly, you are correct, of course. VW has too many plants in China and none of them are fully utilized. When there is a price war in China, VW has no choice but to join in. The Chinese market is broken. The overcapacity means that nobody is earning money anymore. The Chinese car manufacturers go where it makes more sense, which is very much to Europe, but also to Australia or South America.
What does this mean for VW in China?
SAIC, one of Volkswagen’s two major joint venture partners, clearly states: Yes, we have problems with capacity utilization. They don’t mean themselves, because they sell overseas. But the capacity utilization of the SAIC-VW plants is not good. SAIC urges capacity reduction. They are not yet calling for plant closures, but want to reduce shifts first. VW has not yet commented on this.
What would have to happen?
VW has created production capacities of six million units. A capacity utilization rate of 80 percent would make the plants profitable, meaning that 4.8 million cars would have to be sold annually. However, that is almost two million more than VW currently sells. Contrary to its own claims, VW is already making huge losses in China. That is because all the write-offs for the underutilized plants have not been fully taken into account. I believe that VW must close plants in China. There is no way around it. Others are doing the same. Honda will probably close a plant, Hyundai has already closed three out of five factories and may even leave the Chinese market altogether. Nissan will also close one or two plants.
VW executives firmly believe that after a lean period of around two years, they will technically catch up with the Chinese competition and Volkswagen will return to the sales figures it once had.
I’m not buying it.
Why not?
China’s population will shrink from 1.4 billion to less than one billion by 2050. But demand for new cars will also decline significantly for another reason. In 2022, 22 million cars were sold in China, and the market is expected to grow to around 30 million by 2030, according to car market experts. However, many will buy used cars. The used car market is currently still roughly the same size as the new car market. However, it will double in volume, a development that has occurred in all developed countries. The used car market in Germany is also twice the size of the new car market today.
And yet, VW seems to be investing in more and more plants.
I don’t quite understand why. Well, VW is super complicated – including in China. There are the two traditional joint ventures, one with SAIC in Shanghai, the other with FAW in Changchun, both with an incredible number of plants. For some time now, there has been a third joint venture in Hefei, where VW owns a majority stake. VW wants to invest heavily in a proper research and development center there. Hefei is also where the cooperation with Xpeng regarding the Human Machine Interface, autonomous driving and other high-tech applications will be developed. In the future, this will all happen in China and no longer in Wolfsburg (Volkswagen’s headquarters). Hefei, in the formerly underdeveloped province of Anhui, will become VW’s new hub. The company actually wants to move away from the other two joint ventures. But that’s not so easy, of course.
In light of the quarrels, it seemed as if SAIC and FAW were the ones who no longer wanted the joint ventures with Volkswagen.
SAIC has indeed already stated its dissatisfaction and would not mind if VW came up with a plan: ‘Hey, let’s close this and that plant.’ SAIC belongs to the province of Shanghai. And Shanghai doesn’t really care if there is still a car plant in the city. The situation is completely different for FAW in Changchun. If plants are closing down up there in the far northeast of the country, there won’t be much else in the region. That is why it will be much harder for VW to close plants in the joint venture with FAW. Although Wolfsburg could then say: ‘Then let’s at least close the plants that are not in Changchun – instead close the ones in Chengdu or Foshan in the south of China.’
China’s original goal with joint ventures was to learn from foreign companies until they were good enough themselves and no longer needed them. That never worked with combustion engines. German cars were always superior. With electric cars, things now look different.
I don’t share this assessment. In my view, electric cars are a ruse and China has no intention of abandoning the combustion engine. On the contrary: In December, the Chinese Ministry of Commerce published its eagerly awaited roadmap for the development of the automotive industry through 2060. And it explicitly states that the combustion engine will continue to play an important role for a long time to come. And then it goes on to list in detail what kind of ideas they have, including all sorts of synthetic fuels. With electric, China was mainly concerned about energy security. Now, it is all about creating a bargaining chip with the USA and Europe. China is a leader in battery technology and has created dependencies. Now that this goal has been achieved, the Chinese leadership no longer seems all that interested in electric cars.
The question is: Does China still need VW?
Let’s not kid ourselves: That is a thing of the past. It served its purpose. China no longer needs VW. VW no longer has much to offer, apart from the combustion engine. That is what VW is good at. But can VW build excellent electric cars suitable for the Chinese market? There are others who can do that, too. Can VW put excellent karaoke functions into the car? Nope. Is VW very close to the Chinese end customer? Probably not. VW is only needed as an important employer in a structurally weak region, namely Changchun.
You could also see it in a positive light: FAW in Changchun guarantees that Volkswagen can stay in China.
Yes, but this is awkward cooperation, partly because FAW has about 50 joint ventures with suppliers. And it is only ever considered these suppliers. This stifles innovation and is inefficient. VW has bitten off more than it can chew in China, and this is now costing Wolfsburg dearly.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
The 25th Zhoushan International Sand Sculpture Festival in the eastern Chinese province of Zhejiang coincides with the upcoming May Day holiday. Many of the numerous sand sculptures are inspired by the ancient work of Shan Hai Jing (山海经), the “Classic of Mountains and Seas.”
