Baerbock’s China policy + Global Gateway + Study on standardization

Dear reader,

Today’s features focus mainly on foreign and economic policy. Together with colleagues, Felix Lee had the opportunity to ask Foreign Minister-designate Annalena Baerbock about her future China policy. Baerbock announced that she does not want to “gloss over or hush up” critical issues in the exchange with China. She has long advocated a combination of “dialogue and toughness”. Amelie Richter and Finn Mayer-Kuckuk also asked a number of China experts about their opinion on a future Green-led foreign policy.

EU Commission President Ursula von der Leyen also presented the long-awaited Global Gateway investment program in Brussels on Wednesday. With it, the EU aims to promote projects in emerging countries, including green technology and digitization. The program is clearly positioned as a rival project to China’s New Silk Road (also known as the Belt and Road Initiative/BRI). Amelie Richter analyzes the project in detail.

A new study by the EU Chamber of Commerce also sheds light on the difficulties European companies face when trying to participate in standardization processes in China. Amelie Richter has taken a close look at the study. In it, companies criticize exclusion, insufficient transparency, or simply a lack of translations as hurdles to participation. But they often also lack the expertise to participate in complex standardization processes. An important issue, as China is also increasingly pushing into the global standardization of key technologies.

We hope you enjoy today’s issue!

Your
Christiane Kühl

Baerbock strives for ‘dialogue and toughness’ towards China

Shortly before taking office, German Foreign Minister-Designate Annalena Baerbock (Greens) outlines her program for dealing with the challenge China poses in the future. According to the program, she wants to find much clearer words towards the People’s Republic than her predecessors. “Dialogue is the central building block of international politics. But that doesn’t mean you have to gloss things over or hush things up,” Baerbock said in an interview with China.Table editor Felix Lee and journalists from the daily newspaper (taz). “A foreign policy that puts differences first leads just as much to a dead end as one based on blocking out conflicts.” For her, “values-driven foreign policy is always an interplay of dialogue and toughness.”

To this end, Baerbock wants to anchor German foreign policy more firmly within Europe. Towards an important trading partner like China, the EU would best pull together, Baerbock said. “We need a common European China policy.” If Germany, “as the largest member state, formulates its own China policy,” as it has done in the past, it would weaken the position of all. The EU, in turn, has considerable weight as one of the world’s largest domestic markets.

In the “system competition with an authoritarian regime like China“, Baerbock, therefore, wants to specifically join forces with European democracies. She also sees Germany as “part of a transatlantic democratic alliance“. This makes it necessary to “seek strategic solidarity with democratic partners, to defend our values and interests together, and to continuously promote these values in our foreign policy.” During the interview, Baerbock also took the liberty of taking a jab at the outgoing government’s political style: “Eloquent silence is not a form of diplomacy in the long term, even if some people have seen it that way in recent years.”

Xinjiang, Peng Shuai and Zhang Zhan specifically named

In this first interview since the announcement of the cabinet line-up, Baerbock outright addressed two hotly debated issues. She calls for tightening European supply chain rules in light of human rights abuses in Xinjiang. “If products from regions like Xinjiang, where forced labor is common practice, are blocked, that’s a big problem for an exporting country like China.” In response to the case of missing tennis player Peng Shuai (China.Table reported), she at least won’t rule out a diplomatic boycott of the upcoming Winter Olympics in Beijing. There are “different ways for governments to deal with this”, but they still need to be discussed.

The future foreign minister linked Peng Shuai to another recent case of suppression of free speech: “When I see how China’s leadership deals with tennis player Peng Shuai or with the arrested citizen journalist Zhang Zhan, then, of course, we should take a closer look at the Olympic Games,” she said. “Journalistic reporting is not a crime. Zhang Zhan should therefore be released.”

In addition to trade policy and human rights, Baerbock wants to also set a focus in her future work on the international networking of climate protection. The “220 German diplomatic missions could become important climate embassies and also contribute to intensifying technology transfer”. She advocates that countries willing to act should move forward on the energy transition as quickly as possible. “A global CO2 price, for example, is a fine idea, but it’s also just a good excuse. Because by the time all 190 countries are ready for it, it’s probably too late.” Just as Germany exported the energy transition to the world 20 years ago with the Renewable Energy Sources Act, it could now move forward again and become a pioneer of climate-neutral business.

Praise for realistic assessment of China

Experts believe that Baerbock will be able to provide important impetus in her new office as announced. “The coalition agreement very impressively outlines a new China policy that represents our interests and values in the systemic competition with Beijing,” says Thorsten Benner of the Global Public Policy Institute (GPPi) in Berlin. If Baerbock implements this concept of a European-focused China strategy, Germany and the EU could win equally.

Benner welcomes the fact that both the coalition agreement and the statements so far made by Baerbock are turned towards a “China that actually exists“. According to him, the Merkel governments had for far too long pursued the model of a “cooperative, friendly, easily malleable China”. Germany must now face systemic competition with confidence and reduce dependencies. These approaches can also be found in the foreign policy positions of the Greens.

According to Benner, a lot is also now riding on whether the Chancellery and the Foreign Ministry share a common perception of China policy. “It would be counterproductive if, after a few months, it turns out that the Foreign Ministry and the Chancellery are working against each other,” Benner says. If the government is at odds within itself, Germany is playing far below its capabilities. Scholz, as chancellor, should also try to play as a team with the foreign minister in talks in Beijing, instead of pursuing parallel diplomacy.

Foreign policy expert Noah Barkin of the Berlin office of the German Marshall Fund (GMF) also believes coordination with Scholz is key. “German foreign policy is made in the Chancellery, and Olaf Scholz favors a more measured approach with China.” Baerbock, however, has the public opinion, the mood in the Bundestag, and the media on her side. Many of Germany’s international allies are also more in line with Baerbock.

With Baerbock in the foreign ministry, Barkin expects “a new tone” in relations with China. “If she plays her cards right, and builds support for her approach with other cabinet ministers, she can push Germany towards a more clear-eyed vision of the relationship with China. ” She would address critical issues more openly than her predecessors and show a greater commitment to human rights.

Warning against a break with Beijing

Other observers, however, also see potential risks in the program outlined by the coalition agreement and the future foreign minister. Playing with red lines could cause lasting damage to relations with Beijing, believes sinologist Helwig Schmidt-Glintzer of the China Centrum Tübingen (CCT). The tone of the coalition agreement points to the idea of a more-China policy as opposed to the current one-China policy. Specifically, this refers to the mention of Taiwan in the coalition agreement, which, for example, advocates the “participation of democratic Taiwan in international organizations”.

Schmidt-Glintzer warns that a particularly critical mindset could lead to a break with Beijing. China’s policy has changed many times and has proven to be highly adaptable and capable of learning. It had changed course several times in response to changing conditions, and will probably do so again. However, anything that goes in the direction of challenging the country’s external borders could “lead to a dynamic that can no longer be controlled.” Finn Mayer-Kuckuk, Felix Lee, Amelie Richter

‘Global Gateway’ – Brussels answer to the Silk Road

By

Amelie Richter

What always resonated around “Global Gateway”, but was rarely openly mentioned, now found a clear answer at the official presentation of the infrastructure initiative of the EU Commission: “Yes, definitely. We are able to do that,” said EU Commission President Ursula von der Leyen in response to the question whether the program could compete with China’s “Belt and Road” initiative. “Countries made their experience with the Chinese investments. They need better and different offers.” The EU offer would involve the private sector, which does not exist in the People’s Republic. “So it is a true alternative,” the Commission chief stressed.

Brussels had been working on the counter Silk Road for a long time; the publication date was postponed several times. The result, however, is impressive and was met with much approval from politics and the economy. As with many EU initiatives, it remains to be seen how the implementation will progress in concrete terms. The projected program is ambitious: Up to €300 billion are to be mobilized by 2027. To this end, the EU Commission is not only bringing member states to the table but also the private sector as well as the European Investment Bank and other European financial institutions, including, for example, the European Bank for Reconstruction and Development.

The most important questions about “Global Gateway” at a glance:

Where is the money coming from?

Part of the projected billion euro investment is to come from the European Fund for Sustainable Development Plus (EFDS+) – around €135 billion. EFDS+ is an already existing EU budget fund, which in turn is filled in various ways. Not all the financial instruments for it are ready yet. The majority of the “Global Gateway” initiative, around €145 billion, is for “planned investment volumes by European financial and development
finance institutions“. Another €18 billion are to be raised “under other EU external assistance programs”. In addition, billions more are to come from the private sector.

Is it enough to go up against the BRI?

That remains questionable – because, in purely numerical terms, the BRI dwarfs “Global Gateway”. Beijing’s total spending on the New Silk Road could amount to $1.2 to 1.3 trillion by 2027, according to Morgan Stanley. The People’s Republic also has an advantage of an existing foothold in many emerging and developing economies now targeted by the EU. Moreover, because the BRI involves China’s state-owned commercial banks, Chinese companies can make even politically or commercially risky investments without taking on much risk. This is a security that European companies will not have.

What is to be financed?

EU foreign infrastructure projects. The focus will lie on digitalization and green transformation. As examples of projects worthy of funding, von der Leyen mentioned the use of green hydrogen and the expansion of rail lines and Internet connections. For example, the railways between the Western Balkans are to be improved and are to be connected to the EU, emphasized Neighbourhood and Enlargement Commissioner Olivér Várhelyi. €30 billion have been earmarked for this. Within the framework of the Eastern Partnership, of which Ukraine is a member, the laying of a data cable beneath the Black Sea is planned. Fiber-optic networks are also to be expanded in Latin America.

The Global Gateway also provides for the development of the health sector and support for the education system in emerging and developing countries. The EU also wants to become active in China’s neighborhood: A connectivity partnership with the Southeast Asian confederation ASEAN is planned. The EU also wants to “promote the strengthening of connections with adjacent strategic corridors in Sub-Saharan Africa and Central Asia”, according to the paper.

What is the USP of Global Gateway?

Unlike China, the EU will primarily provide grants to participating countries, said Jutta Urpilainen, the EU commissioner responsible for international partnerships. This is to avoid credit traps. Von der Leyen stressed that regarding EU funding, partner countries need not fear accumulating unsustainable mountains of debt. In addition, there is transparency in EU aid. The projects implemented remain in the hands of the respective countries and should achieve concrete results on the ground, said von der Leyen.

The EU’s thrust is also clearly formulated in its official communication, not without a nod towards Beijing: “Without proper transparency, good governance and high standards projects can be badly chosen or designed, left incomplete or be used to fuel corruption.” Partner countries will thus have to abide by rules, which could make China’s investments seem less binding by comparison. When it comes to environmental standards in particular, however, “Global Gateway” could be attractive: There is criticism in several BRI countries about the environmental pollution that sometimes follows Chinese projects.

What are the reactions of politicians?

The chairman of the EU Parliament’s trade committee, Bernd Lange (SPD), welcomed the initiative as a “contribution to the global fight against climate change and poverty”. “Instead of making states an offer they cannot refuse, we as the EU want to make them one they do not want to refuse,” Lange said. However, he cautioned, “As with all projects of this magnitude, we will see if the large sums of investment can be realized. If ‘Global Gateway’ is not to remain a pipe dream, we will have to pull a lot of levers together.”

Criticism came from CSU MEP Markus Ferber: “A large part of the money comes from existing programs or depends on private funding,” Ferber said. “A big score looks different. China will not freeze in fear,” Ferber said. Reinhard Buetikofer (Greens), chairman of the European Parliament’s China delegation, called for “getting things done quickly” now. Digital connectivity and green technologies, in particular, must now be the focus, Buetikofer said.

“Global Gateway” has the potential to make the EU a more effective geopolitical actor, stressed Michael Clauß, the German EU ambassador and former German ambassador to China. The top German diplomat had stepped up his advocacy of the infrastructure initiative in recent weeks. “For many partner countries, the offer of rules- and values-based cooperation on a level playing field will be an attractive alternative to China’s ‘Belt & Road’ initiative,” Clauß said.

EU Foreign Affairs High Representative Josep Borrell said: “A stronger Europe in the world means a resolute engagement with our partners, firmly grounded in our core principles”. The Global Gateway reaffirms the vision of a network of connections based on internationally recognized standards and rules.

The German coalition agreement between the SPD, the Greens, and the FDP presented last week already endorses the Brussels infrastructure initiative (China.Table reported). “We want to actively advocate infrastructure development according to high-quality international standards. The EU’s Global Gateway Initiative is an important instrument in this regard,” the paper states.

What does the industry say?

The Federation of German Industries (BDI) praised the Brussels initiative. As there was often no alternative to Chinese infrastructure offered to other countries, it was “high time to offer pragmatic alternative offers according to European standards”, explained Wolfgang Niedermark, Member of the BDI Executive Board. “Global Gateway” is a “serious alternative” to the BRI, Niedermark said. “Especially in the Balkans and North Africa, there is a great need for investment in the areas of digitalization, power, transport, and health.” Niedermark, too, called for quick and concrete planning of projects. To this end, the promised financial resources would have to be made available quickly.

The German Association of the Automotive Industry (VDA) also saw the initiative as an important approach to supply and security of raw materials for Germany and Europe. “In the interests of conserving resources and reducing dependence on third countries, an efficient circular economy for critical raw materials must be established,” said VDA President Hildegard Mueller. “The EU’s new Global Gateway initiative helps on this path.” The strategy also offers companies additional investment opportunities, especially in Africa, Mueller said.

How does Beijing react?

Relatively verbose – and visibly upset: The English-published Global Times slammed the “Global Gateway” shortly after its presentation. For the initiative to be more than “another rubber check,” the EU would have to demonstrate its ability to finance various projects. The budgeted funds go “largely beyond the bloc’s financing capabilities,” Global Times wrote, citing analysts. Global Gateway “builds on the West’s never-ceasing efforts to portray their BRI version as superior in moral terms,” calling it hypocrisy.

There was also room for a general snide remark at Brussels, calling the EU a “loosely-bound grouping, with the distribution of national interests within the 27-member bloc fairly divided.” This would make the EU infrastructure plan more prone to failure, observers told Global Times.

EU Chamber of Commerce: businesses excluded from standardization process

China is out to play a major role in the global standardization of key technologies. The country is already moving towards dominating standardization in future fields such as electromobility, artificial intelligence, and autonomous driving. National standards set by the People’s Republic will then also play an increasingly global role.

Conversely, European companies are often left out of the standardization process in China. This is shown in a new report by the EU Chamber of Commerce in China and the Europe Program of the Swedish Institute of International Affairs (UI). The companies surveyed in this report also point to the cause: above all, there is a lack of expertise. In addition, barriers such as voting shares, lack of translations, or intransparency make it difficult to participate in the proceedings.

China: Standardization as the “battlefield” of the future

There is a lot at stake here. Standardization is the “battleground” of the future, emphasized EU Chamber of Commerce head Joerg Wuttke. Many debates about standardization processes in China are held outside official bodies. European companies stand outside and press their noses against the window, Wuttke says. Standardization is shaping key issues of our time, warns scientist Tim Ruehlig of the Swedish Institute, who co-authored the report.

The issue has also received attention in Brussels: The EU Commission plans to present its expected standardization strategy at the beginning of next year, a source inside the Commission told China.Table. The focus will likely be on digital and green transformation. Standardization plays a major role in this: “Technical standards are indispensable for implementation,” says UI researcher Ruehlig. Of course, the whole thing also has a political component, the scientist warns. That’s because technology is not value-free, he said. “Who is setting standards is a political question.”

Developments in standardization in the People’s Republic in particular are of crucial importance for Europeans. The size of the Chinese market and its increasing competitiveness make it necessary for companies to participate in standardization, says the EU Chamber’s report.

European companies in China are apparently aware of this: According to the report, almost 87 percent of the standardization experts surveyed from EU companies rated technical standards as “very important” or “important” concerning their company’s investment opportunities in China. The future of Chinese standardization will have a clear impact on economic relations between the EU and China.

“Significant hurdles” to participation in standardization

The actual involvement of European companies in the standardization process, much of which is still government-led in China (China.Table reported) is quite sobering. According to the EU Chamber’s 2020 Business Confidence Survey, only 37 percent of respondents participate in any of the government-led standardization projects in China. Chinese legislation – including the Foreign Investment Law (FIL) – stipulates that all relevant stakeholders should be granted equal access and participation rights in standardization activities, according to the EU Chamber. Its implementation, however, leaves much to be desired. This creates numerous hurdles.

The extent of these participation barriers in Chinese standard-setting varies by industry and company size: There are particular problems in the pharmaceutical, petrochemical, and automotive sectors, according to the study. Access is also more difficult in IT and telecommunications, medical devices, and the food and beverage industry. “Barriers to participation appear to be more common among large companies,” the report also says.

Criticism: lack of translations and vitamin B

Where exactly are the EU companies failing? According to the interviews conducted by the study authors with members of the EU Chamber, lack of expertise is a decisive obstacle. Companies lack standardization specialists. The extent to which a company invests in local research and development in China also plays a role. The more local research, the higher opportunities seem to be. This is particularly true in industrial plants, information and communications technology, and the chemicals sectors.

Companies also directly criticized the approach of the Chinese. For example, companies complain about the lack of transparency and feel repeatedly excluded from information. They also cited high participation fees of standard-setting associations and the preferential treatment of Chinese companies as problems. This aspect also includes the lack of translations of Chinese standards into English.

Companies also expressed concern about the lack of intellectual property protection. The importance of vitamin B should not be underestimated either. Given “the strong role of the state in standardization”, it is hardly surprising that companies state “that good connections with standardization authorities are the key to increasing their chances of influencing technical standardization”.

“China Standards 2035” could have a positive impact

After all, there is a shift. 60 percent of the European companies surveyed have noted improved access to Chinese standardization activities. The “China Standards 2035” standardization strategy could bring further positive developments, the report concludes. “But whether it will bring fundamental changes remains to be seen.”

As always, the EU Chamber makes several recommendations. Europe urgently needs to invest in standardization expertise and continue to insist on transparency, the report says. It calls on Beijing to involve European companies more. The chamber recommends that EU companies include standardization in their strategic considerations at an early stage. This would allow them to react to the politicization of technical standardization. Companies should also prepare themselves for cooperation with political decision-makers and business organizations.

Wuttke, the head of the EU Chamber of Commerce, used a musical analogy to describe future developments: Standardization would be like the Vienna Philharmonic Orchestra – and China would now play the trumpet. The question now is whether the trumpet will blend into the orchestra or drown everyone out.

EU supply chain law further delayed

Brussels to postpone the presentation of the planned EU supply chain law again. According to EU circles, the Regulatory Control Committee has once again raised objections to the project. Accordingly, the proposal could even be delayed until February or March 2022. The proposal, which was last scheduled for December 8, no longer appears on the EU Commission’s updated agenda. Sources within the authority said that work on the law was continuing at full speed. However, “quality is more important than speed“.

The EU supply chain law is to even go a step further than the German law, which comes into force in January 2023. Companies would then have to check with all suppliers whether they comply with its conditions. There are concerns within the industry about a law that could impose such far-reaching due diligence obligations on companies concerning the social and environmental conditions of their suppliers. Particularly controversial are the questions of possible legal action by affected parties in third countries and the liability of management. There are also doubts on the part of companies about the implementation of the requirements in practice. This is particularly true in regions such as Xinjiang, where independent audits are practically no longer possible.

The Regulatory Scrutiny Board, a body of Commission officials and external experts, had already rejected the first draft by Commissioner for Justice Didier Reynders in early summer due to flaws. Since then, Internal Market Commissioner Thierry Breton is also working on the law. tho/chw

Sinopec to build world’s largest ‘green hydrogen’ plant

State-owned oil company China Petrochemical Corporation – Sinopec for short – is building a hydrogen production plant in the northwestern region of Xinjiang that will be powered entirely by photovoltaics. The plant in the city of Kuqa will be the world’s largest production facility for so-called “green hydrogen,” Sinopec announced Tuesday. It is expected to start production in June 2023. The annual capacity will be 20,000 tons, according to Sinopec. The state-owned company plans to invest a total of billions of ¥3 billion (€415 million).

According to Sinopec, the project consists of five sections: photovoltaic power generation,
power transmission and conversion, hydrogen from water electrolysis, hydrogen storage, and hydrogen transport. The company plans to supply the green hydrogen produced at the plant to Sinopec Tahe Refining & Chemical, which has been using hydrogen produced with natural gas and other fossil fuels. According to Sinopec, this will cut carbon dioxide emissions by 485,000 tons per year.

Hydrogen is considered to be a climate-neutral form of power that is especially suited for high-temperature production processes. However, this is only true if the complex production of hydrogen is fueled exclusively by renewable energies. So far, this is the case for only four percent of the hydrogen produced in China. China is already the world’s largest producer of hydrogen. So far, however, it has mainly used it as an industrial raw material – for the production of plastics or chemicals, for example.

Xinjiang is one of China’s photovoltaic strongholds. However, there are allegations that Uighur forced laborers are also being used in this sector. ck

Beijing expands diesel production

China has ramped up diesel production since September, providing much-needed supplies on domestic and regional export markets. The state has coordinated the production expansion by state-owned China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec), Bloomberg reported on Tuesday. The state-owned refineries will export about 210,000 tonnes of diesel in December, Bloomberg wrote, citing energy market information provider JLC.

In recent months, China had largely withdrawn from the export business to meet its demand. This withdrawal coincided with a recovery in demand and shrinking diesel stocks worldwide. Customers therefore increasingly sought to buy diesel in India and South Korea. According to Bloomberg, the increased demand is due to other reasons besides at least a temporary easing of the Covid pandemic. Demand in China has been rising seasonally since September due to stronger demand from the fishing industry and for harvesting. In addition, businesses across China have turned to diesel generators in the face of power rationing.

Diesel production in China already increased in October by 12.4 percent compared to the previous month to 14.52 million tons, as business magazine Caixin writes. This trend continued in November, the magazine also reports, citing JLC. Demand for diesel from the construction and logistics sectors also remains robust. Prices are also high. Therefore, some of China’s truck drivers, many of whom operate on their own account, have recently been supplying themselves via the black market. Diesel at the gas station had simply become too expensive for them. ck

Pressure to extradite Taiwanese

China is pressuring foreign governments to extradite Taiwanese to the People’s Republic, according to a report by human rights organization Safeguard Defenders. Through this, Beijing wants to extradite hundreds of Taiwanese living abroad, according to the report by the Madrid-based organization, which was already published on Tuesday. Foreign Office spokesman Wang Wenbin described the study on Wednesday as “pure nonsense”.

Between 2016 and 2019, more than 600 Taiwanese living abroad were extradited to the People’s Republic, according to Safeguard Defenders. China is engaged in a “hunt for Taiwanese”. However, Spain accounted for the largest proportion, with 200 cases. According to the report, a Spanish court complied with Beijing’s demands. A Czech court, on the other hand, rejected China’s request for the extradition of eight Taiwanese in April 2020. It referred to the risk of torture and human rights violations in the People’s Republic. Beijing also exerted pressure on the Philippines and Cambodia, according to Safeguard Defenders.

In 2009, AFP reported that Taiwan and China agreed that police should deport suspected criminals from abroad to their respective home countries. However, Beijing had been increasingly less compliant with this agreement since the election of Taiwanese President Tsai Ing-wen in 2016. ck

Antidialect campaign

Officially, China’s Communist Party attributes great importance to minorities in the country. However, it is actually focusing on cultural and linguistic unification. The central government has launched a nationwide campaign to promote High Chinese, also known as Mandarin. This is ultimately directed against the many dialects spoken in the country.

At least 85 percent of citizens in the People’s Republic should speak Mandarin by 2025, according to an order issued by the State Council on Tuesday. The use of Mandarin remains “unbalanced and insufficient” so far. Mandarin must therefore be promoted to meet the needs of the modern economy. The leadership wants Mandarin to be virtually universal by 2035, including in rural areas and among ethnic minorities.

China is a multi-ethnic state with officially 56 ethnic groups, all of which have their own languages, including Tibetan, Mongolian and Uighur. In addition, countless dialects differ from Mandarin at least as much as German differs from English. These include Cantonese, Hokkien, and Shanghainese. They are only called “dialects” because the written language is the same as Mandarin.

The State Council document now calls for increased supervision. The aim is to “ensure that the national common spoken and written language is used as the official language of government agencies and used as the basic language of schools, news and publications, radio, film and television, public services and other fields”. This will not necessarily be easy, as people are attached to their local languages. In 2020, protests erupted in Inner Mongolia when authorities banned Mongolian in schools and made Mandarin the language of instruction. Beijing then called the protests a form of separatism and cracked down on the protesters accordingly. flee

Peng Shuai case: WTA suspends tournaments in China and Hong Kong

International pressure is mounting in the case of Chinese tennis player Peng Shuai. The Women’s Tennis Association (WTA) will suspend all of its tournaments in China and Hong Kong, WTA chief Steve Simon announced on Wednesday. “In good conscience, I don’t see how I can ask our athletes to compete there when Peng Shuai is not allowed to communicate freely and has seemingly been pressured to contradict her allegation of sexual assault,” Simon wrote.

Given the current situation, he said he was also very concerned about the risks that female players, staff, and employees could face if the tennis federation were to hold events in China in 2022. “To further protect Peng and many other women throughout the world, it is more urgent than ever for people to speak out.”

The decision to suspend the tournaments was made jointly by the board, Simon wrote. The head of the International Women’s Tennis Federation criticized censorship in China over the Peng Shuai case and called for a transparent review of the sexual assault allegations. “While we now know where Peng is, I have serious doubts that she is free, safe and not subject to censorship, coercion and intimidation.” He said the leadership in China had failed to address the issue in a credible manner, leaving the WTA with no other choice. Simon regretted the move for the tennis community.

For the WTA, China represents one of the largest growth markets in the world. The federation had made a big push in the People’s Republic over the past decade. In the last season before the
start of the Covid pandemic in 2019, WTA hosted nine tournaments with prize money of more than $30 million in China.

Learning from Double 11: Marketing, Retail, Consumption Trends

By Sofia Brooke, Dezan Shira

China’s rising consumer power plays an important part in the country’s dual circulation strategy and is an engine of global growth in many categories. The Double 11 shopping festival, as the largest and most popular annual global shopping festival in the world – now overshadowing Black Friday and Cyber Monday combined – serves as a window to observe China’s latest consumer trends.

This year, the Chinese annual shopping festival began on October 20, 2021 at 8 pm. It was first launched by the Alibaba Group Holding Ltd. in 2009 around the unofficial November 11 holiday that celebrated single people. Since then, the commercial activity around the celebration has expanded from one day to three weeks and extended from Alibaba’s Taobao and Tmall marketplaces to the whole retail sector.

Retailers and brands now tap into social features on social media platforms and embrace livestreaming sessions besides omnichannel marketing campaigns to increase their sales in the Chinese market, particularly as new entrants bolster competition during periods like the Double 11 shopping festival. In this article, we’ll walk you through the emerging new trends.

Marketing and retail trends continue to shift

This year’s Double 11 shopping festival did not feature “battle reports”, which typically show new records created by the minutes as has been done for around a decade.

45 minutes after midnight on Thursday November 11^th, a total 382 brands on Alibaba’s platform Tmall had sales exceeding $15.6 million. The brands included domestic brands like Huawei and Erke and international brands like L’Oréal and Apple. Up from last year’s nearly US$78 billion, Tmall’s total transaction volume reached hit US$84 billion. As of 2am, Xiaomi’s total sales during the festival had exceeded $2 million. JD.com reported a new record, with earnings of $54 billion.

This year, presales were earlier. In the past, the Double 11 presales began at midnight. Consumers would pull all-nighters to place orders. However, this year, Tmall and JD.com’s presales began hours earlier at 8 pm on October 20^th. Besides the presales period, Alibaba runs two sales periods, a practice the company debuted last year. JD.com’s Double 11 sales began at 8 pm on October 31^st, with a final “price-off” occurring at 8 pm on November 10^th. Extending sales meant e-commerce companies boosted the value of goods and eased pressure on logistics networks and merchants.

Longer pre-sale period and new platform features

Short-video operators ByteDance Ltd. and Kuaishou Technology have also started shopping events on their platforms. Both platforms livestream e-commerce. Streamers use their connections and credibility with audiences to recommend products, with discounts exclusive to the stream at times.

These platforms have hundreds of millions of daily visitors. In August 2020, ByteDance’s Douyin reached 600 million daily active users while Kuaishou reached 293 million active daily users in the second quarter in 2021. These platforms also have special features such as content recommendation algorithms that contribute to sales figures.

In June 2020, ByteDance created its own e-commerce department and participated in the Double 11 shopping festival that year instead of acting as just an advertising platform for other platforms. Douyin recorded final sales of US$2.9 billion.

On October 1 this year, Alibaba released a new feature called “Zhongcao Machine”, which allows shoppers to search through reviews from other users. It translates to “planting grass” – referring to the idea of planting an idea to purchase goods in a consumer’s mind.

The Guochao trend: focus on local brands

The notion of guochao – the desire to buy Chinese services and goods and connect with local producers and roots – has become popular much to the benefit of Chinese companies and likely in response to their greater competitive goods and service offerings in recent years. While the trend may have been strengthened by nationalist backlashes against foreign products, it has been some time since brand preferences in China shifted from foreign to domestic companies.

A recent survey conducted of 5,000 respondents from 15 cities found that the number of those who would buy a local brand over a foreign brand increased from 15 percent to 85 percent from 2011 to 2020. The shifts in preference has led to the emergence of large local players in some categories. Over the last decade, local Chinese brands have captured most of the market in household packaged goods and electronics. In these categories, many Chinese brands hold market shares of more than 50 percent.

Historically, foreign players have had the largest market share in the beauty and automotive industry in China. Chinese premium automotive brands now account for six percent of the market while electric vehicles account for almost the entire market in China.

The guochao trend has been most noticed in apparel and footwear, with local apparel brands gaining three percentage points market share between 2015 and 2020. However, footwear and sportswear dropped between five and 10 percent in the same period. Despite this, some Chinese companies have shown strong growth. Sportswear company Anta Group increased its sales approximately threefold in this period while Li-Ning grew its sales by 85 percent. Some global brands also saw declines in early 2021.

Clearly, the preference shifts are thus responding to more than just ‘buying local’ but a mix of factors like quality expectations, market trends, price range, and perception among target consumer bands, etc.

For example, Chinese domestic skincare and makeup products have been able to challenge global counterparts through a better understanding of Chinese consumers, R&D capabilities, and better online channels for sales. The industry has also received support from the government and the Ministry of Industry and Information Technology (MIIT), with promises being made to team up with other agencies to offer the cosmetics industry innovation and funding support.

According to Shanghai Shenyin Wangou Research & Consulting Co. Ltd., though foreign cosmetic brand led in presale figures, domestic brands Winona and Proya Cosmetic Co. Ltd. ranked number 5 and 10, respectively, during the first two days of presale in the Double 11 festival. In the first hour of presales, Winona achieved sales of US$109 million. This surpassed its record for the whole festival period last year. Sports brands like Erke, MobiGarden, and Warrior and appliance brand like Tineco and Narwal surpassed sales figure records for the entire day within the first hour of sales.

Walled gardens approach banned

It has been a common practice for years for the largest tech companies to block rivals’ links on their apps. This is known as the “walled gardens” approach and can protect a company’s digital ecosystem, discourage consumers from spending money elsewhere, and reduce their competitor’s growth. This year’s Double 11 shopping festival saw a major change as this walled gardens approach was banned by government directive to avoid monopolies and uncompetitive practices.

Previously, a walled gardens strategy meant that links from Douyin and Feishu (a workplace tool) could not be opened easily on Tencent Holdings Ltd’s WeChat platform. Links forwarded from Taobao and Tmall could not be opened directly in the app either. Tencent claimed this practice was for security concerns. These practices led to legal issues and complaints from users.

Other companies implemented similar restrictions. Alibaba did not allow shoppers to use Tencent’s WeChat Pay system for years. Douyin also banned third-party website links on livestreaming channels during the 2020 Double 11 festival.

However, these practices are now effectively banned. On July 26, this year, the MIIT detailed a six-month campaign to clean up the internet industry, and blocking external links was one of eight types of activities targeted. On August 17, the State Administration for Market Regulation (SAMR) released draft guidelines to regulate anti-competitive measures in the industry, barring link blocking once more. On September 15, the cybersecurity watchdog released guidelines that required platforms to cooperate on traffic and data in line with national rules.

Tencent, ByteDance, and Alibaba all expressed support for the new rules. On September 17, Tencent allowed WeChat users to share external links in private chats. On October 27, Alibaba’s Chief Marketing Officer Christ Tung confirmed WeChat Pay could be now used to make purchases on their apps. Users can also share their Alibaba shopping carts to WeChat group chats and “Moments” feeds.

Retailers want to polish up their green image

During this Double 11 festival, some companies tried to promote public welfare and green consumption. The efforts come at the backdrop of government calls demanding the tech sector to contribute more towards “common prosperity” and several authorities introducing plans to meet China’s carbon reduction goals.

On Tmall, US$15 million worth of green vouchers were given out to encourage consumers to buy green certification and energy-efficient products. At the same time, Alibaba’s logistics department introduced 60,000 package recycling points across 20 cities. JD.com said it is recycling and reducing packaging, and making deliveries using electric vehicles. These initiatives come as no surprise due to sustainable consumption becoming popular in China. In a survey conducted by Pwc, 72% of respondents in China said they buy from companies which are committed to protecting the environment.

Alibaba also launched philanthropy campaigns. For example, their RMB 1 donation for social media posts mentioning the “Goods for Good” program. An initiative from 2006, donations from the program benefit older people living alone, low-income workers, and “left-behind children” of migrant workers.

The future of consumption in China is bright

China contributes a large amount to global consumption but McKinsey reports there is ‘room to grow’. China’s household consumption is approximately 38 percent of its GDP. In comparison, the whole of Asia-Pacific’s consumption is 50 percent of its GDP, the European Union’s is 52 percent, and the United States’ is 68 percent. McKinsey reports that a more complex financial system and new policy directions may steer customers towards discretionary spending or financial assets.

As China continues to urbanize, cities remain the driving force of China’s growth. Approximately 80 percent of future consumption growth is expected to happen in cities. Consumption in China is driven by its 30 largest cities. Consumers in these cities have large amounts of purchasing power, spending more on a per capita basis than the average national spend. These cities have had larger service offers and retail opportunities, historically. However, new hotspots of consumption are emerging in cities outside the top 30, such as Guiyang, and reporting higher household consumption. Many companies are anticipating this next wave of growth and are expanding their reach into cities where incomes are rising.

Ein Bauer zerschneidet getrocknete Platten aus Süßkartoffeln zum Trocknen — Sweet potato harvest time in Zhejiang

A farmer in Quanfan cuts slabs of sweet potato pulp into strips. Then the pieces are dried under the sun. Every winter, the residents of the village in the coastal province of Zhejiang prepare various sweet potato delicacies in this way. Tasty and healthy traditional sweet potato chips, for example, are popular in all of China.

CHINA.TABLE EDITORIAL OFFICE

Amelie
Richter

Marcel
Grzanna

Fabian
Peltsch

Julia
Fiedler

Angela
Köckritz

Jörn
Petring

Dear reader,

Today’s features focus mainly on foreign and economic policy. Together with colleagues, Felix Lee had the opportunity to ask Foreign Minister-designate Annalena Baerbock about her future China policy. Baerbock announced that she does not want to “gloss over or hush up” critical issues in the exchange with China. She has long advocated a combination of “dialogue and toughness”. Amelie Richter and Finn Mayer-Kuckuk also asked a number of China experts about their opinion on a future Green-led foreign policy.

EU Commission President Ursula von der Leyen also presented the long-awaited Global Gateway investment program in Brussels on Wednesday. With it, the EU aims to promote projects in emerging countries, including green technology and digitization. The program is clearly positioned as a rival project to China’s New Silk Road (also known as the Belt and Road Initiative/BRI). Amelie Richter analyzes the project in detail.

A new study by the EU Chamber of Commerce also sheds light on the difficulties European companies face when trying to participate in standardization processes in China. Amelie Richter has taken a close look at the study. In it, companies criticize exclusion, insufficient transparency, or simply a lack of translations as hurdles to participation. But they often also lack the expertise to participate in complex standardization processes. An important issue, as China is also increasingly pushing into the global standardization of key technologies.

We hope you enjoy today’s issue!

Your
Christiane Kühl

Baerbock strives for ‘dialogue and toughness’ towards China

Shortly before taking office, German Foreign Minister-Designate Annalena Baerbock (Greens) outlines her program for dealing with the challenge China poses in the future. According to the program, she wants to find much clearer words towards the People’s Republic than her predecessors. “Dialogue is the central building block of international politics. But that doesn’t mean you have to gloss things over or hush things up,” Baerbock said in an interview with China.Table editor Felix Lee and journalists from the daily newspaper (taz). “A foreign policy that puts differences first leads just as much to a dead end as one based on blocking out conflicts.” For her, “values-driven foreign policy is always an interplay of dialogue and toughness.”

To this end, Baerbock wants to anchor German foreign policy more firmly within Europe. Towards an important trading partner like China, the EU would best pull together, Baerbock said. “We need a common European China policy.” If Germany, “as the largest member state, formulates its own China policy,” as it has done in the past, it would weaken the position of all. The EU, in turn, has considerable weight as one of the world’s largest domestic markets.

In the “system competition with an authoritarian regime like China“, Baerbock, therefore, wants to specifically join forces with European democracies. She also sees Germany as “part of a transatlantic democratic alliance“. This makes it necessary to “seek strategic solidarity with democratic partners, to defend our values and interests together, and to continuously promote these values in our foreign policy.” During the interview, Baerbock also took the liberty of taking a jab at the outgoing government’s political style: “Eloquent silence is not a form of diplomacy in the long term, even if some people have seen it that way in recent years.”

Xinjiang, Peng Shuai and Zhang Zhan specifically named

In this first interview since the announcement of the cabinet line-up, Baerbock outright addressed two hotly debated issues. She calls for tightening European supply chain rules in light of human rights abuses in Xinjiang. “If products from regions like Xinjiang, where forced labor is common practice, are blocked, that’s a big problem for an exporting country like China.” In response to the case of missing tennis player Peng Shuai (China.Table reported), she at least won’t rule out a diplomatic boycott of the upcoming Winter Olympics in Beijing. There are “different ways for governments to deal with this”, but they still need to be discussed.

The future foreign minister linked Peng Shuai to another recent case of suppression of free speech: “When I see how China’s leadership deals with tennis player Peng Shuai or with the arrested citizen journalist Zhang Zhan, then, of course, we should take a closer look at the Olympic Games,” she said. “Journalistic reporting is not a crime. Zhang Zhan should therefore be released.”

In addition to trade policy and human rights, Baerbock wants to also set a focus in her future work on the international networking of climate protection. The “220 German diplomatic missions could become important climate embassies and also contribute to intensifying technology transfer”. She advocates that countries willing to act should move forward on the energy transition as quickly as possible. “A global CO2 price, for example, is a fine idea, but it’s also just a good excuse. Because by the time all 190 countries are ready for it, it’s probably too late.” Just as Germany exported the energy transition to the world 20 years ago with the Renewable Energy Sources Act, it could now move forward again and become a pioneer of climate-neutral business.

Praise for realistic assessment of China

Experts believe that Baerbock will be able to provide important impetus in her new office as announced. “The coalition agreement very impressively outlines a new China policy that represents our interests and values in the systemic competition with Beijing,” says Thorsten Benner of the Global Public Policy Institute (GPPi) in Berlin. If Baerbock implements this concept of a European-focused China strategy, Germany and the EU could win equally.

Benner welcomes the fact that both the coalition agreement and the statements so far made by Baerbock are turned towards a “China that actually exists“. According to him, the Merkel governments had for far too long pursued the model of a “cooperative, friendly, easily malleable China”. Germany must now face systemic competition with confidence and reduce dependencies. These approaches can also be found in the foreign policy positions of the Greens.

According to Benner, a lot is also now riding on whether the Chancellery and the Foreign Ministry share a common perception of China policy. “It would be counterproductive if, after a few months, it turns out that the Foreign Ministry and the Chancellery are working against each other,” Benner says. If the government is at odds within itself, Germany is playing far below its capabilities. Scholz, as chancellor, should also try to play as a team with the foreign minister in talks in Beijing, instead of pursuing parallel diplomacy.

Foreign policy expert Noah Barkin of the Berlin office of the German Marshall Fund (GMF) also believes coordination with Scholz is key. “German foreign policy is made in the Chancellery, and Olaf Scholz favors a more measured approach with China.” Baerbock, however, has the public opinion, the mood in the Bundestag, and the media on her side. Many of Germany’s international allies are also more in line with Baerbock.

With Baerbock in the foreign ministry, Barkin expects “a new tone” in relations with China. “If she plays her cards right, and builds support for her approach with other cabinet ministers, she can push Germany towards a more clear-eyed vision of the relationship with China. ” She would address critical issues more openly than her predecessors and show a greater commitment to human rights.

Warning against a break with Beijing

Other observers, however, also see potential risks in the program outlined by the coalition agreement and the future foreign minister. Playing with red lines could cause lasting damage to relations with Beijing, believes sinologist Helwig Schmidt-Glintzer of the China Centrum Tübingen (CCT). The tone of the coalition agreement points to the idea of a more-China policy as opposed to the current one-China policy. Specifically, this refers to the mention of Taiwan in the coalition agreement, which, for example, advocates the “participation of democratic Taiwan in international organizations”.

Schmidt-Glintzer warns that a particularly critical mindset could lead to a break with Beijing. China’s policy has changed many times and has proven to be highly adaptable and capable of learning. It had changed course several times in response to changing conditions, and will probably do so again. However, anything that goes in the direction of challenging the country’s external borders could “lead to a dynamic that can no longer be controlled.” Finn Mayer-Kuckuk, Felix Lee, Amelie Richter

‘Global Gateway’ – Brussels answer to the Silk Road

By

Amelie Richter

What always resonated around “Global Gateway”, but was rarely openly mentioned, now found a clear answer at the official presentation of the infrastructure initiative of the EU Commission: “Yes, definitely. We are able to do that,” said EU Commission President Ursula von der Leyen in response to the question whether the program could compete with China’s “Belt and Road” initiative. “Countries made their experience with the Chinese investments. They need better and different offers.” The EU offer would involve the private sector, which does not exist in the People’s Republic. “So it is a true alternative,” the Commission chief stressed.

Brussels had been working on the counter Silk Road for a long time; the publication date was postponed several times. The result, however, is impressive and was met with much approval from politics and the economy. As with many EU initiatives, it remains to be seen how the implementation will progress in concrete terms. The projected program is ambitious: Up to €300 billion are to be mobilized by 2027. To this end, the EU Commission is not only bringing member states to the table but also the private sector as well as the European Investment Bank and other European financial institutions, including, for example, the European Bank for Reconstruction and Development.

The most important questions about “Global Gateway” at a glance:

Where is the money coming from?

Part of the projected billion euro investment is to come from the European Fund for Sustainable Development Plus (EFDS+) – around €135 billion. EFDS+ is an already existing EU budget fund, which in turn is filled in various ways. Not all the financial instruments for it are ready yet. The majority of the “Global Gateway” initiative, around €145 billion, is for “planned investment volumes by European financial and development
finance institutions“. Another €18 billion are to be raised “under other EU external assistance programs”. In addition, billions more are to come from the private sector.

Is it enough to go up against the BRI?

That remains questionable – because, in purely numerical terms, the BRI dwarfs “Global Gateway”. Beijing’s total spending on the New Silk Road could amount to $1.2 to 1.3 trillion by 2027, according to Morgan Stanley. The People’s Republic also has an advantage of an existing foothold in many emerging and developing economies now targeted by the EU. Moreover, because the BRI involves China’s state-owned commercial banks, Chinese companies can make even politically or commercially risky investments without taking on much risk. This is a security that European companies will not have.

What is to be financed?

EU foreign infrastructure projects. The focus will lie on digitalization and green transformation. As examples of projects worthy of funding, von der Leyen mentioned the use of green hydrogen and the expansion of rail lines and Internet connections. For example, the railways between the Western Balkans are to be improved and are to be connected to the EU, emphasized Neighbourhood and Enlargement Commissioner Olivér Várhelyi. €30 billion have been earmarked for this. Within the framework of the Eastern Partnership, of which Ukraine is a member, the laying of a data cable beneath the Black Sea is planned. Fiber-optic networks are also to be expanded in Latin America.

The Global Gateway also provides for the development of the health sector and support for the education system in emerging and developing countries. The EU also wants to become active in China’s neighborhood: A connectivity partnership with the Southeast Asian confederation ASEAN is planned. The EU also wants to “promote the strengthening of connections with adjacent strategic corridors in Sub-Saharan Africa and Central Asia”, according to the paper.

What is the USP of Global Gateway?

Unlike China, the EU will primarily provide grants to participating countries, said Jutta Urpilainen, the EU commissioner responsible for international partnerships. This is to avoid credit traps. Von der Leyen stressed that regarding EU funding, partner countries need not fear accumulating unsustainable mountains of debt. In addition, there is transparency in EU aid. The projects implemented remain in the hands of the respective countries and should achieve concrete results on the ground, said von der Leyen.

The EU’s thrust is also clearly formulated in its official communication, not without a nod towards Beijing: “Without proper transparency, good governance and high standards projects can be badly chosen or designed, left incomplete or be used to fuel corruption.” Partner countries will thus have to abide by rules, which could make China’s investments seem less binding by comparison. When it comes to environmental standards in particular, however, “Global Gateway” could be attractive: There is criticism in several BRI countries about the environmental pollution that sometimes follows Chinese projects.

What are the reactions of politicians?

The chairman of the EU Parliament’s trade committee, Bernd Lange (SPD), welcomed the initiative as a “contribution to the global fight against climate change and poverty”. “Instead of making states an offer they cannot refuse, we as the EU want to make them one they do not want to refuse,” Lange said. However, he cautioned, “As with all projects of this magnitude, we will see if the large sums of investment can be realized. If ‘Global Gateway’ is not to remain a pipe dream, we will have to pull a lot of levers together.”

Criticism came from CSU MEP Markus Ferber: “A large part of the money comes from existing programs or depends on private funding,” Ferber said. “A big score looks different. China will not freeze in fear,” Ferber said. Reinhard Buetikofer (Greens), chairman of the European Parliament’s China delegation, called for “getting things done quickly” now. Digital connectivity and green technologies, in particular, must now be the focus, Buetikofer said.

“Global Gateway” has the potential to make the EU a more effective geopolitical actor, stressed Michael Clauß, the German EU ambassador and former German ambassador to China. The top German diplomat had stepped up his advocacy of the infrastructure initiative in recent weeks. “For many partner countries, the offer of rules- and values-based cooperation on a level playing field will be an attractive alternative to China’s ‘Belt & Road’ initiative,” Clauß said.

EU Foreign Affairs High Representative Josep Borrell said: “A stronger Europe in the world means a resolute engagement with our partners, firmly grounded in our core principles”. The Global Gateway reaffirms the vision of a network of connections based on internationally recognized standards and rules.

The German coalition agreement between the SPD, the Greens, and the FDP presented last week already endorses the Brussels infrastructure initiative (China.Table reported). “We want to actively advocate infrastructure development according to high-quality international standards. The EU’s Global Gateway Initiative is an important instrument in this regard,” the paper states.

What does the industry say?

The Federation of German Industries (BDI) praised the Brussels initiative. As there was often no alternative to Chinese infrastructure offered to other countries, it was “high time to offer pragmatic alternative offers according to European standards”, explained Wolfgang Niedermark, Member of the BDI Executive Board. “Global Gateway” is a “serious alternative” to the BRI, Niedermark said. “Especially in the Balkans and North Africa, there is a great need for investment in the areas of digitalization, power, transport, and health.” Niedermark, too, called for quick and concrete planning of projects. To this end, the promised financial resources would have to be made available quickly.

The German Association of the Automotive Industry (VDA) also saw the initiative as an important approach to supply and security of raw materials for Germany and Europe. “In the interests of conserving resources and reducing dependence on third countries, an efficient circular economy for critical raw materials must be established,” said VDA President Hildegard Mueller. “The EU’s new Global Gateway initiative helps on this path.” The strategy also offers companies additional investment opportunities, especially in Africa, Mueller said.

How does Beijing react?

Relatively verbose – and visibly upset: The English-published Global Times slammed the “Global Gateway” shortly after its presentation. For the initiative to be more than “another rubber check,” the EU would have to demonstrate its ability to finance various projects. The budgeted funds go “largely beyond the bloc’s financing capabilities,” Global Times wrote, citing analysts. Global Gateway “builds on the West’s never-ceasing efforts to portray their BRI version as superior in moral terms,” calling it hypocrisy.

There was also room for a general snide remark at Brussels, calling the EU a “loosely-bound grouping, with the distribution of national interests within the 27-member bloc fairly divided.” This would make the EU infrastructure plan more prone to failure, observers told Global Times.

EU Chamber of Commerce: businesses excluded from standardization process

China is out to play a major role in the global standardization of key technologies. The country is already moving towards dominating standardization in future fields such as electromobility, artificial intelligence, and autonomous driving. National standards set by the People’s Republic will then also play an increasingly global role.

Conversely, European companies are often left out of the standardization process in China. This is shown in a new report by the EU Chamber of Commerce in China and the Europe Program of the Swedish Institute of International Affairs (UI). The companies surveyed in this report also point to the cause: above all, there is a lack of expertise. In addition, barriers such as voting shares, lack of translations, or intransparency make it difficult to participate in the proceedings.

China: Standardization as the “battlefield” of the future

There is a lot at stake here. Standardization is the “battleground” of the future, emphasized EU Chamber of Commerce head Joerg Wuttke. Many debates about standardization processes in China are held outside official bodies. European companies stand outside and press their noses against the window, Wuttke says. Standardization is shaping key issues of our time, warns scientist Tim Ruehlig of the Swedish Institute, who co-authored the report.

The issue has also received attention in Brussels: The EU Commission plans to present its expected standardization strategy at the beginning of next year, a source inside the Commission told China.Table. The focus will likely be on digital and green transformation. Standardization plays a major role in this: “Technical standards are indispensable for implementation,” says UI researcher Ruehlig. Of course, the whole thing also has a political component, the scientist warns. That’s because technology is not value-free, he said. “Who is setting standards is a political question.”

Developments in standardization in the People’s Republic in particular are of crucial importance for Europeans. The size of the Chinese market and its increasing competitiveness make it necessary for companies to participate in standardization, says the EU Chamber’s report.

European companies in China are apparently aware of this: According to the report, almost 87 percent of the standardization experts surveyed from EU companies rated technical standards as “very important” or “important” concerning their company’s investment opportunities in China. The future of Chinese standardization will have a clear impact on economic relations between the EU and China.

“Significant hurdles” to participation in standardization

The actual involvement of European companies in the standardization process, much of which is still government-led in China (China.Table reported) is quite sobering. According to the EU Chamber’s 2020 Business Confidence Survey, only 37 percent of respondents participate in any of the government-led standardization projects in China. Chinese legislation – including the Foreign Investment Law (FIL) – stipulates that all relevant stakeholders should be granted equal access and participation rights in standardization activities, according to the EU Chamber. Its implementation, however, leaves much to be desired. This creates numerous hurdles.

The extent of these participation barriers in Chinese standard-setting varies by industry and company size: There are particular problems in the pharmaceutical, petrochemical, and automotive sectors, according to the study. Access is also more difficult in IT and telecommunications, medical devices, and the food and beverage industry. “Barriers to participation appear to be more common among large companies,” the report also says.

Criticism: lack of translations and vitamin B

Where exactly are the EU companies failing? According to the interviews conducted by the study authors with members of the EU Chamber, lack of expertise is a decisive obstacle. Companies lack standardization specialists. The extent to which a company invests in local research and development in China also plays a role. The more local research, the higher opportunities seem to be. This is particularly true in industrial plants, information and communications technology, and the chemicals sectors.

Companies also directly criticized the approach of the Chinese. For example, companies complain about the lack of transparency and feel repeatedly excluded from information. They also cited high participation fees of standard-setting associations and the preferential treatment of Chinese companies as problems. This aspect also includes the lack of translations of Chinese standards into English.

Companies also expressed concern about the lack of intellectual property protection. The importance of vitamin B should not be underestimated either. Given “the strong role of the state in standardization”, it is hardly surprising that companies state “that good connections with standardization authorities are the key to increasing their chances of influencing technical standardization”.

“China Standards 2035” could have a positive impact

After all, there is a shift. 60 percent of the European companies surveyed have noted improved access to Chinese standardization activities. The “China Standards 2035” standardization strategy could bring further positive developments, the report concludes. “But whether it will bring fundamental changes remains to be seen.”

As always, the EU Chamber makes several recommendations. Europe urgently needs to invest in standardization expertise and continue to insist on transparency, the report says. It calls on Beijing to involve European companies more. The chamber recommends that EU companies include standardization in their strategic considerations at an early stage. This would allow them to react to the politicization of technical standardization. Companies should also prepare themselves for cooperation with political decision-makers and business organizations.

Wuttke, the head of the EU Chamber of Commerce, used a musical analogy to describe future developments: Standardization would be like the Vienna Philharmonic Orchestra – and China would now play the trumpet. The question now is whether the trumpet will blend into the orchestra or drown everyone out.

EU supply chain law further delayed

Brussels to postpone the presentation of the planned EU supply chain law again. According to EU circles, the Regulatory Control Committee has once again raised objections to the project. Accordingly, the proposal could even be delayed until February or March 2022. The proposal, which was last scheduled for December 8, no longer appears on the EU Commission’s updated agenda. Sources within the authority said that work on the law was continuing at full speed. However, “quality is more important than speed“.

The EU supply chain law is to even go a step further than the German law, which comes into force in January 2023. Companies would then have to check with all suppliers whether they comply with its conditions. There are concerns within the industry about a law that could impose such far-reaching due diligence obligations on companies concerning the social and environmental conditions of their suppliers. Particularly controversial are the questions of possible legal action by affected parties in third countries and the liability of management. There are also doubts on the part of companies about the implementation of the requirements in practice. This is particularly true in regions such as Xinjiang, where independent audits are practically no longer possible.

The Regulatory Scrutiny Board, a body of Commission officials and external experts, had already rejected the first draft by Commissioner for Justice Didier Reynders in early summer due to flaws. Since then, Internal Market Commissioner Thierry Breton is also working on the law. tho/chw

Sinopec to build world’s largest ‘green hydrogen’ plant

State-owned oil company China Petrochemical Corporation – Sinopec for short – is building a hydrogen production plant in the northwestern region of Xinjiang that will be powered entirely by photovoltaics. The plant in the city of Kuqa will be the world’s largest production facility for so-called “green hydrogen,” Sinopec announced Tuesday. It is expected to start production in June 2023. The annual capacity will be 20,000 tons, according to Sinopec. The state-owned company plans to invest a total of billions of ¥3 billion (€415 million).

According to Sinopec, the project consists of five sections: photovoltaic power generation,
power transmission and conversion, hydrogen from water electrolysis, hydrogen storage, and hydrogen transport. The company plans to supply the green hydrogen produced at the plant to Sinopec Tahe Refining & Chemical, which has been using hydrogen produced with natural gas and other fossil fuels. According to Sinopec, this will cut carbon dioxide emissions by 485,000 tons per year.

Hydrogen is considered to be a climate-neutral form of power that is especially suited for high-temperature production processes. However, this is only true if the complex production of hydrogen is fueled exclusively by renewable energies. So far, this is the case for only four percent of the hydrogen produced in China. China is already the world’s largest producer of hydrogen. So far, however, it has mainly used it as an industrial raw material – for the production of plastics or chemicals, for example.

Xinjiang is one of China’s photovoltaic strongholds. However, there are allegations that Uighur forced laborers are also being used in this sector. ck

Beijing expands diesel production

China has ramped up diesel production since September, providing much-needed supplies on domestic and regional export markets. The state has coordinated the production expansion by state-owned China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec), Bloomberg reported on Tuesday. The state-owned refineries will export about 210,000 tonnes of diesel in December, Bloomberg wrote, citing energy market information provider JLC.

In recent months, China had largely withdrawn from the export business to meet its demand. This withdrawal coincided with a recovery in demand and shrinking diesel stocks worldwide. Customers therefore increasingly sought to buy diesel in India and South Korea. According to Bloomberg, the increased demand is due to other reasons besides at least a temporary easing of the Covid pandemic. Demand in China has been rising seasonally since September due to stronger demand from the fishing industry and for harvesting. In addition, businesses across China have turned to diesel generators in the face of power rationing.

Diesel production in China already increased in October by 12.4 percent compared to the previous month to 14.52 million tons, as business magazine Caixin writes. This trend continued in November, the magazine also reports, citing JLC. Demand for diesel from the construction and logistics sectors also remains robust. Prices are also high. Therefore, some of China’s truck drivers, many of whom operate on their own account, have recently been supplying themselves via the black market. Diesel at the gas station had simply become too expensive for them. ck

Pressure to extradite Taiwanese

China is pressuring foreign governments to extradite Taiwanese to the People’s Republic, according to a report by human rights organization Safeguard Defenders. Through this, Beijing wants to extradite hundreds of Taiwanese living abroad, according to the report by the Madrid-based organization, which was already published on Tuesday. Foreign Office spokesman Wang Wenbin described the study on Wednesday as “pure nonsense”.

Between 2016 and 2019, more than 600 Taiwanese living abroad were extradited to the People’s Republic, according to Safeguard Defenders. China is engaged in a “hunt for Taiwanese”. However, Spain accounted for the largest proportion, with 200 cases. According to the report, a Spanish court complied with Beijing’s demands. A Czech court, on the other hand, rejected China’s request for the extradition of eight Taiwanese in April 2020. It referred to the risk of torture and human rights violations in the People’s Republic. Beijing also exerted pressure on the Philippines and Cambodia, according to Safeguard Defenders.

In 2009, AFP reported that Taiwan and China agreed that police should deport suspected criminals from abroad to their respective home countries. However, Beijing had been increasingly less compliant with this agreement since the election of Taiwanese President Tsai Ing-wen in 2016. ck

Antidialect campaign

Officially, China’s Communist Party attributes great importance to minorities in the country. However, it is actually focusing on cultural and linguistic unification. The central government has launched a nationwide campaign to promote High Chinese, also known as Mandarin. This is ultimately directed against the many dialects spoken in the country.

At least 85 percent of citizens in the People’s Republic should speak Mandarin by 2025, according to an order issued by the State Council on Tuesday. The use of Mandarin remains “unbalanced and insufficient” so far. Mandarin must therefore be promoted to meet the needs of the modern economy. The leadership wants Mandarin to be virtually universal by 2035, including in rural areas and among ethnic minorities.

China is a multi-ethnic state with officially 56 ethnic groups, all of which have their own languages, including Tibetan, Mongolian and Uighur. In addition, countless dialects differ from Mandarin at least as much as German differs from English. These include Cantonese, Hokkien, and Shanghainese. They are only called “dialects” because the written language is the same as Mandarin.

The State Council document now calls for increased supervision. The aim is to “ensure that the national common spoken and written language is used as the official language of government agencies and used as the basic language of schools, news and publications, radio, film and television, public services and other fields”. This will not necessarily be easy, as people are attached to their local languages. In 2020, protests erupted in Inner Mongolia when authorities banned Mongolian in schools and made Mandarin the language of instruction. Beijing then called the protests a form of separatism and cracked down on the protesters accordingly. flee

Peng Shuai case: WTA suspends tournaments in China and Hong Kong

International pressure is mounting in the case of Chinese tennis player Peng Shuai. The Women’s Tennis Association (WTA) will suspend all of its tournaments in China and Hong Kong, WTA chief Steve Simon announced on Wednesday. “In good conscience, I don’t see how I can ask our athletes to compete there when Peng Shuai is not allowed to communicate freely and has seemingly been pressured to contradict her allegation of sexual assault,” Simon wrote.

Given the current situation, he said he was also very concerned about the risks that female players, staff, and employees could face if the tennis federation were to hold events in China in 2022. “To further protect Peng and many other women throughout the world, it is more urgent than ever for people to speak out.”

The decision to suspend the tournaments was made jointly by the board, Simon wrote. The head of the International Women’s Tennis Federation criticized censorship in China over the Peng Shuai case and called for a transparent review of the sexual assault allegations. “While we now know where Peng is, I have serious doubts that she is free, safe and not subject to censorship, coercion and intimidation.” He said the leadership in China had failed to address the issue in a credible manner, leaving the WTA with no other choice. Simon regretted the move for the tennis community.

For the WTA, China represents one of the largest growth markets in the world. The federation had made a big push in the People’s Republic over the past decade. In the last season before the
start of the Covid pandemic in 2019, WTA hosted nine tournaments with prize money of more than $30 million in China.

Learning from Double 11: Marketing, Retail, Consumption Trends

By Sofia Brooke, Dezan Shira

China’s rising consumer power plays an important part in the country’s dual circulation strategy and is an engine of global growth in many categories. The Double 11 shopping festival, as the largest and most popular annual global shopping festival in the world – now overshadowing Black Friday and Cyber Monday combined – serves as a window to observe China’s latest consumer trends.

This year, the Chinese annual shopping festival began on October 20, 2021 at 8 pm. It was first launched by the Alibaba Group Holding Ltd. in 2009 around the unofficial November 11 holiday that celebrated single people. Since then, the commercial activity around the celebration has expanded from one day to three weeks and extended from Alibaba’s Taobao and Tmall marketplaces to the whole retail sector.

Retailers and brands now tap into social features on social media platforms and embrace livestreaming sessions besides omnichannel marketing campaigns to increase their sales in the Chinese market, particularly as new entrants bolster competition during periods like the Double 11 shopping festival. In this article, we’ll walk you through the emerging new trends.

Marketing and retail trends continue to shift

This year’s Double 11 shopping festival did not feature “battle reports”, which typically show new records created by the minutes as has been done for around a decade.

45 minutes after midnight on Thursday November 11^th, a total 382 brands on Alibaba’s platform Tmall had sales exceeding $15.6 million. The brands included domestic brands like Huawei and Erke and international brands like L’Oréal and Apple. Up from last year’s nearly US$78 billion, Tmall’s total transaction volume reached hit US$84 billion. As of 2am, Xiaomi’s total sales during the festival had exceeded $2 million. JD.com reported a new record, with earnings of $54 billion.

This year, presales were earlier. In the past, the Double 11 presales began at midnight. Consumers would pull all-nighters to place orders. However, this year, Tmall and JD.com’s presales began hours earlier at 8 pm on October 20^th. Besides the presales period, Alibaba runs two sales periods, a practice the company debuted last year. JD.com’s Double 11 sales began at 8 pm on October 31^st, with a final “price-off” occurring at 8 pm on November 10^th. Extending sales meant e-commerce companies boosted the value of goods and eased pressure on logistics networks and merchants.

Longer pre-sale period and new platform features

Short-video operators ByteDance Ltd. and Kuaishou Technology have also started shopping events on their platforms. Both platforms livestream e-commerce. Streamers use their connections and credibility with audiences to recommend products, with discounts exclusive to the stream at times.

These platforms have hundreds of millions of daily visitors. In August 2020, ByteDance’s Douyin reached 600 million daily active users while Kuaishou reached 293 million active daily users in the second quarter in 2021. These platforms also have special features such as content recommendation algorithms that contribute to sales figures.

In June 2020, ByteDance created its own e-commerce department and participated in the Double 11 shopping festival that year instead of acting as just an advertising platform for other platforms. Douyin recorded final sales of US$2.9 billion.

On October 1 this year, Alibaba released a new feature called “Zhongcao Machine”, which allows shoppers to search through reviews from other users. It translates to “planting grass” – referring to the idea of planting an idea to purchase goods in a consumer’s mind.

The Guochao trend: focus on local brands

The notion of guochao – the desire to buy Chinese services and goods and connect with local producers and roots – has become popular much to the benefit of Chinese companies and likely in response to their greater competitive goods and service offerings in recent years. While the trend may have been strengthened by nationalist backlashes against foreign products, it has been some time since brand preferences in China shifted from foreign to domestic companies.

A recent survey conducted of 5,000 respondents from 15 cities found that the number of those who would buy a local brand over a foreign brand increased from 15 percent to 85 percent from 2011 to 2020. The shifts in preference has led to the emergence of large local players in some categories. Over the last decade, local Chinese brands have captured most of the market in household packaged goods and electronics. In these categories, many Chinese brands hold market shares of more than 50 percent.

Historically, foreign players have had the largest market share in the beauty and automotive industry in China. Chinese premium automotive brands now account for six percent of the market while electric vehicles account for almost the entire market in China.

The guochao trend has been most noticed in apparel and footwear, with local apparel brands gaining three percentage points market share between 2015 and 2020. However, footwear and sportswear dropped between five and 10 percent in the same period. Despite this, some Chinese companies have shown strong growth. Sportswear company Anta Group increased its sales approximately threefold in this period while Li-Ning grew its sales by 85 percent. Some global brands also saw declines in early 2021.

Clearly, the preference shifts are thus responding to more than just ‘buying local’ but a mix of factors like quality expectations, market trends, price range, and perception among target consumer bands, etc.

For example, Chinese domestic skincare and makeup products have been able to challenge global counterparts through a better understanding of Chinese consumers, R&D capabilities, and better online channels for sales. The industry has also received support from the government and the Ministry of Industry and Information Technology (MIIT), with promises being made to team up with other agencies to offer the cosmetics industry innovation and funding support.

According to Shanghai Shenyin Wangou Research & Consulting Co. Ltd., though foreign cosmetic brand led in presale figures, domestic brands Winona and Proya Cosmetic Co. Ltd. ranked number 5 and 10, respectively, during the first two days of presale in the Double 11 festival. In the first hour of presales, Winona achieved sales of US$109 million. This surpassed its record for the whole festival period last year. Sports brands like Erke, MobiGarden, and Warrior and appliance brand like Tineco and Narwal surpassed sales figure records for the entire day within the first hour of sales.

Walled gardens approach banned

It has been a common practice for years for the largest tech companies to block rivals’ links on their apps. This is known as the “walled gardens” approach and can protect a company’s digital ecosystem, discourage consumers from spending money elsewhere, and reduce their competitor’s growth. This year’s Double 11 shopping festival saw a major change as this walled gardens approach was banned by government directive to avoid monopolies and uncompetitive practices.

Previously, a walled gardens strategy meant that links from Douyin and Feishu (a workplace tool) could not be opened easily on Tencent Holdings Ltd’s WeChat platform. Links forwarded from Taobao and Tmall could not be opened directly in the app either. Tencent claimed this practice was for security concerns. These practices led to legal issues and complaints from users.

Other companies implemented similar restrictions. Alibaba did not allow shoppers to use Tencent’s WeChat Pay system for years. Douyin also banned third-party website links on livestreaming channels during the 2020 Double 11 festival.

However, these practices are now effectively banned. On July 26, this year, the MIIT detailed a six-month campaign to clean up the internet industry, and blocking external links was one of eight types of activities targeted. On August 17, the State Administration for Market Regulation (SAMR) released draft guidelines to regulate anti-competitive measures in the industry, barring link blocking once more. On September 15, the cybersecurity watchdog released guidelines that required platforms to cooperate on traffic and data in line with national rules.

Tencent, ByteDance, and Alibaba all expressed support for the new rules. On September 17, Tencent allowed WeChat users to share external links in private chats. On October 27, Alibaba’s Chief Marketing Officer Christ Tung confirmed WeChat Pay could be now used to make purchases on their apps. Users can also share their Alibaba shopping carts to WeChat group chats and “Moments” feeds.

Retailers want to polish up their green image

During this Double 11 festival, some companies tried to promote public welfare and green consumption. The efforts come at the backdrop of government calls demanding the tech sector to contribute more towards “common prosperity” and several authorities introducing plans to meet China’s carbon reduction goals.

On Tmall, US$15 million worth of green vouchers were given out to encourage consumers to buy green certification and energy-efficient products. At the same time, Alibaba’s logistics department introduced 60,000 package recycling points across 20 cities. JD.com said it is recycling and reducing packaging, and making deliveries using electric vehicles. These initiatives come as no surprise due to sustainable consumption becoming popular in China. In a survey conducted by Pwc, 72% of respondents in China said they buy from companies which are committed to protecting the environment.

Alibaba also launched philanthropy campaigns. For example, their RMB 1 donation for social media posts mentioning the “Goods for Good” program. An initiative from 2006, donations from the program benefit older people living alone, low-income workers, and “left-behind children” of migrant workers.

The future of consumption in China is bright

China contributes a large amount to global consumption but McKinsey reports there is ‘room to grow’. China’s household consumption is approximately 38 percent of its GDP. In comparison, the whole of Asia-Pacific’s consumption is 50 percent of its GDP, the European Union’s is 52 percent, and the United States’ is 68 percent. McKinsey reports that a more complex financial system and new policy directions may steer customers towards discretionary spending or financial assets.

As China continues to urbanize, cities remain the driving force of China’s growth. Approximately 80 percent of future consumption growth is expected to happen in cities. Consumption in China is driven by its 30 largest cities. Consumers in these cities have large amounts of purchasing power, spending more on a per capita basis than the average national spend. These cities have had larger service offers and retail opportunities, historically. However, new hotspots of consumption are emerging in cities outside the top 30, such as Guiyang, and reporting higher household consumption. Many companies are anticipating this next wave of growth and are expanding their reach into cities where incomes are rising.

A farmer in Quanfan cuts slabs of sweet potato pulp into strips. Then the pieces are dried under the sun. Every winter, the residents of the village in the coastal province of Zhejiang prepare various sweet potato delicacies in this way. Tasty and healthy traditional sweet potato chips, for example, are popular in all of China.

CHINA.TABLE EDITORIAL OFFICE

Amelie
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Grzanna

Fabian
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Julia
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Angela
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Petring

Baerbock&#8217;s China policy + Global Gateway + Study on standardization

Feature

Baerbock strives for ‘dialogue and toughness’ towards China

Xinjiang, Peng Shuai and Zhang Zhan specifically named

Praise for realistic assessment of China

Warning against a break with Beijing

‘Global Gateway’ – Brussels answer to the Silk Road

Where is the money coming from?

Is it enough to go up against the BRI?

What is to be financed?

What is the USP of Global Gateway?

What are the reactions of politicians?

What does the industry say?

How does Beijing react?

EU Chamber of Commerce: businesses excluded from standardization process

China: Standardization as the “battlefield” of the future

“Significant hurdles” to participation in standardization

Criticism: lack of translations and vitamin B

“China Standards 2035” could have a positive impact

News

EU supply chain law further delayed

Sinopec to build world’s largest ‘green hydrogen’ plant

Beijing expands diesel production

Pressure to extradite Taiwanese

Antidialect campaign

Peng Shuai case: WTA suspends tournaments in China and Hong Kong

Tools

Learning from Double 11: Marketing, Retail, Consumption Trends

Marketing and retail trends continue to shift

Longer pre-sale period and new platform features

The Guochao trend: focus on local brands

Walled gardens approach banned

Retailers want to polish up their green image

The future of consumption in China is bright

Executive Moves

Dessert

China.Table Editors

CHINA.TABLE EDITORIAL OFFICE

Feature

Baerbock strives for ‘dialogue and toughness’ towards China

Xinjiang, Peng Shuai and Zhang Zhan specifically named

Praise for realistic assessment of China

Warning against a break with Beijing

‘Global Gateway’ – Brussels answer to the Silk Road

Where is the money coming from?

Is it enough to go up against the BRI?

What is to be financed?

What is the USP of Global Gateway?

What are the reactions of politicians?

What does the industry say?

How does Beijing react?

EU Chamber of Commerce: businesses excluded from standardization process

China: Standardization as the “battlefield” of the future

“Significant hurdles” to participation in standardization

Criticism: lack of translations and vitamin B

“China Standards 2035” could have a positive impact

News

EU supply chain law further delayed

Sinopec to build world’s largest ‘green hydrogen’ plant

Beijing expands diesel production

Pressure to extradite Taiwanese

Antidialect campaign

Peng Shuai case: WTA suspends tournaments in China and Hong Kong

Tools

Learning from Double 11: Marketing, Retail, Consumption Trends

Marketing and retail trends continue to shift

Longer pre-sale period and new platform features

The Guochao trend: focus on local brands

Walled gardens approach banned

Retailers want to polish up their green image

The future of consumption in China is bright

Executive Moves

Dessert

China.Table Editors

CHINA.TABLE EDITORIAL OFFICE

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