Table.Briefing: China (English)

Beijing makes Putin’s war possible + The next e-commerce dispute looms

Dear reader,

Vladimir Putin has good reason to be grateful during his visit to Beijing starting Thursday: Although China does not export weapons for the war against Ukraine, it does export precursors and machinery that can be used to build weapons. These shipments are valued at several hundred million dollars per month. Read how Xi Jinping is further supporting his friend Putin in Michael Radunski’s Feature.

Customers of ultra-cheap platforms Shein and Temu should ask themselves: How is it even possible to produce fairly at these prices? However, customs authorities should ask a different question: Why do the majority of goods ordered from these platforms come into Germany duty-free from China? Amelie Richter provides the answer in her Feature: by declaring packages below the exemption threshold, even though not all of them qualify for it.

Your
Finn Mayer-Kuckuk
Image of Finn  Mayer-Kuckuk

Feature

Putin and Xi: What the two presidents will discuss

They simply like each other. Vladimir Putin with Xi Jinping during his visit to Beijing in October 2023.

Russia’s President Vladimir Putin will arrive in China today, Thursday, and stay for two days with his most important ally. To the general public, this visit might not seem very different from his previous meetings with China’s President Xi Jinping. We can expect further affirmations of the close partnership between China and Russia, the personal rapport between the “good old friends” Xi and Putin, and a red carpet for someone under an international arrest warrant.

But behind closed doors, Xi and Putin have a lot to discuss. The most important aspect of their discussions will be: How can China and Russia become more resilient against Western sanctions?

Putin’s delegation shows what the focus is

This is a broad topic. Accordingly, the Russian delegation accompanying Putin to China is extensive. Included are the newly appointed Defense Minister Andrei Beloussow, Foreign Minister Sergei Lavrov, Sergei Shoigu, now Secretary of the Security Council, and foreign policy advisor Yuri Ushakov. Given the war in Ukraine, these participants are unsurprising.

Far more telling are the other members of the Russian delegation: Putin will bring a large economic and financial delegation to China, including Finance Minister Anton Siluanov and the Governor of the Russian Central Bank Elvira Nabiullina. Also attending are Sberbank CEO German Gref, businessman Oleg Deripaska, VTB CEO Andrei Kostin, Rosneft CEO Igor Sechin and Novatek CEO Leonid Mikhelson.

Becoming more resilient against Western sanctions

Since Russia’s invasion of Ukraine, Beijing and Moscow have shown how well they can adapt to Western restrictions. The Central Bank and Finance Ministry have been working since 2014 to de-dollarize the Russian financial system. Their measures have enabled Russia to cushion the impact of initial sanctions and gradually shift the Russian financial system away from the dollar and euro toward more trade with the Chinese renminbi.

Putin’s visit offers the opportunity to discuss options privately. For Moscow and Beijing, it will be about creating a financial infrastructure for handling sensitive payments, speculates American China expert Bill Bishop.

Beijing likely knows how delicate such steps are – after all, it doesn’t want to lose Europe, especially the European market. Thus, it is unlikely that any of the large Chinese banks will participate in this endeavor, Bishop believes. However, some of the 4,500 regional banks already have close ties with Russian banks.

USA: ‘Without China, Russia couldn’t continue fighting this way’

Especially the financial handling of trade in “dual-use” goods is likely to be conducted away from Western attention. The US is trying to pressure China to stop the supply of products that can be used both civilian and militarily. This includes:

  • semiconductors,
  • engines for cruise missiles and drones,
  • optical sensors,
  • satellite reconnaissance,
  • machine tools for manufacturing missile parts,
  • chemicals for ammunition or rocket fuel production.

Notably, the US is now sharing much of its intelligence. The goal is to get as many countries as possible to join this effort. In confidential talks, senior US officials emphasize how China has significantly expanded its support for Russia – in areas that specifically support the Russian military and thus the war against Ukraine. China’s supplies are crucial for the revival of the Russian military.

According to US intelligence, more than 70 percent of Russia’s imports of machine tools in the last three months of last year came from China. This has enabled Moscow to increase its production of ballistic missiles. Evidence of this is increasingly found on the battlefields in Ukraine. The US conclusion: Without China, Russia could not continue fighting so intensively on the battlefields in Ukraine.

China’s support for the Russian war machine

Nathaniel Sher from the Carnegie Endowment for International Peace in Washington analyzed Chinese customs data and concluded: Around 90 percent of the products classified by the West as “high priority” due to their danger were sourced by Russia from China. Sometimes, the People’s Republic serves merely as a transit country, but often the goods are produced in China. By comparison, before the Ukraine war, the proportion was only 30 percent.

Sher describes China’s approach in his study: “Providing Russia with dual-use goods instead of finished weapons has allowed China to support Russia while denying this support.”

According to Sher’s study, China exports dual-use products worth more than 300 million US dollars to Russia each month – goods that the US, the European Union and Japan all classify as “priority” for Russia’s weapons production. For those looking for a silver lining in these numbers: In December 2023, China’s monthly dual-use exports to Russia were still 600 million US dollars. So, the volume has decreased somewhat.

  • Geopolitics
  • Military
  • Russland
  • Technology
  • Trade
  • USA
  • Zölle

E-commerce: Where the next conflict between the EU and China lurks

The apps of online providers Temu, Shein and AliExpress lead the download charts in Germany and Europe. These Chinese platforms ship most of their products duty-free to Europe. Cross-border e-commerce (CBEC) threatens to become another trade problem for the EU market.

Most of these inexpensive exports reach the EU market through direct shipping from China, primarily via Belgium and the Netherlands. About 19 percent of these shipments arrive in Liège, Belgium, according to the EU trade newsletter “Soapbox”, based on Eurostat data.

Similarly, 19 percent of the packages enter through the Netherlands, 16 percent are processed by French customs and 13 percent through Spanish customs. Chinese customs classify these items under HS 9804, defining them as low-cost items under simplified customs procedures – or as “Soapbox” author Rafael Jimenez Buendia aptly puts it: “cheap stuff”.

Unclear customs classification

The Chinese platforms attract customers with clothing, electronics and household goods at such low prices that European consumers should be alarmed. They should ask: How is it even possible to produce fairly and sustainably at these dumping prices while adhering to international labor protection conventions?

Classification under HS 9804 by Chinese customs includes items valued under 150 euros, making them duty-free. However, they do not bypass VAT. It remains unclear what exactly Chinese customs classify under HS 9804. Is every item genuinely worth less than 150 euros? A data match on both sides is difficult, writes Jimenez Buendia.

Cheap goods flood as a result of Xi’s new productive forces?

Buendia believes that the flood of cheap goods is being directed toward Europe with the approval of the Chinese state. He even sees this as an application of Xi Jinping’s new slogan of “new productive forces” that he wants to unleash in China. What exactly this concept entails is still relatively open. What is clear is that it is about economic growth and innovation to stimulate the domestic economy, with exports being central.

In the context of Chinese exports, overcapacities have recently become a central point of contention in trade between China and the EU. The main disputes are over electric cars and solar panels from China. The country produces more goods than there is demand for and drives down prices.

Two billion packages under the duty-free limit

This is also evident at the EU customs offices, which seem overwhelmed by the flood of packages. According to the European Commission, two billion packages with a value below the 150-euro duty-free threshold were shipped to the EU from non-EU countries in 2023, mostly from China. The Federal Network Agency in Germany reportedly inspected only about 5,000 shipments in 2023. Of those inspected, 92 percent were not approved.

Chinese suppliers often declare a false value at customs: Incorrectly declared packages with a value higher than 150 euros or an item shipment split into multiple packages are not uncommon, as an investigation by SWR in February revealed at customs in Liège, Belgium.

Will the next overcapacity problem from China be that of “cheap stuff”? The fundamental issue, says Björn Ognibeni, an expert on global e-commerce trends, is the concept of overcapacity. “Germany as an export champion also operates on overcapacity. That has always been our business model. And for that, we have very gladly used very cheap precursor products from China to produce more profitably. Only now, more and more finished products are coming from there, and that is a problem for us.”

E-commerce expert senses fear behind the outcry

Moreover, one must consider why Chinese platforms can offer the same goods cheaper than Amazon. The manufacturing process of the products hasn’t suddenly changed just because the items are sold on Amazon or other Western providers. “They are often the same products from the same factories.” Where this is the case, Ognibeni sees more of a fear of competition from China among Western companies.

Chinese companies have simply outpaced German suppliers in terms of the customer shopping experience and are much more innovative. “This doesn’t mean that there isn’t a sustainability problem,” says Ognibeni. However, the same product isn’t better just because it is sold via Amazon instead of Temu. “Both channels have the same problem, and only we consumers can solve it.”

EU regulatory authorities are currently considering abolishing the 150-euro duty-free limit. A decision is expected by 2028.

Volume of cross-border e-commerce increases

Online fashion retailer Shein is at the forefront of efficiency in online retail. For example, it offers design clothing on its platform that doesn’t actually exist yet. It is only produced when enough customers order the item. This doesn’t apply to everything Shein sells. On the other hand, Temu, which mainly sells household goods and electronics, likely offers items that already exist.

In the first quarter of the year, cross-border e-commerce increased by about ten percent according to official figures. E-commerce warehouse exports abroad also grew by 11.8 percent. According to Chinese customs data, China’s total CBEC trade amounts to 80 billion US dollars, with 62 billion for exports and 18 billion for imports.

  • EU-Binnenmarkt

News

US tariffs: growing concern among associations about a trade war

Dirk Jandura, President of the German Association of Wholesale, Foreign Trade, Services (BGA), cautions against protectionist steps by the EU in response to the US’s announced tariff hikes on many Chinese products. “Market participants, consumers, and companies alike would be the losers,” he told the newspapers of the Redaktionsnetzwerk Deutschland (RND). “In the end, everything will become more expensive.”

Jandura specifically warned that the German automotive industry would suffer if the EU followed suit. “There is not a single car in the EU without parts from China. We would be hurting ourselves,” he said. BMW CEO Oliver Zipse also spoke out against punitive tariffs on Chinese EVs. “Protectionism sets a spiral in motion,” Zipse said at the annual general meeting on Wednesday. “Tariffs lead to new tariffs.” BMW is one of the largest importers of electric cars from China, with models like the electric Mini and the iX3 being produced in China for the global market.

The Federation of German Industries (BDI) also warned of potential impacts on the domestic market. “Germany and the EU should now carefully ensure that the EU internal market does not become a buffer for Chinese overcapacities being blocked from the US market,” stated Wolfgang Niedermark of the BDI’s main management.

On Tuesday, the US announced extensive tariff increases on a wide range of Chinese products, including EVs, batteries, chips and various raw materials. “We reject such measures, as their effect is highly questionable,” Jandura said. He sees the announcement to quadruple import tariffs on electric cars in the US against the backdrop of the escalating US election campaign. The Biden administration seems to want to send a populist signal to specifically protect industrial jobs in the US.

“We are watching this with concern, considering the potential consequences for our European internal market,” said Katja Mast, parliamentary manager of the SPD parliamentary group. Federal Transport Minister Volker Wissing (FDP) also warned the EU against imposing punitive tariffs in an interview with the Augsburger Allgemeine. “Our market should not be shielded but strengthened through competition.” flee/rtr

  • EU
  • EU-Binnenmarkt
  • Trade
  • USA

Taiwan: Why China is sending dozens of fighter jets again

China is threatening again. A few days before the inauguration of Taiwan’s new President Lai Ching-te, China has once again sent People’s Liberation Army fighter jets near the island, according to Taiwan’s Ministry of National Defense. Within 24 hours, the intrusion of 45 aircraft was recorded, marking the highest number of fighter jets this year. In March, Taiwanese authorities had counted 36 aircraft from the People’s Republic in one day.

According to the ministry, 26 of these aircraft crossed the median line in the Taiwan Strait and entered Taiwan’s air defense identification zone to the north and southwest of the island. Taiwan’s military responded by scrambling aircraft. Authorities also detected six Chinese warships around the island.

Lai will be inaugurated as president next Monday. The election winner secured his victory in January for the Democratic Progressive Party (DPP). flee

  • Geopolitik

South China Sea: How the Philippines fights for its territory

A confrontation between China and the Philippines is brewing in the South China Sea. In protest against Chinese territorial claims, a fleet of around 100 boats carrying Filipino activists and fishermen has set off towards the disputed Scarborough Shoal. The government in Manila has deployed three Coast Guard ships to escort the convoy.

The convoy is led by a group named Atin Ito (This belongs to us). The action is peaceful and based on international law, said one of the organizers of the protest voyage, Rafaela David, to the Associated Press. They do not wish to provoke but to protect the territorial integrity of the Philippines. The Coast Guard will ensure the convoy’s safety, a spokesperson stated. flee/rtr

  • Geopolitik

Real estate crisis: Why the government plans to buy housing

China is contemplating addressing its domestic real estate crisis by having regional governments purchase unsold apartments, according to a media report. The State Council is currently gathering feedback from various provinces and government agencies on these considerations, reported Bloomberg, citing people familiar with the matter.

Earlier, the leadership of the ruling Communist Party called for reducing the growing housing inventory. While details and feasibility of the plan are being discussed within government circles, implementation could take months if the party leadership decides to proceed, the report noted.

China’s real estate sector has been in a debt crisis since 2021, which has weighed on the economy of the world’s second-largest economic power. The sector accounts for nearly a quarter of China’s economic output. Analysts estimate there are ten million unfinished apartments across the country due to a construction boom. Potential buyers are currently holding back due to fears that indebted developers may not complete their projects or finish them on time. rtr

  • Immobilienkrise

Opinion

China establishes itself as an exporter of law

by Thomas Duve
Thomas Duve, Director, Max Planck Institute for Legal History and Legal Theory (mpilhlt)
Thomas Duve, Director, Max Planck Institute for Legal History and Legal Theory (mpilhlt)

For years, China’s Party and government have been intensively reforming their legal system. Many observers view the 2020 Party resolutions to expand the rule of law more as a program of rule by law, reflecting a uniquely Chinese approach to legal governance. Nonetheless, many reforms draw on foreign, including German, models.

This has a tradition: The first draft of a Chinese Civil Code from the late Qing Dynasty in 1911 was heavily influenced by the German and Swiss Civil Codes. The constitutions of the 20th century systematically translated models from around the world. The most recent significant legislative work, the new Civil Code of the People’s Republic of China (CC), which came into force in 2021, shows numerous borrowings from foreign models: German, French, Japanese, Italian and American civil law have shaped the content and structure of the CC.

Advantage through technology?

Does the hegemony of North Atlantic-European law persist despite geopolitical changes, maintaining the “advantage through technology” often associated with German civil law in the 20th century?

Indeed, the CC that took effect in 2021 seems to have adopted many provisions from German law. Legal literature points to the German Pandectist system as a foundation, and Freiburg legal scholar Yuanshi Bu describes a “return to German tradition” in her account of the Chinese CC. However, the codification significantly builds on earlier individual laws. Many provisions and their underlying knowledge have already had a long journey, partly via Japanese bridges, and have developed their own life. Not everything that appears German is truly German.

The same applies to the still highly regarded German legal science. Many Chinese legal scholars are well-versed in European legal systems. For more than a century, a whole translation industry has made fundamental works of legal science accessible. Scientific practices such as legal commentary have also been adopted from Germany. However, norms, concepts, theories, and practices are translated not only linguistically but also culturally. This is especially true when adapting them to local legal culture, economic and social realities or political guidelines.

The Chinese way in law

Every legal system must provide mechanisms for updates and adjustments. In the European model, tasks are clearly divided: The legislature makes laws, courts interpret and decide, and legal science systematizes within the framework provided by the legislature and the constitution. The Chinese CC, like many European codifications, includes some guidelines for interpretation. The law’s goal, according to § 1 CC, is to “maintain social and economic order”. It aims “to adapt to the requirements of the development of socialism with Chinese characteristics” and to “promote socialist core values”. § 8 also contains the general clause, common in many European codifications, that civil law subjects must not “violate the law [or] public order [and] good customs (公序良俗).” All this allows significant interpretive leeway.

In China, however, the roles are not as clearly defined as in the Western tradition of separation of powers. A recent study in the China Law and Society Review shows that the Supreme People’s Court (SPC) has taken a particularly active role in legal development in recent years. It no longer sees itself merely as a decision-making body. It drafts white papers, advises and prepares legislation and provides the lower courts with guidelines for interpretation, themes and trends. SPC President Zhang Jun explicitly speaks of judicial activism (能动司法) as a task of the court. Courts must actively use their considerable discretion to achieve political and social goals.

That laws need interpretation is self-evident. So, too, is the fact that this interpretation relies on very diverse knowledge. Roscoe Pound, one of the most influential US jurists of the 20th century who also dealt with China, pointed out almost 80 years ago in the Harvard Law Review that Chinese laws are applied by Chinese people, for people in China, to regulate life in China. A legal system, according to Pound, does not consist solely of rules but is based on ideals, conceptions, images of society that influence the interpretation of law. Under Xi Jinping, these images are increasingly derived from Chinese history. To understand legal development in China, one must, therefore, look at these historical images, the ideals and the self-interpretation traditions of political and legal actors. Competence in Chinese law thus extends beyond knowledge of the laws.

On the way to becoming a norm exporter

Competence in Chinese law is all the more important as it has been clear for at least a decade that the Chinese path is not intended to be confined to Chinese soil. Similar to other areas, such as the Belt and Road Initiative, China sees itself as a regional and global player in law as well. In 2014, the Central Committee emphasized in a resolution on strengthening governance that China should also enhance its discursive power in transnational and international law. Many of the goals formulated then have been incorporated into the plan for promoting the rule of law 2020-2025, and the SPC has outlined an ambitious international agenda in a 2022 report on legal developments relevant to foreign countries. This positions China as a provider in the market for legal forum shopping and smart courts.

Some European jurists may smile at this, as a legal system without separation of powers, without the regulatory idea of the autonomy of law, without legal guarantees, seems unattractive. However, not all actors are likely to share this view. As China establishes itself as an export nation not only for cars but also in the global market for transnational and international law, it could become a tighter competition for Germany, the export world champion, in the realm of legal systems. The technological advantage is decreasing.

Thomas Duve, Director at the Max Planck Institute for Legal History and Legal Theory, Frankfurt a.M., Professor at Goethe University, Frankfurt a.M. and Honorary Professor at the China University of Political Science and Law, Beijing.

  • Justice
  • Neue Seidenstraße

Executive Moves

Joakim Johansson took over the position of Commissioning Director Liancheng China at Andritz in April. The machine and plant engineering company headquartered in Graz is cooperating with the Chinese paper and pulp producer Liansheng Pulp & Paper for a new pulp mill in Zhangzhou in the province of Fujian.

Pia Senger has been Head of Brand Operations Asia Pacific & China at Volvo since April. Senger previously worked for Volvo in Australia and for BMW in the USA. She will continue to be based in Gothenburg, Sweden.

Is something changing in your organization? Let us know at heads@table.media!

Dessert

China knows how to build bridges. With the longest, highest and most bridges, Chinese engineers have proven this abundantly. Now, however, they are also supposed to be beautiful. Since Tuesday, this elegantly curved structure has connected the two sides of the industrial metropolis of Huizhou over the Dongjiang River. Or is it just the perspective that makes this bridge appear so gracefully arched?

China.Table editorial team

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    Vladimir Putin has good reason to be grateful during his visit to Beijing starting Thursday: Although China does not export weapons for the war against Ukraine, it does export precursors and machinery that can be used to build weapons. These shipments are valued at several hundred million dollars per month. Read how Xi Jinping is further supporting his friend Putin in Michael Radunski’s Feature.

    Customers of ultra-cheap platforms Shein and Temu should ask themselves: How is it even possible to produce fairly at these prices? However, customs authorities should ask a different question: Why do the majority of goods ordered from these platforms come into Germany duty-free from China? Amelie Richter provides the answer in her Feature: by declaring packages below the exemption threshold, even though not all of them qualify for it.

    Your
    Finn Mayer-Kuckuk
    Image of Finn  Mayer-Kuckuk

    Feature

    Putin and Xi: What the two presidents will discuss

    They simply like each other. Vladimir Putin with Xi Jinping during his visit to Beijing in October 2023.

    Russia’s President Vladimir Putin will arrive in China today, Thursday, and stay for two days with his most important ally. To the general public, this visit might not seem very different from his previous meetings with China’s President Xi Jinping. We can expect further affirmations of the close partnership between China and Russia, the personal rapport between the “good old friends” Xi and Putin, and a red carpet for someone under an international arrest warrant.

    But behind closed doors, Xi and Putin have a lot to discuss. The most important aspect of their discussions will be: How can China and Russia become more resilient against Western sanctions?

    Putin’s delegation shows what the focus is

    This is a broad topic. Accordingly, the Russian delegation accompanying Putin to China is extensive. Included are the newly appointed Defense Minister Andrei Beloussow, Foreign Minister Sergei Lavrov, Sergei Shoigu, now Secretary of the Security Council, and foreign policy advisor Yuri Ushakov. Given the war in Ukraine, these participants are unsurprising.

    Far more telling are the other members of the Russian delegation: Putin will bring a large economic and financial delegation to China, including Finance Minister Anton Siluanov and the Governor of the Russian Central Bank Elvira Nabiullina. Also attending are Sberbank CEO German Gref, businessman Oleg Deripaska, VTB CEO Andrei Kostin, Rosneft CEO Igor Sechin and Novatek CEO Leonid Mikhelson.

    Becoming more resilient against Western sanctions

    Since Russia’s invasion of Ukraine, Beijing and Moscow have shown how well they can adapt to Western restrictions. The Central Bank and Finance Ministry have been working since 2014 to de-dollarize the Russian financial system. Their measures have enabled Russia to cushion the impact of initial sanctions and gradually shift the Russian financial system away from the dollar and euro toward more trade with the Chinese renminbi.

    Putin’s visit offers the opportunity to discuss options privately. For Moscow and Beijing, it will be about creating a financial infrastructure for handling sensitive payments, speculates American China expert Bill Bishop.

    Beijing likely knows how delicate such steps are – after all, it doesn’t want to lose Europe, especially the European market. Thus, it is unlikely that any of the large Chinese banks will participate in this endeavor, Bishop believes. However, some of the 4,500 regional banks already have close ties with Russian banks.

    USA: ‘Without China, Russia couldn’t continue fighting this way’

    Especially the financial handling of trade in “dual-use” goods is likely to be conducted away from Western attention. The US is trying to pressure China to stop the supply of products that can be used both civilian and militarily. This includes:

    • semiconductors,
    • engines for cruise missiles and drones,
    • optical sensors,
    • satellite reconnaissance,
    • machine tools for manufacturing missile parts,
    • chemicals for ammunition or rocket fuel production.

    Notably, the US is now sharing much of its intelligence. The goal is to get as many countries as possible to join this effort. In confidential talks, senior US officials emphasize how China has significantly expanded its support for Russia – in areas that specifically support the Russian military and thus the war against Ukraine. China’s supplies are crucial for the revival of the Russian military.

    According to US intelligence, more than 70 percent of Russia’s imports of machine tools in the last three months of last year came from China. This has enabled Moscow to increase its production of ballistic missiles. Evidence of this is increasingly found on the battlefields in Ukraine. The US conclusion: Without China, Russia could not continue fighting so intensively on the battlefields in Ukraine.

    China’s support for the Russian war machine

    Nathaniel Sher from the Carnegie Endowment for International Peace in Washington analyzed Chinese customs data and concluded: Around 90 percent of the products classified by the West as “high priority” due to their danger were sourced by Russia from China. Sometimes, the People’s Republic serves merely as a transit country, but often the goods are produced in China. By comparison, before the Ukraine war, the proportion was only 30 percent.

    Sher describes China’s approach in his study: “Providing Russia with dual-use goods instead of finished weapons has allowed China to support Russia while denying this support.”

    According to Sher’s study, China exports dual-use products worth more than 300 million US dollars to Russia each month – goods that the US, the European Union and Japan all classify as “priority” for Russia’s weapons production. For those looking for a silver lining in these numbers: In December 2023, China’s monthly dual-use exports to Russia were still 600 million US dollars. So, the volume has decreased somewhat.

    • Geopolitics
    • Military
    • Russland
    • Technology
    • Trade
    • USA
    • Zölle

    E-commerce: Where the next conflict between the EU and China lurks

    The apps of online providers Temu, Shein and AliExpress lead the download charts in Germany and Europe. These Chinese platforms ship most of their products duty-free to Europe. Cross-border e-commerce (CBEC) threatens to become another trade problem for the EU market.

    Most of these inexpensive exports reach the EU market through direct shipping from China, primarily via Belgium and the Netherlands. About 19 percent of these shipments arrive in Liège, Belgium, according to the EU trade newsletter “Soapbox”, based on Eurostat data.

    Similarly, 19 percent of the packages enter through the Netherlands, 16 percent are processed by French customs and 13 percent through Spanish customs. Chinese customs classify these items under HS 9804, defining them as low-cost items under simplified customs procedures – or as “Soapbox” author Rafael Jimenez Buendia aptly puts it: “cheap stuff”.

    Unclear customs classification

    The Chinese platforms attract customers with clothing, electronics and household goods at such low prices that European consumers should be alarmed. They should ask: How is it even possible to produce fairly and sustainably at these dumping prices while adhering to international labor protection conventions?

    Classification under HS 9804 by Chinese customs includes items valued under 150 euros, making them duty-free. However, they do not bypass VAT. It remains unclear what exactly Chinese customs classify under HS 9804. Is every item genuinely worth less than 150 euros? A data match on both sides is difficult, writes Jimenez Buendia.

    Cheap goods flood as a result of Xi’s new productive forces?

    Buendia believes that the flood of cheap goods is being directed toward Europe with the approval of the Chinese state. He even sees this as an application of Xi Jinping’s new slogan of “new productive forces” that he wants to unleash in China. What exactly this concept entails is still relatively open. What is clear is that it is about economic growth and innovation to stimulate the domestic economy, with exports being central.

    In the context of Chinese exports, overcapacities have recently become a central point of contention in trade between China and the EU. The main disputes are over electric cars and solar panels from China. The country produces more goods than there is demand for and drives down prices.

    Two billion packages under the duty-free limit

    This is also evident at the EU customs offices, which seem overwhelmed by the flood of packages. According to the European Commission, two billion packages with a value below the 150-euro duty-free threshold were shipped to the EU from non-EU countries in 2023, mostly from China. The Federal Network Agency in Germany reportedly inspected only about 5,000 shipments in 2023. Of those inspected, 92 percent were not approved.

    Chinese suppliers often declare a false value at customs: Incorrectly declared packages with a value higher than 150 euros or an item shipment split into multiple packages are not uncommon, as an investigation by SWR in February revealed at customs in Liège, Belgium.

    Will the next overcapacity problem from China be that of “cheap stuff”? The fundamental issue, says Björn Ognibeni, an expert on global e-commerce trends, is the concept of overcapacity. “Germany as an export champion also operates on overcapacity. That has always been our business model. And for that, we have very gladly used very cheap precursor products from China to produce more profitably. Only now, more and more finished products are coming from there, and that is a problem for us.”

    E-commerce expert senses fear behind the outcry

    Moreover, one must consider why Chinese platforms can offer the same goods cheaper than Amazon. The manufacturing process of the products hasn’t suddenly changed just because the items are sold on Amazon or other Western providers. “They are often the same products from the same factories.” Where this is the case, Ognibeni sees more of a fear of competition from China among Western companies.

    Chinese companies have simply outpaced German suppliers in terms of the customer shopping experience and are much more innovative. “This doesn’t mean that there isn’t a sustainability problem,” says Ognibeni. However, the same product isn’t better just because it is sold via Amazon instead of Temu. “Both channels have the same problem, and only we consumers can solve it.”

    EU regulatory authorities are currently considering abolishing the 150-euro duty-free limit. A decision is expected by 2028.

    Volume of cross-border e-commerce increases

    Online fashion retailer Shein is at the forefront of efficiency in online retail. For example, it offers design clothing on its platform that doesn’t actually exist yet. It is only produced when enough customers order the item. This doesn’t apply to everything Shein sells. On the other hand, Temu, which mainly sells household goods and electronics, likely offers items that already exist.

    In the first quarter of the year, cross-border e-commerce increased by about ten percent according to official figures. E-commerce warehouse exports abroad also grew by 11.8 percent. According to Chinese customs data, China’s total CBEC trade amounts to 80 billion US dollars, with 62 billion for exports and 18 billion for imports.

    • EU-Binnenmarkt

    News

    US tariffs: growing concern among associations about a trade war

    Dirk Jandura, President of the German Association of Wholesale, Foreign Trade, Services (BGA), cautions against protectionist steps by the EU in response to the US’s announced tariff hikes on many Chinese products. “Market participants, consumers, and companies alike would be the losers,” he told the newspapers of the Redaktionsnetzwerk Deutschland (RND). “In the end, everything will become more expensive.”

    Jandura specifically warned that the German automotive industry would suffer if the EU followed suit. “There is not a single car in the EU without parts from China. We would be hurting ourselves,” he said. BMW CEO Oliver Zipse also spoke out against punitive tariffs on Chinese EVs. “Protectionism sets a spiral in motion,” Zipse said at the annual general meeting on Wednesday. “Tariffs lead to new tariffs.” BMW is one of the largest importers of electric cars from China, with models like the electric Mini and the iX3 being produced in China for the global market.

    The Federation of German Industries (BDI) also warned of potential impacts on the domestic market. “Germany and the EU should now carefully ensure that the EU internal market does not become a buffer for Chinese overcapacities being blocked from the US market,” stated Wolfgang Niedermark of the BDI’s main management.

    On Tuesday, the US announced extensive tariff increases on a wide range of Chinese products, including EVs, batteries, chips and various raw materials. “We reject such measures, as their effect is highly questionable,” Jandura said. He sees the announcement to quadruple import tariffs on electric cars in the US against the backdrop of the escalating US election campaign. The Biden administration seems to want to send a populist signal to specifically protect industrial jobs in the US.

    “We are watching this with concern, considering the potential consequences for our European internal market,” said Katja Mast, parliamentary manager of the SPD parliamentary group. Federal Transport Minister Volker Wissing (FDP) also warned the EU against imposing punitive tariffs in an interview with the Augsburger Allgemeine. “Our market should not be shielded but strengthened through competition.” flee/rtr

    • EU
    • EU-Binnenmarkt
    • Trade
    • USA

    Taiwan: Why China is sending dozens of fighter jets again

    China is threatening again. A few days before the inauguration of Taiwan’s new President Lai Ching-te, China has once again sent People’s Liberation Army fighter jets near the island, according to Taiwan’s Ministry of National Defense. Within 24 hours, the intrusion of 45 aircraft was recorded, marking the highest number of fighter jets this year. In March, Taiwanese authorities had counted 36 aircraft from the People’s Republic in one day.

    According to the ministry, 26 of these aircraft crossed the median line in the Taiwan Strait and entered Taiwan’s air defense identification zone to the north and southwest of the island. Taiwan’s military responded by scrambling aircraft. Authorities also detected six Chinese warships around the island.

    Lai will be inaugurated as president next Monday. The election winner secured his victory in January for the Democratic Progressive Party (DPP). flee

    • Geopolitik

    South China Sea: How the Philippines fights for its territory

    A confrontation between China and the Philippines is brewing in the South China Sea. In protest against Chinese territorial claims, a fleet of around 100 boats carrying Filipino activists and fishermen has set off towards the disputed Scarborough Shoal. The government in Manila has deployed three Coast Guard ships to escort the convoy.

    The convoy is led by a group named Atin Ito (This belongs to us). The action is peaceful and based on international law, said one of the organizers of the protest voyage, Rafaela David, to the Associated Press. They do not wish to provoke but to protect the territorial integrity of the Philippines. The Coast Guard will ensure the convoy’s safety, a spokesperson stated. flee/rtr

    • Geopolitik

    Real estate crisis: Why the government plans to buy housing

    China is contemplating addressing its domestic real estate crisis by having regional governments purchase unsold apartments, according to a media report. The State Council is currently gathering feedback from various provinces and government agencies on these considerations, reported Bloomberg, citing people familiar with the matter.

    Earlier, the leadership of the ruling Communist Party called for reducing the growing housing inventory. While details and feasibility of the plan are being discussed within government circles, implementation could take months if the party leadership decides to proceed, the report noted.

    China’s real estate sector has been in a debt crisis since 2021, which has weighed on the economy of the world’s second-largest economic power. The sector accounts for nearly a quarter of China’s economic output. Analysts estimate there are ten million unfinished apartments across the country due to a construction boom. Potential buyers are currently holding back due to fears that indebted developers may not complete their projects or finish them on time. rtr

    • Immobilienkrise

    Opinion

    China establishes itself as an exporter of law

    by Thomas Duve
    Thomas Duve, Director, Max Planck Institute for Legal History and Legal Theory (mpilhlt)
    Thomas Duve, Director, Max Planck Institute for Legal History and Legal Theory (mpilhlt)

    For years, China’s Party and government have been intensively reforming their legal system. Many observers view the 2020 Party resolutions to expand the rule of law more as a program of rule by law, reflecting a uniquely Chinese approach to legal governance. Nonetheless, many reforms draw on foreign, including German, models.

    This has a tradition: The first draft of a Chinese Civil Code from the late Qing Dynasty in 1911 was heavily influenced by the German and Swiss Civil Codes. The constitutions of the 20th century systematically translated models from around the world. The most recent significant legislative work, the new Civil Code of the People’s Republic of China (CC), which came into force in 2021, shows numerous borrowings from foreign models: German, French, Japanese, Italian and American civil law have shaped the content and structure of the CC.

    Advantage through technology?

    Does the hegemony of North Atlantic-European law persist despite geopolitical changes, maintaining the “advantage through technology” often associated with German civil law in the 20th century?

    Indeed, the CC that took effect in 2021 seems to have adopted many provisions from German law. Legal literature points to the German Pandectist system as a foundation, and Freiburg legal scholar Yuanshi Bu describes a “return to German tradition” in her account of the Chinese CC. However, the codification significantly builds on earlier individual laws. Many provisions and their underlying knowledge have already had a long journey, partly via Japanese bridges, and have developed their own life. Not everything that appears German is truly German.

    The same applies to the still highly regarded German legal science. Many Chinese legal scholars are well-versed in European legal systems. For more than a century, a whole translation industry has made fundamental works of legal science accessible. Scientific practices such as legal commentary have also been adopted from Germany. However, norms, concepts, theories, and practices are translated not only linguistically but also culturally. This is especially true when adapting them to local legal culture, economic and social realities or political guidelines.

    The Chinese way in law

    Every legal system must provide mechanisms for updates and adjustments. In the European model, tasks are clearly divided: The legislature makes laws, courts interpret and decide, and legal science systematizes within the framework provided by the legislature and the constitution. The Chinese CC, like many European codifications, includes some guidelines for interpretation. The law’s goal, according to § 1 CC, is to “maintain social and economic order”. It aims “to adapt to the requirements of the development of socialism with Chinese characteristics” and to “promote socialist core values”. § 8 also contains the general clause, common in many European codifications, that civil law subjects must not “violate the law [or] public order [and] good customs (公序良俗).” All this allows significant interpretive leeway.

    In China, however, the roles are not as clearly defined as in the Western tradition of separation of powers. A recent study in the China Law and Society Review shows that the Supreme People’s Court (SPC) has taken a particularly active role in legal development in recent years. It no longer sees itself merely as a decision-making body. It drafts white papers, advises and prepares legislation and provides the lower courts with guidelines for interpretation, themes and trends. SPC President Zhang Jun explicitly speaks of judicial activism (能动司法) as a task of the court. Courts must actively use their considerable discretion to achieve political and social goals.

    That laws need interpretation is self-evident. So, too, is the fact that this interpretation relies on very diverse knowledge. Roscoe Pound, one of the most influential US jurists of the 20th century who also dealt with China, pointed out almost 80 years ago in the Harvard Law Review that Chinese laws are applied by Chinese people, for people in China, to regulate life in China. A legal system, according to Pound, does not consist solely of rules but is based on ideals, conceptions, images of society that influence the interpretation of law. Under Xi Jinping, these images are increasingly derived from Chinese history. To understand legal development in China, one must, therefore, look at these historical images, the ideals and the self-interpretation traditions of political and legal actors. Competence in Chinese law thus extends beyond knowledge of the laws.

    On the way to becoming a norm exporter

    Competence in Chinese law is all the more important as it has been clear for at least a decade that the Chinese path is not intended to be confined to Chinese soil. Similar to other areas, such as the Belt and Road Initiative, China sees itself as a regional and global player in law as well. In 2014, the Central Committee emphasized in a resolution on strengthening governance that China should also enhance its discursive power in transnational and international law. Many of the goals formulated then have been incorporated into the plan for promoting the rule of law 2020-2025, and the SPC has outlined an ambitious international agenda in a 2022 report on legal developments relevant to foreign countries. This positions China as a provider in the market for legal forum shopping and smart courts.

    Some European jurists may smile at this, as a legal system without separation of powers, without the regulatory idea of the autonomy of law, without legal guarantees, seems unattractive. However, not all actors are likely to share this view. As China establishes itself as an export nation not only for cars but also in the global market for transnational and international law, it could become a tighter competition for Germany, the export world champion, in the realm of legal systems. The technological advantage is decreasing.

    Thomas Duve, Director at the Max Planck Institute for Legal History and Legal Theory, Frankfurt a.M., Professor at Goethe University, Frankfurt a.M. and Honorary Professor at the China University of Political Science and Law, Beijing.

    • Justice
    • Neue Seidenstraße

    Executive Moves

    Joakim Johansson took over the position of Commissioning Director Liancheng China at Andritz in April. The machine and plant engineering company headquartered in Graz is cooperating with the Chinese paper and pulp producer Liansheng Pulp & Paper for a new pulp mill in Zhangzhou in the province of Fujian.

    Pia Senger has been Head of Brand Operations Asia Pacific & China at Volvo since April. Senger previously worked for Volvo in Australia and for BMW in the USA. She will continue to be based in Gothenburg, Sweden.

    Is something changing in your organization? Let us know at heads@table.media!

    Dessert

    China knows how to build bridges. With the longest, highest and most bridges, Chinese engineers have proven this abundantly. Now, however, they are also supposed to be beautiful. Since Tuesday, this elegantly curved structure has connected the two sides of the industrial metropolis of Huizhou over the Dongjiang River. Or is it just the perspective that makes this bridge appear so gracefully arched?

    China.Table editorial team

    CHINA.TABLE EDITORIAL OFFICE

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