Today’s issue is set in three places: Strasbourg, the South China Sea and Berlin. Firstly, we look at Alsace, where EU Commission President Ursula von der Leyen has presented her cabinet. All candidates still have to go through a hearing in the EU Parliament. We already present the key commissioner posts for Brussels’ China policy and their staffing.
Our second analysis looks at the situation around the Sabina Shoal in the South China Sea, which is the subject of a bitter dispute between China and the Philippines. Following a further escalation, the balance of power in the area has shifted strongly in favor of one side, writes Michael Radunski: 65 Chinese ships are currently present on the reef – nine Coast Guard vessels, four People’s Liberation Army naval vessels and 52 maritime militias. Manila, on the other hand, had to withdraw its most important ship after a clash involving injuries. This could be the preliminary outcome of the lengthy dispute.
In our Heads column, we return to Berlin – where Friedrich Merz has become the Christian Democratic Union’s candidate for chancellor. What is his position on the People’s Republic? And who could get in his way?
Your Amelie Richter
Feature
EU Commission: These are the China portfolios and their staffing
EU Commission President Ursula von der Leyen at the presentation of her cabinet.
EU Commission President Ursula von der Leyen presented the picks for her cabinet of 26 commissioners and their portfolios on Tuesday. China played a significant role in some of the decisions. The candidates will still have a hearing in the European Parliament in October. The new EU Commission could then take over from November.
An overview of the most important Commission posts for the EU’s China policy and their staffing:
Stéphane Séjourné is the commissioner-designate for Executive Vice-President for Prosperity and Industrial Strategy – a broad and powerful dossier. This puts the Macron confidant in charge of industry, SMEs and the internal market. He is also responsible for investment and innovation as well as economic security. Séjourné was in China this spring in his current position as French Foreign Minister. He is regarded as a leading figure in the EU investigation into Chinese EVs. Séjourné will continue this line as EU Commissioner.
Kaja Kallas is to become the new High Representative for Foreign Affairs and Security Policy and Vice-President of the European Commission. “We are in an era of geostrategic rivalries and instability. Our foreign and security policy must be designed with this reality in mind,” von der Leyen said at the presentation. As Prime Minister of Estonia, Kallas took a critical stance towards China. Kallas has repeatedly emphasized that she views China’s growing influence in Europe with skepticism. Consequently, her China policy is characterized by a combination of strategic caution and an emphasis on European values and security interests. When Beijing had imposed a de facto trade embargo on Lithuania in the dispute over a Taiwan office, the Estonian government in Tallinn was outraged. The three Baltic States, including Latvia, had recently withdrawn from China’s 16+1 platform.
Teresa Ribera is to become Executive Vice-President for Clean, Just and Competitive Transition. She is also expected to deliver on the objectives of the European Green Deal. Ribera currently serves as Spain’s Minister for Ecological Transformation. In her current position, she has warned that the EU is losing the greentech race against China: “This is going to be a very critical period for Europe, and either we manage to overcome all the difficulties and become this strong, positive power. Or, we implode,” Ribera told Reuters in an interview. “The green agenda is a good driver to catch up and to get back in a relevant position.”
Maroš Šefčovič will become Commissioner for Trade and Economic Security. This new portfolio also includes customs policy. Šefčovič will also be responsible for inter-institutional relations and transparency. According to the mission letter to Šefčovič, he will manage trade and economic relations with China in line with the EU’s de-risking policy. He is also tasked with addressing “the impact of non-market-oriented policies and practices, market distortions and harmful overcapacity.” Concerning economic security, the EU Commission President asked him to continue working on the plan for export controls and foreign investment screening. He certainly has some China experience. As Executive Vice-President for the Green Deal – he took over the portfolio from Frans Timmermans in 2023 – he held the High-Level Dialogue on Climate and Environment with Vice-Premier Ding Xuexiang in June. Šefčovič can now apply his experience in this area to the difficult balancing act between the goals of the green transformation and the growing dependence on China for greentech such as solar modules, wind turbines and critical raw materials.
Valdis Dombrovskis will be appointed Commissioner for Economy and Productivity. Dombrovskis previously served as Commissioner for Trade. The People’s Republic has been one of the main items on the Latvian’s agenda in recent years. In his new role, he is expected to improve the EU’s competitiveness and implement proposals from last week’s Draghi Report, among other things. For example, Dombrovskis has been tasked with developing a new tool for closer coordination of competition projects. Dombrovskis still has a lot to do before he takes up his new position: On Thursday, for example, he will meet China’s Trade Minister Wang Wentao to discuss the EU’s additional tariffs on Chinese EVs.
Jozef Síkela is to become Commissioner for International Partnerships. Von der Leyen emphasized that he will lead the work on Global Gateway and ensure that Europe concludes partnerships that invest in a mutually beneficial future. According to his mission letter, Síkela will “refine and accelerate” the EU’s offers to partners. Global Gateway, the counter-proposal to China’s Belt and Road Initiative, still lacks momentum since its inception. Síkela is now responsible for providing Global Gateway with more visibility and visible successful projects. Currently, Síkela is the Minister of Industry and Trade in the Czech Republic. The government in Prague has recently become increasingly critical of China – but is still part of China’s 14+1 platform. As trade minister, Síkela had warned of a subsidy war between the EU and the USA, saying that China would emerge as the winner.
Europapolitik
South China Sea: This could be the harbinger of China’s victory
Deliberate collision: The crew of the “Teresa Magbanua” filmed the aggressive maneuver of a Chinese Coast Guard vessel
The situation around Sabina Shoal is evident this Tuesday: As the Philippine Coast Guard announced on Tuesday, 65 Chinese ships are currently present at the reef-nine Coast Guard vessels, four People’s Liberation Army navy ships and 52 maritime militias. However, the Philippine Coast Guard had to withdraw the “Teresa Magbanua,” one of its most modern ships. Now, the score is practically 65:0 for China.
However, the move proved necessary. A collision with the Chinese Coast Guard left the “Teresa Magbanua” badly damaged and the Filipino crew at the end of their strength. Completely dehydrated and exhausted, four crew members were taken to hospital on the island of Palawan on stretchers after their return.
“We did not surrender [the Sabina Shoal]. It’s wrong to say we surrendered it,” stressed Jay Tarriela, spokesman for the Coast Guard. The Philippines “will never abandon our sovereign rights over these waters.” A spokesperson for the National Maritime Council announced on Sunday that a replacement ship would be dispatched to Sabina Reef. “We will definitely maintain our presence there.”
Far-reaching consequences for the entire region
If this fails, the departure of the “Teresa Magbanua” could have far-reaching repercussions – not only for the Sabina Shoal, but for the entire South China Sea. The immediate consequences on the Sabina Reef are obvious:
The Philippines would lose an important anchor point directly off its own coast.
China could massively disrupt Philippine maritime trade from the Sabina Shoal.
The Sabina Shoal is located near the oil and gas-rich Reed Bank.
It is also an important staging point for supply missions on the way to Manila’s outpost at Second Thomas Shoal, which China also claims as its own.
“It does set up a new front line in the long struggle much closer to the Philippine mainland,” Raymond Powell, Director of Sealight, a project on transparency in maritime law at Stanford University, told Table.Briefings.
This leads to further consequences for other disputes over other reefs between China and the Philippines:
China is currently building a massive blockade at Scarborough Shoal to deny Philippine supply ships access.
That leaves the Second Thomas Shoal, where Philippine soldiers have been holding out since 1999 on a deliberately grounded shipwreck. Beijing claims it had struck a deal with Manila to regulate access to the reef and the Philippines’ old warship – in China’s favor.
“China, meanwhile, will likely maintain its elevated presence as evidence that Philippine resistance is futile,” says Powell.
Consequences for the South China Sea
And finally, it would have consequences for the entire region:
It would be a significant success for China’s efforts to gain control of almost the entire South China Sea – one of the most important regions for international trade. Almost one in three shipping containers passes through the South China Sea.
The legal situation is actually entirely different. The uninhabited Sabina Reef – known as Escoda Reef in the Philippines – is part of the Spratlys, a group of islands off the west coast of the Philippine island of Palawan. Located around 75 nautical miles from Palawan, it is part of Manila’s Exclusive Economic Zone (EEZ). By comparison, China’s Hainan is 650 nautical miles away. Nevertheless, China considers the reef part of China – and consistently calls it “Xianbin Jiao.”
China’s claim extends far beyond the Sabina Reef anyway. It claims practically the entire South China Sea – including areas in the EEZs of various neighboring countries. In July 2016, the Permanent Court of Arbitration in The Hague declared Beijing’s claims along its so-called nine-dash line null and void. However, Beijing refuses to accept the ruling – and has been resorting to increasingly brash measures ever since.
Damaged ship, water from the air conditioning system
The “Teresa Magbanua” had been deployed at Sabina Shoal since April to prevent a possible takeover by China. In addition to the deliberate collision caused by the Chinese coast guard, a Chinese blockade had cut off all supplies to the Filipino crew. For weeks, the crew had to drink water from the air conditioning system and ration their food to the bare minimum.
Carl Thayer, professor emeritus at the University of New South Wales, told the South China Morning Post that the Philippines should have provided a replacement vessel before withdrawing the “Teresa Magbanua.” While this is true, it overlooks the fundamental problem: The Philippine Coast Guard currently only has two ships suitable for long-term deployment in the Sabina Shoal: the BRP Teresa Magbanua and BRP Melchora Aquino.
“China now has the initiative,” said Thayer, predicting that if the Philippines truly wanted to return to Sabina Shoal, the Chinese Coast Guard would prevent this and justify it as a defensive measure. And so, despite Manila’s plans to send new ships, the withdrawal of the “Teresa Magbanua” could herald the final decision at Sabina Shoal.
Geopolitics
Philippines
South China Sea
Sinolytics.Radar
Why China may now have reached its coal peak this time
Dieser Inhalt ist Lizenznehmern unserer Vollversion vorbehalten.
In 2013, China consumed 4.2 billion tons of coal. Over the next two years, demand continued to fall. China’s coal consumption had peaked, it seemed. In 2016, however, consumption began to rise again, even growing by about 5 percent per year during the Covid.
This development clearly undermined the goals of China’s 2030 Carbon Peak Action Plan, which called for strict control of coal consumption growth. On the positive side, coal’s share of primary energy consumption fell from around 70 percent in 2011 to 55 percent in 2022. However, this achievement is offset by the 40 percent growth in total energy consumption over the same period.
The increase in coal consumption was a direct result of the massive electricity shortage in 2021, which forced many factories to halt production. In response, the government has massively promoted the construction of coal-fired power plants.
Now there is hope for a second peak. The IEA estimates that Chinese coal consumption will decline in 2024 and plateau through 2026. China’s coal production in 2024 will be the same as last year. The peak would be in line with China’s policy targets to gradually reduce coal consumption from 2026 onwards.
There are signs of a near-term coal peak. According to an analyst by the Centre for Research on Energy and Clean Air (CREA), new coal power approvals fell by 83 percent in the first half of 2024 compared to last year. However, coal power construction activity remains at a high level due to the large number of approvals in 2022 and 2023.
The coal peak is a key condition for China to meet its commitment to peak carbon emissions before 2030. This would also help reduce global coal consumption.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
News
Habeck meets Trade Minister Wang: Trade war harms both sides
China’s Minister of Commerce Wang Wentao is touring several European capitals and Brussels to discuss the EU’s additional tariffs on imported Chinese EVs. On Tuesday, he met with German Economy Minister Robert Habeck in Berlin. The central topic was “the issue of fair competitive conditions,” the Ministry announced afterward. This was “the core of the European Commission’s investigation into EVs manufactured in China,” said Habeck. “It is important to me to make clear that Germany is not shying away from competition with China. On the contrary, we embrace competition – but it must be on fair terms.”
A trade war with a spiral of tariffs that would ultimately harm both sides must be avoided at all costs, Habeck added. “We need a political solution. The EU Commission and China must do everything they can to find a negotiated solution.” Wang will also meet with outgoing EU Trade Commissioner Valdis Dombrovskis in Brussels on Thursday.
Final vote is imminent
However, Wang’s task is also to get as many member states as possible on China’s side for the final vote on September 25 on the currently provisional special tariffs. Unless a qualified majority votes against, the tariffs would take effect from the beginning of November. This would require at least 15 of the 27 EU countries, representing 65 percent of the EU population.
German Chancellor Olaf Scholz and, with some reservations, Habeck are skeptical about the tariffs. Italy’s Foreign Minister Antonio Tajani, on the other hand, informed Wang in Rome on Monday that Italy supports the EU tariffs. France is also seen as an explicit supporter. Spain’s Prime Minister Pedro Sánchez spoke out against a trade war in Beijing last week, similar to Habeck. He also called the EU tariffs “challenging.” The EU Commission’s tariffs range from eight percent for Tesla imports to 35.3 percent for Chinese car manufacturers that refused to cooperate with the Brussels authority’s investigation. In retaliation, Beijing has already launched anti-dumping investigations into European pork, spirits and dairy products. ck
Autoindustrie
Zölle
Fraud cases: Federal Environment Agency wants to stop 45 China projects
Following suspected fraud involving climate certificates, the German Environment Agency (UBA) plans to stop and reverse “all 45 suspicious China projects.” According to UBA President Dirk Messner, the projects are under “very strong suspicion of fraud.” He also suspects a veritable “shadow and parallel system” in which projects are registered on site that do not meet the stated requirements, such as the reduction of greenhouse gases. In early September, the UBA had already stopped the activation of certificates for eight Chinese projects that had been applied for by several large, internationally active companies.
Specifically, the projects in question are known as “Upstream Emission Reductions” (UER), which are intended to reduce transport emissions by offsetting emission reductions during fuel production – for example, in refineries – against the CO2 reduction obligation in the sale of fossil fuels (“GHG quota”).
The UBA reports that the 45 suspicious Chinese projects include climate certificates worth six million tons of CO2 equivalent, corresponding to a market value of around 1.5 billion euros. However, only four of these six million tons can be reversed and saved. This means that the fraud has so far caused financial damages of around 500 million euros for the certificates issued. According to Messner, the UBA has thoroughly investigated 56 climate projects in China. Both the public prosecutor’s office in Berlin and an international law firm are involved in the ongoing investigations. ck
Klima & Umwelt
EV joint venture Denza: BYD acquires last shares from Mercedes
BYD has acquired the remaining ten percent of Mercedes-Benz’s shares in the formerly jointly founded EV company Denza. According to Bloomberg, the BYD announcement did not specify the value of the transaction, and Mercedes-Benz representatives in China initially declined to comment. BYG and Mercedes founded the Denza car brand in 2011 under the company name Shenzhen BYD New Energy, each holding 50 percent of the shares. The company focused on premium electric vehicles; due to poor sales figures, Mercedes reduced its stake to ten percent in 2021.
In 2022, Denza repositioned itself and, according to Bloomberg, is already having success with electric luxury vans, with the D9 minivan seen as the bestseller in this category for 2023. According to the trade magazine Auto Motor Sport, citing local media reports, Denza plans to launch its new Z9GT this week, which could compete with the Porsche Taycan Sport Turismo model. The magazine reports that the design for the luxury model was penned by ex-Audi designer Wolfgang Egger. It will be sold in China as a purely electric model and plug-in hybrid. The report also states that the Z9 will also come to Europe as it will play a central role in the global sales of Denza and BYD. ck
Mercedes Benz
Heads
Friedrich Merz: Sharper tone on China than Scholz and Merkel
Friedrich Merz has been appointed as a chancellor candidate for the Christian Democrats in Germany.
When Friedrich Merz commented on China in the past, he often accused other politicians of misconduct. He accused German Chancellor Olaf Scholz of not arranging a meeting with ousted former head of state Hu Jintao during his trip to China. The head of the Christian Democratic Union (CDU) explained at the time that it was not even known whether he was still alive. The approval of the Chinese state-owned shipping company Cosco to invest in a terminal at the port of Hamburg, mainly due to pressure from the Chancellery, was also a perfect opportunity for him to scold the government’s recklessness in its dealings with China. According to Merz, the Chancellor obviously still believes in the theory of change through trade. “He lacks the willingness to reassess the risks we are exposed to.”
All expectations of “change through trade” have remained unfulfilled, Merz Told Table.Briefings, commenting on Scholz’s visit in November 2022. “On the contrary: China is using all bilateral and multilateral relations exclusively for its own benefit, systematically expanding its political, economic and military supremacy beyond its immediate neighborhood.”
Risk assessment is an important issue for Friedrich Merz: “Part of the Zeitenwende is taking a new look at China.” In the summer of 2023, the CDU leader accused the German government of not having a functioning China strategy underway. At the time, he told industry representatives that this could no longer be afforded. “We need a strategic consensus on these issues as to how far we are actually prepared to take our interests.”
Fine line between geopolitics and economic reality
After Scholz’s trip to China last April, Merz told the news agency dpa that the Chinese state was becoming increasingly repressive and an “increasing threat to our security.” China’s influence is stronger than it has been for 30 years, said Merz, adding that German companies in particular also feel the risks.
Although Friedrich Merz believes that China remains an interesting economic partner, anyone investing in China now has to think carefully about what is at stake. “Every German company is also well advised to analyze and minimize the risks and to classify them correctly on the balance sheet.” Merz also hinted that under his leadership, the government would no longer be willing to bail out companies taking excessive risks in China. Merz said that the state must clearly define the framework for investment and trade when it comes to strategically important goods and resources.
However, as a potential German Chancellor, Merz can hardly avoid considering the strong commitment of many German companies in the People’s Republic when making political decisions. Even though both the German government’s China strategy and that of the EU Commission call for de-risking and diversification, large companies in particular seem to be continuing to invest locally without a care in the world. Although company associations are no longer uncritical of China, they primarily have the interests of their own members in mind when addressing the government.
China strategy paper with many ideas
The CDU and CSU parliamentary group in the Bundestag presented a strategy paper on China in 2023 and called for a broad-based strengthening of China expertise in Germany. The paper states that a meaningful partnership with China is only possible if the German side recognizes and assesses the risks. It also calls for a China competence center subordinate to the German Chancellery.
It remains to be seen how these plans and the already simmering disagreements within the CDU/CSU will react to a reality check: While Merz verbally adopts a confrontational tone towards Beijing, Jens Spahn, the vice-chairman of the CDU/CSU parliamentary group in the Bundestag, for example, rejects the idea of state control over companies’ foreign investments in China. Bavarian Prime Minister Markus Soeder’s (CSU) visit to China this year revealed a completely uncritical position.
Merz does not see China as a mediator
Merz also wants to look at the big picture. “The Chinese state has become a geostrategic and, above all, a geoeconomic player. Xi Jinping is pursuing a hard Leninist-Maoist course of dominance and ideological supremacy like no other Chinese ruler since Mao,” he wrote for Table.Briefings.
Merz does not believe in China’s desire to play the role of mediator on the global stage. After all, it supports countries such as North Korea and Russia. Although Beijing has at times exerted a moderating influence on Russian President Vladimir Putin, Merz is sure that Beijing will not exert any decisive influence on Moscow to end the Russian war of aggression in Ukraine. China’s closeness to Russia is straining relations with the EU, he added.
Regardless of whether Trump or Harris wins the presidential election in November, Merz believes that Germany’s relationship with the USA will not become any closer. In the future, Washington will focus even more on the Pacific region and, in this context, above all on containing China. We will see whether Merz ultimately follows the US course. Fabian Peltsch/Amelie Richter/Christiane Kuehl
China-Strategie
De-Risking
Geopolitik
Executive Moves
Cai Wei becomes the new Director-General of the Department of North American and Oceanian Affairs at the Ministry of Foreign Affairs. He replaces Yang Tao. Cai previously served as Director-General of the Department of Latin American and Caribbean Affairs. In 2020, he was the Consul-General in Houston when then-US President Donald Trump closed the consulate due to espionage allegations.
Is something changing in your organization? Let us know at heads@table.media!
Dessert
It doesn’t get any more Chinese than this: For the Mid-Autumn Festival 中秋节 on September 17, the pandas at Chongqing Zoo were served mooncakes. It was also practically Christmas for the animals in other panda enclosures throughout the country. The bears at the zoo in Sichuan Panda Province were served a feast of mooncakes made from steamed cornbread, fruit plates and bamboo shoot cakes – “carefully selected and prepared by experts and animal keepers, taking into account their age, personality, health and eating habits,” as the state media reported. Panda fans were able to watch the feast via livestream and offer their blessings to the popular black and white animals.
Today’s issue is set in three places: Strasbourg, the South China Sea and Berlin. Firstly, we look at Alsace, where EU Commission President Ursula von der Leyen has presented her cabinet. All candidates still have to go through a hearing in the EU Parliament. We already present the key commissioner posts for Brussels’ China policy and their staffing.
Our second analysis looks at the situation around the Sabina Shoal in the South China Sea, which is the subject of a bitter dispute between China and the Philippines. Following a further escalation, the balance of power in the area has shifted strongly in favor of one side, writes Michael Radunski: 65 Chinese ships are currently present on the reef – nine Coast Guard vessels, four People’s Liberation Army naval vessels and 52 maritime militias. Manila, on the other hand, had to withdraw its most important ship after a clash involving injuries. This could be the preliminary outcome of the lengthy dispute.
In our Heads column, we return to Berlin – where Friedrich Merz has become the Christian Democratic Union’s candidate for chancellor. What is his position on the People’s Republic? And who could get in his way?
Your Amelie Richter
Feature
EU Commission: These are the China portfolios and their staffing
EU Commission President Ursula von der Leyen at the presentation of her cabinet.
EU Commission President Ursula von der Leyen presented the picks for her cabinet of 26 commissioners and their portfolios on Tuesday. China played a significant role in some of the decisions. The candidates will still have a hearing in the European Parliament in October. The new EU Commission could then take over from November.
An overview of the most important Commission posts for the EU’s China policy and their staffing:
Stéphane Séjourné is the commissioner-designate for Executive Vice-President for Prosperity and Industrial Strategy – a broad and powerful dossier. This puts the Macron confidant in charge of industry, SMEs and the internal market. He is also responsible for investment and innovation as well as economic security. Séjourné was in China this spring in his current position as French Foreign Minister. He is regarded as a leading figure in the EU investigation into Chinese EVs. Séjourné will continue this line as EU Commissioner.
Kaja Kallas is to become the new High Representative for Foreign Affairs and Security Policy and Vice-President of the European Commission. “We are in an era of geostrategic rivalries and instability. Our foreign and security policy must be designed with this reality in mind,” von der Leyen said at the presentation. As Prime Minister of Estonia, Kallas took a critical stance towards China. Kallas has repeatedly emphasized that she views China’s growing influence in Europe with skepticism. Consequently, her China policy is characterized by a combination of strategic caution and an emphasis on European values and security interests. When Beijing had imposed a de facto trade embargo on Lithuania in the dispute over a Taiwan office, the Estonian government in Tallinn was outraged. The three Baltic States, including Latvia, had recently withdrawn from China’s 16+1 platform.
Teresa Ribera is to become Executive Vice-President for Clean, Just and Competitive Transition. She is also expected to deliver on the objectives of the European Green Deal. Ribera currently serves as Spain’s Minister for Ecological Transformation. In her current position, she has warned that the EU is losing the greentech race against China: “This is going to be a very critical period for Europe, and either we manage to overcome all the difficulties and become this strong, positive power. Or, we implode,” Ribera told Reuters in an interview. “The green agenda is a good driver to catch up and to get back in a relevant position.”
Maroš Šefčovič will become Commissioner for Trade and Economic Security. This new portfolio also includes customs policy. Šefčovič will also be responsible for inter-institutional relations and transparency. According to the mission letter to Šefčovič, he will manage trade and economic relations with China in line with the EU’s de-risking policy. He is also tasked with addressing “the impact of non-market-oriented policies and practices, market distortions and harmful overcapacity.” Concerning economic security, the EU Commission President asked him to continue working on the plan for export controls and foreign investment screening. He certainly has some China experience. As Executive Vice-President for the Green Deal – he took over the portfolio from Frans Timmermans in 2023 – he held the High-Level Dialogue on Climate and Environment with Vice-Premier Ding Xuexiang in June. Šefčovič can now apply his experience in this area to the difficult balancing act between the goals of the green transformation and the growing dependence on China for greentech such as solar modules, wind turbines and critical raw materials.
Valdis Dombrovskis will be appointed Commissioner for Economy and Productivity. Dombrovskis previously served as Commissioner for Trade. The People’s Republic has been one of the main items on the Latvian’s agenda in recent years. In his new role, he is expected to improve the EU’s competitiveness and implement proposals from last week’s Draghi Report, among other things. For example, Dombrovskis has been tasked with developing a new tool for closer coordination of competition projects. Dombrovskis still has a lot to do before he takes up his new position: On Thursday, for example, he will meet China’s Trade Minister Wang Wentao to discuss the EU’s additional tariffs on Chinese EVs.
Jozef Síkela is to become Commissioner for International Partnerships. Von der Leyen emphasized that he will lead the work on Global Gateway and ensure that Europe concludes partnerships that invest in a mutually beneficial future. According to his mission letter, Síkela will “refine and accelerate” the EU’s offers to partners. Global Gateway, the counter-proposal to China’s Belt and Road Initiative, still lacks momentum since its inception. Síkela is now responsible for providing Global Gateway with more visibility and visible successful projects. Currently, Síkela is the Minister of Industry and Trade in the Czech Republic. The government in Prague has recently become increasingly critical of China – but is still part of China’s 14+1 platform. As trade minister, Síkela had warned of a subsidy war between the EU and the USA, saying that China would emerge as the winner.
Europapolitik
South China Sea: This could be the harbinger of China’s victory
Deliberate collision: The crew of the “Teresa Magbanua” filmed the aggressive maneuver of a Chinese Coast Guard vessel
The situation around Sabina Shoal is evident this Tuesday: As the Philippine Coast Guard announced on Tuesday, 65 Chinese ships are currently present at the reef-nine Coast Guard vessels, four People’s Liberation Army navy ships and 52 maritime militias. However, the Philippine Coast Guard had to withdraw the “Teresa Magbanua,” one of its most modern ships. Now, the score is practically 65:0 for China.
However, the move proved necessary. A collision with the Chinese Coast Guard left the “Teresa Magbanua” badly damaged and the Filipino crew at the end of their strength. Completely dehydrated and exhausted, four crew members were taken to hospital on the island of Palawan on stretchers after their return.
“We did not surrender [the Sabina Shoal]. It’s wrong to say we surrendered it,” stressed Jay Tarriela, spokesman for the Coast Guard. The Philippines “will never abandon our sovereign rights over these waters.” A spokesperson for the National Maritime Council announced on Sunday that a replacement ship would be dispatched to Sabina Reef. “We will definitely maintain our presence there.”
Far-reaching consequences for the entire region
If this fails, the departure of the “Teresa Magbanua” could have far-reaching repercussions – not only for the Sabina Shoal, but for the entire South China Sea. The immediate consequences on the Sabina Reef are obvious:
The Philippines would lose an important anchor point directly off its own coast.
China could massively disrupt Philippine maritime trade from the Sabina Shoal.
The Sabina Shoal is located near the oil and gas-rich Reed Bank.
It is also an important staging point for supply missions on the way to Manila’s outpost at Second Thomas Shoal, which China also claims as its own.
“It does set up a new front line in the long struggle much closer to the Philippine mainland,” Raymond Powell, Director of Sealight, a project on transparency in maritime law at Stanford University, told Table.Briefings.
This leads to further consequences for other disputes over other reefs between China and the Philippines:
China is currently building a massive blockade at Scarborough Shoal to deny Philippine supply ships access.
That leaves the Second Thomas Shoal, where Philippine soldiers have been holding out since 1999 on a deliberately grounded shipwreck. Beijing claims it had struck a deal with Manila to regulate access to the reef and the Philippines’ old warship – in China’s favor.
“China, meanwhile, will likely maintain its elevated presence as evidence that Philippine resistance is futile,” says Powell.
Consequences for the South China Sea
And finally, it would have consequences for the entire region:
It would be a significant success for China’s efforts to gain control of almost the entire South China Sea – one of the most important regions for international trade. Almost one in three shipping containers passes through the South China Sea.
The legal situation is actually entirely different. The uninhabited Sabina Reef – known as Escoda Reef in the Philippines – is part of the Spratlys, a group of islands off the west coast of the Philippine island of Palawan. Located around 75 nautical miles from Palawan, it is part of Manila’s Exclusive Economic Zone (EEZ). By comparison, China’s Hainan is 650 nautical miles away. Nevertheless, China considers the reef part of China – and consistently calls it “Xianbin Jiao.”
China’s claim extends far beyond the Sabina Reef anyway. It claims practically the entire South China Sea – including areas in the EEZs of various neighboring countries. In July 2016, the Permanent Court of Arbitration in The Hague declared Beijing’s claims along its so-called nine-dash line null and void. However, Beijing refuses to accept the ruling – and has been resorting to increasingly brash measures ever since.
Damaged ship, water from the air conditioning system
The “Teresa Magbanua” had been deployed at Sabina Shoal since April to prevent a possible takeover by China. In addition to the deliberate collision caused by the Chinese coast guard, a Chinese blockade had cut off all supplies to the Filipino crew. For weeks, the crew had to drink water from the air conditioning system and ration their food to the bare minimum.
Carl Thayer, professor emeritus at the University of New South Wales, told the South China Morning Post that the Philippines should have provided a replacement vessel before withdrawing the “Teresa Magbanua.” While this is true, it overlooks the fundamental problem: The Philippine Coast Guard currently only has two ships suitable for long-term deployment in the Sabina Shoal: the BRP Teresa Magbanua and BRP Melchora Aquino.
“China now has the initiative,” said Thayer, predicting that if the Philippines truly wanted to return to Sabina Shoal, the Chinese Coast Guard would prevent this and justify it as a defensive measure. And so, despite Manila’s plans to send new ships, the withdrawal of the “Teresa Magbanua” could herald the final decision at Sabina Shoal.
Geopolitics
Philippines
South China Sea
Sinolytics.Radar
Why China may now have reached its coal peak this time
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In 2013, China consumed 4.2 billion tons of coal. Over the next two years, demand continued to fall. China’s coal consumption had peaked, it seemed. In 2016, however, consumption began to rise again, even growing by about 5 percent per year during the Covid.
This development clearly undermined the goals of China’s 2030 Carbon Peak Action Plan, which called for strict control of coal consumption growth. On the positive side, coal’s share of primary energy consumption fell from around 70 percent in 2011 to 55 percent in 2022. However, this achievement is offset by the 40 percent growth in total energy consumption over the same period.
The increase in coal consumption was a direct result of the massive electricity shortage in 2021, which forced many factories to halt production. In response, the government has massively promoted the construction of coal-fired power plants.
Now there is hope for a second peak. The IEA estimates that Chinese coal consumption will decline in 2024 and plateau through 2026. China’s coal production in 2024 will be the same as last year. The peak would be in line with China’s policy targets to gradually reduce coal consumption from 2026 onwards.
There are signs of a near-term coal peak. According to an analyst by the Centre for Research on Energy and Clean Air (CREA), new coal power approvals fell by 83 percent in the first half of 2024 compared to last year. However, coal power construction activity remains at a high level due to the large number of approvals in 2022 and 2023.
The coal peak is a key condition for China to meet its commitment to peak carbon emissions before 2030. This would also help reduce global coal consumption.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
News
Habeck meets Trade Minister Wang: Trade war harms both sides
China’s Minister of Commerce Wang Wentao is touring several European capitals and Brussels to discuss the EU’s additional tariffs on imported Chinese EVs. On Tuesday, he met with German Economy Minister Robert Habeck in Berlin. The central topic was “the issue of fair competitive conditions,” the Ministry announced afterward. This was “the core of the European Commission’s investigation into EVs manufactured in China,” said Habeck. “It is important to me to make clear that Germany is not shying away from competition with China. On the contrary, we embrace competition – but it must be on fair terms.”
A trade war with a spiral of tariffs that would ultimately harm both sides must be avoided at all costs, Habeck added. “We need a political solution. The EU Commission and China must do everything they can to find a negotiated solution.” Wang will also meet with outgoing EU Trade Commissioner Valdis Dombrovskis in Brussels on Thursday.
Final vote is imminent
However, Wang’s task is also to get as many member states as possible on China’s side for the final vote on September 25 on the currently provisional special tariffs. Unless a qualified majority votes against, the tariffs would take effect from the beginning of November. This would require at least 15 of the 27 EU countries, representing 65 percent of the EU population.
German Chancellor Olaf Scholz and, with some reservations, Habeck are skeptical about the tariffs. Italy’s Foreign Minister Antonio Tajani, on the other hand, informed Wang in Rome on Monday that Italy supports the EU tariffs. France is also seen as an explicit supporter. Spain’s Prime Minister Pedro Sánchez spoke out against a trade war in Beijing last week, similar to Habeck. He also called the EU tariffs “challenging.” The EU Commission’s tariffs range from eight percent for Tesla imports to 35.3 percent for Chinese car manufacturers that refused to cooperate with the Brussels authority’s investigation. In retaliation, Beijing has already launched anti-dumping investigations into European pork, spirits and dairy products. ck
Autoindustrie
Zölle
Fraud cases: Federal Environment Agency wants to stop 45 China projects
Following suspected fraud involving climate certificates, the German Environment Agency (UBA) plans to stop and reverse “all 45 suspicious China projects.” According to UBA President Dirk Messner, the projects are under “very strong suspicion of fraud.” He also suspects a veritable “shadow and parallel system” in which projects are registered on site that do not meet the stated requirements, such as the reduction of greenhouse gases. In early September, the UBA had already stopped the activation of certificates for eight Chinese projects that had been applied for by several large, internationally active companies.
Specifically, the projects in question are known as “Upstream Emission Reductions” (UER), which are intended to reduce transport emissions by offsetting emission reductions during fuel production – for example, in refineries – against the CO2 reduction obligation in the sale of fossil fuels (“GHG quota”).
The UBA reports that the 45 suspicious Chinese projects include climate certificates worth six million tons of CO2 equivalent, corresponding to a market value of around 1.5 billion euros. However, only four of these six million tons can be reversed and saved. This means that the fraud has so far caused financial damages of around 500 million euros for the certificates issued. According to Messner, the UBA has thoroughly investigated 56 climate projects in China. Both the public prosecutor’s office in Berlin and an international law firm are involved in the ongoing investigations. ck
Klima & Umwelt
EV joint venture Denza: BYD acquires last shares from Mercedes
BYD has acquired the remaining ten percent of Mercedes-Benz’s shares in the formerly jointly founded EV company Denza. According to Bloomberg, the BYD announcement did not specify the value of the transaction, and Mercedes-Benz representatives in China initially declined to comment. BYG and Mercedes founded the Denza car brand in 2011 under the company name Shenzhen BYD New Energy, each holding 50 percent of the shares. The company focused on premium electric vehicles; due to poor sales figures, Mercedes reduced its stake to ten percent in 2021.
In 2022, Denza repositioned itself and, according to Bloomberg, is already having success with electric luxury vans, with the D9 minivan seen as the bestseller in this category for 2023. According to the trade magazine Auto Motor Sport, citing local media reports, Denza plans to launch its new Z9GT this week, which could compete with the Porsche Taycan Sport Turismo model. The magazine reports that the design for the luxury model was penned by ex-Audi designer Wolfgang Egger. It will be sold in China as a purely electric model and plug-in hybrid. The report also states that the Z9 will also come to Europe as it will play a central role in the global sales of Denza and BYD. ck
Mercedes Benz
Heads
Friedrich Merz: Sharper tone on China than Scholz and Merkel
Friedrich Merz has been appointed as a chancellor candidate for the Christian Democrats in Germany.
When Friedrich Merz commented on China in the past, he often accused other politicians of misconduct. He accused German Chancellor Olaf Scholz of not arranging a meeting with ousted former head of state Hu Jintao during his trip to China. The head of the Christian Democratic Union (CDU) explained at the time that it was not even known whether he was still alive. The approval of the Chinese state-owned shipping company Cosco to invest in a terminal at the port of Hamburg, mainly due to pressure from the Chancellery, was also a perfect opportunity for him to scold the government’s recklessness in its dealings with China. According to Merz, the Chancellor obviously still believes in the theory of change through trade. “He lacks the willingness to reassess the risks we are exposed to.”
All expectations of “change through trade” have remained unfulfilled, Merz Told Table.Briefings, commenting on Scholz’s visit in November 2022. “On the contrary: China is using all bilateral and multilateral relations exclusively for its own benefit, systematically expanding its political, economic and military supremacy beyond its immediate neighborhood.”
Risk assessment is an important issue for Friedrich Merz: “Part of the Zeitenwende is taking a new look at China.” In the summer of 2023, the CDU leader accused the German government of not having a functioning China strategy underway. At the time, he told industry representatives that this could no longer be afforded. “We need a strategic consensus on these issues as to how far we are actually prepared to take our interests.”
Fine line between geopolitics and economic reality
After Scholz’s trip to China last April, Merz told the news agency dpa that the Chinese state was becoming increasingly repressive and an “increasing threat to our security.” China’s influence is stronger than it has been for 30 years, said Merz, adding that German companies in particular also feel the risks.
Although Friedrich Merz believes that China remains an interesting economic partner, anyone investing in China now has to think carefully about what is at stake. “Every German company is also well advised to analyze and minimize the risks and to classify them correctly on the balance sheet.” Merz also hinted that under his leadership, the government would no longer be willing to bail out companies taking excessive risks in China. Merz said that the state must clearly define the framework for investment and trade when it comes to strategically important goods and resources.
However, as a potential German Chancellor, Merz can hardly avoid considering the strong commitment of many German companies in the People’s Republic when making political decisions. Even though both the German government’s China strategy and that of the EU Commission call for de-risking and diversification, large companies in particular seem to be continuing to invest locally without a care in the world. Although company associations are no longer uncritical of China, they primarily have the interests of their own members in mind when addressing the government.
China strategy paper with many ideas
The CDU and CSU parliamentary group in the Bundestag presented a strategy paper on China in 2023 and called for a broad-based strengthening of China expertise in Germany. The paper states that a meaningful partnership with China is only possible if the German side recognizes and assesses the risks. It also calls for a China competence center subordinate to the German Chancellery.
It remains to be seen how these plans and the already simmering disagreements within the CDU/CSU will react to a reality check: While Merz verbally adopts a confrontational tone towards Beijing, Jens Spahn, the vice-chairman of the CDU/CSU parliamentary group in the Bundestag, for example, rejects the idea of state control over companies’ foreign investments in China. Bavarian Prime Minister Markus Soeder’s (CSU) visit to China this year revealed a completely uncritical position.
Merz does not see China as a mediator
Merz also wants to look at the big picture. “The Chinese state has become a geostrategic and, above all, a geoeconomic player. Xi Jinping is pursuing a hard Leninist-Maoist course of dominance and ideological supremacy like no other Chinese ruler since Mao,” he wrote for Table.Briefings.
Merz does not believe in China’s desire to play the role of mediator on the global stage. After all, it supports countries such as North Korea and Russia. Although Beijing has at times exerted a moderating influence on Russian President Vladimir Putin, Merz is sure that Beijing will not exert any decisive influence on Moscow to end the Russian war of aggression in Ukraine. China’s closeness to Russia is straining relations with the EU, he added.
Regardless of whether Trump or Harris wins the presidential election in November, Merz believes that Germany’s relationship with the USA will not become any closer. In the future, Washington will focus even more on the Pacific region and, in this context, above all on containing China. We will see whether Merz ultimately follows the US course. Fabian Peltsch/Amelie Richter/Christiane Kuehl
China-Strategie
De-Risking
Geopolitik
Executive Moves
Cai Wei becomes the new Director-General of the Department of North American and Oceanian Affairs at the Ministry of Foreign Affairs. He replaces Yang Tao. Cai previously served as Director-General of the Department of Latin American and Caribbean Affairs. In 2020, he was the Consul-General in Houston when then-US President Donald Trump closed the consulate due to espionage allegations.
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Dessert
It doesn’t get any more Chinese than this: For the Mid-Autumn Festival 中秋节 on September 17, the pandas at Chongqing Zoo were served mooncakes. It was also practically Christmas for the animals in other panda enclosures throughout the country. The bears at the zoo in Sichuan Panda Province were served a feast of mooncakes made from steamed cornbread, fruit plates and bamboo shoot cakes – “carefully selected and prepared by experts and animal keepers, taking into account their age, personality, health and eating habits,” as the state media reported. Panda fans were able to watch the feast via livestream and offer their blessings to the popular black and white animals.
