Table.Briefing: China (English)

China’s annoyance over NATO summit + Beijing examines EU trade barriers

Dear reader,

Yes, China’s leadership supports the Putin regime with microelectronics for weapon production. And yes, Chinese soldiers were involved in military exercises in Belarus near the border with NATO member Poland in recent days. Nevertheless, Europeans should not allow NATO to expand its involvement in the Asia-Pacific region, as the US and NATO Secretary General Stoltenberg apparently intend. NATO was not created for this purpose. Michael Radunski fears in his Feature that mistrust is growing on both sides and warns of an escalation that neither side can afford.

In the trade dispute between the EU and China, Beijing is now ramping up its approach. On Wednesday, the Chinese Ministry of Commerce initiated a formal investigation into the EU’s economic practices. The target: The Foreign Subsidies Regulation (FSR), which has been in force for just over a year and has already led to the withdrawal of Chinese companies from two tenders. Beijing sees this as an unfair restriction on Chinese companies in Europe, for example, in locomotives, photovoltaics and wind energy. This sounds aggressive, but what the Ministry of Commerce plans is still vaguely formulated, as Amelie Richter and Finn Mayer-Kuckuk report.

Your
Felix Lee
Image of Felix  Lee

Feature

NATO summit: Why mutual mistrust is growing

China views the current NATO summit with anger and frustration. The meeting in Washington has turned into a rumor mill, mainly brewing the theory of a Chinese threat, according to the Chinese newspaper Global Times. “Under the hype from the US and NATO, it seems that China has become the ‘key’ to the survival of Europe, controlling the fate of the Russia-Ukraine conflict like a ‘decisive power’.”

The Chinese Foreign Ministry echoes this sentiment: “We firmly reject NATO’s vilification and blame-shifting against China. NATO should not use China to justify its insertion into the Asia-Pacific and attempt to disrupt regional dynamics.”

One could retort with similar fervor, branding China’s increasingly assertive foreign policy as regionally hegemonic. Countries in China’s neighborhood like Japan, South Korea, Australia or the Philippines could say much about this. Yet, one must acknowledge that China’s criticism is somewhat understandable. NATO is indeed shifting its focus toward Asia.

NATO strengthens cooperation in China’s neighborhood

At the NATO summit, not only member states are present, but also for the third time, the so-called AP4: Australia, Japan, New Zealand and South Korea. In Washington, NATO aims to agree on several projects with its Indo-Pacific partners, covering areas such as cybersecurity, disinformation, artificial intelligence, joint support for Ukraine, as well as new technologies and the defense industry.

NATO Secretary General Jens Stoltenberg makes no secret of NATO’s orientation. “Europe’s security affects Asia, and Asia’s security affects Europe,” he writes in an essay for Foreign Affairs magazine. His argument: Security is no longer a regional matter. “Russia would be incapable of sustaining this war without the support of its authoritarian friends in Asia.”

NATO secretary general increases pressure on China

Stoltenberg specifically names China alongside Iran and North Korea. “Publicly, Chinese President Xi Jinping wants the world to believe he seeks peace. However, he secretly fuels the conflict by providing Russia with cutting-edge technologies like semiconductors and microelectronics, which Moscow uses to produce missiles, tanks, and aircraft.” Indeed, Chinese customs data, US intelligence information and battlefield finds in Ukraine reveal the extent of China’s support for Russia’s war machine.

At this point, the NATO secretary general puts pressure on China. “Simultaneously, Xi wants to maintain good relations with the West to avoid sanctions and sustain trade. But he cannot have both. Eventually, China’s support for Russia’s illegal war must come at a price.” This approach makes sense: defining core interests and presenting them unitedly to the outside world.

China exploits Western disunity

While China has pursued this policy for years, the West struggles with defining and jointly representing its interests. This is evident within the European Union, with the latest example being Hungarian Prime Minister Viktor Orbán’s “Peace Mission 3.0”. China has long known how to exploit this disunity in the West to its advantage. Hungary frequently vetoes EU proposals condemning China for human rights violations or issues regarding Hong Kong or Taiwan.

There are also disagreements regarding NATO’s direction. France, in particular, wants to avoid the appearance that NATO is expanding its presence in the Indo-Pacific. French President Emmanuel Macron opposed a liaison office in Japan. “If we push NATO to expand its scope and geography, we are making a big mistake,” argues Macron.

China also moves closer to NATO borders

Overall, China’s anger towards NATO is understandable. Yet, there are two sides to this. Not only is NATO looking towards Asia, but China is also advancing its foreign policy towards NATO borders and beyond. Chinese troops are participating in military exercises in Belarus, near Brest, a Belarusian city on the border with NATO member Poland. A reminder: Belarusian leader Alexander Lukashenko allowed Putin’s troops free access to attack Ukraine from the north.

Furthermore, Beijing is enhancing cooperation with NATO member Turkey. For years, Turkey has participated in summits of the Shanghai Cooperation Organization (SCO). Turkey is not yet an SCO member, but President Recep Tayyip Erdogan has repeatedly expressed his desire to join. This is problematic for NATO, as Turkey hosts important NATO facilities.

Thus, there is cause for concern on both sides – in China and NATO capitals. Mutual mistrust is growing, which is dangerous. Given this situation, it is crucial to engage in direct dialogue. Interests and intentions must be clearly defined and communicated. An escalation – even if only due to misunderstandings – serves no one’s interest.

  • EU
  • Europapolitik
  • European policy
  • Geopolitics
  • Nato
  • Russland
  • Ukraine
  • USA
Translation missing.

Tariff dispute with the EU: China strikes back

Chinese electric cars on their way to export (Suzhou Port).

The first outlines of China’s response in the tariff dispute with the EU are beginning to emerge. On Wednesday, China’s Ministry of Commerce announced an investigation into trade barriers on the EU’s side. This investigation had been planned for some time: Back in late June, a spokesperson for the ministry announced that they were reviewing a corresponding request from the China Chamber of Commerce to the EU (CCCEU). The matter has now entered the next phase.

The investigation follows a set mechanism, which the Chinese government transparently outlines on its website. If the review finds that the EU is unfairly closing its market to China, the Ministry of Commerce has three options:

  • consultations with the EU to remove the barriers,
  • appealing to international organizations, namely the World Trade Organization (WTO), for arbitration, or
  • “other appropriate measures”.

The third option leaves all possibilities open, including counter-tariffs and other potentially unpleasant escalations.

The review is not directly targeting electric car tariffs

The investigation is set to last six months. The announcement does not specify which sectors and trade barriers are being targeted. It concerns “trade and investment barriers related to the EU’s practices in investigating Chinese companies under the decision to review foreign subsidies.” The ministry’s statement explicitly mentions:

  • locomotives,
  • solar cells,
  • wind turbines and
  • security equipment.

At first glance, no general market barriers apply here. In the solar industry, the EU has recently refrained from examining tariffs. The EU has also refrained from initiating proceedings in the wind power sector for the time being.

At the same time, however, a pattern can be recognized. In all cases, these are industries in which the EU has initiated an anti-subsidy investigation. It has had this instrument for almost exactly a year, with the Foreign Subsidies Regulation (FSR) coming into force in July 2023. It is particularly annoying for the Chinese side because it is much quicker and more hands-on than the good old anti-dumping investigations, which often dragged on forever. The investigations of Chinese suppliers for inappropriate state subsidies included

Symmetrical approach to the EU customs procedure

The first phase for the ministry is to research how the EU might be violating a range of rules defined in the implementing regulations. This includes breaches of agreements between the economies, as well as more ambiguous cases such as “causing market entry barriers for our country” or “harming the competitiveness [of Chinese] firms”. Another broadly defined point is: “[The trade measure] could hinder export opportunities for a [Chinese] product.”

The tools for examining the facts on the Chinese side include:

  • questionnaires,
  • public hearings and
  • on-site investigations.

These are similar to the tools the EU used to scrutinize the Chinese vehicle industry in setting electric car tariffs.

China shows off its trade weapons, but remains moderate

China is making it clear that it will not accept the EU tariffs quietly or consider them fair, as Trade Commissioner Valdis Dombrovskis had hoped. There will be a robust response, not limited to specific products like cognac or pork. China wants to show that it won’t be pushed around.

However, this does not necessarily mean an uncontrolled spiral of ever-higher tariffs and other barriers. Even with the US, China generally responded with roughly equivalent trade measures when first Donald Trump and then Joe Biden imposed new tariffs and restrictions.

Beijing relies on exports and has no interest in closed markets, as it has repeatedly emphasized. China will probably also proceed according to the same principle with the EU: tit for tat.

  • Duties
  • Solar
  • Trade
Translation missing.

News

Consumer prices: Why the risk of deflation is not averted

Despite China’s economic recovery, the threat of harmful deflation is not averted. Consumer prices in China have risen for the fifth consecutive month in June, but weak demand caused them to fall short of expectations. The Consumer Price Index (CPI) rose by 0.2 percent in June compared to the same month last year, following a 0.3 percent increase in May, the National Bureau of Statistics (NBS) reported on Wednesday. This is the slowest increase in three months and below the 0.4 percent predicted by economists in a Reuters poll.

Producer prices, which are due at the factory gate before products enter the market, are considered an early indicator of future price trends. These prices have been falling for some time but only dropped by 0.8 percent in June, the smallest decline in 17 months. Experts attribute this mainly to a statistical base effect. “The risk of deflation in China is not averted. Domestic demand remains weak,” warned Zhiwei Zhang, chief economist at Pinpoint Asset Management.

The economy, severely affected by strict COVID-19 measures, gained unexpected momentum in the first quarter due to booming exports: Gross Domestic Product (GDP) grew by 5.3 percent from January to March compared to the previous year. Despite numerous measures by the government and central bank to stimulate the economy, fundamental problems such as the real estate crisis and labor market uncertainty remain. These issues weigh on consumption and industrial production, amplifying calls for more effective political measures.

Chinese retailers have lowered prices for goods ranging from coffee to cars to stay competitive amid weak consumer spending and uncertain economic prospects. Repeated government appeals for consumers to “dare to spend money” have largely fallen flat. Experts see the central bank under pressure as a result. “Low inflation and weak credit data provide a compelling argument for further easing of monetary policy by the Chinese central bank in the coming months,” said Lynn Song, chief economist for China at ING. rtr

  • Deflation

Solar: Why overproduction is also a problem for China

China intends to curb the overproduction of solar panels domestically by implementing tougher capital requirements. The Ministry of Industry released a new regulation mandating that solar companies must maintain a minimum capital ratio of 30 percent for both expansions and new production facilities. Previously, the requirement was 20 percent. The Ministry did not provide a more detailed definition of the capital ratio. Additionally, new efficiency standards for various types of solar module production were established. Comments on the draft regulation can be submitted until July 15.

Jessica Jin, an analyst at “S&P Global Commodity Insight”, views this as an attempt to prevent the credit-driven expansion of solar production. Furthermore, it is evident that consolidation in the sector and the phasing out of outdated capacities are planned.

China dominates the global solar panel market. In Germany, almost exclusively Chinese modules are installed. Experts estimate that China can meet global demand until 2032 with its existing and firmly planned factories. The current overproduction has led to a price decline, which has recently fueled the solar boom in Germany.

However, China’s dominance has been viewed critically in Europe for years. EU import tariffs have not changed this situation. Plans to at least preserve the remnants of production in Europe have not yet been implemented. rtr

  • Technologie

After veto against sale: VW shuts down MAN gas turbine plant

Following the federal government’s veto on the sale of the division to China, Volkswagen subsidiary MAN Energy Solutions will cease the production and development of gas turbines. “We respect the government’s decision,” a spokesperson for the Augsburg-based company stated on Wednesday. MAN Energy will wind down the new development of gas turbines over the coming months. The MAN Energy division encompasses a total of 100 employees in Oberhausen and Zurich.

The federal government had blocked the planned sale to the Chinese CSIC Longjiang GH Gas Turbine Co (GHGT) citing the Foreign Trade and Payments Act. They feared that China could use the gas turbines not just for civilian purposes but also to power warships.

GHGT is part of the shipbuilding conglomerate China State Shipbuilding Corp (CSSC), which also constructs ships for the Chinese navy. China aims to modernize its fleet, which is the largest in the world. According to the Foreign Trade and Payments Act, the federal government can prohibit sales to non-EU countries if these sales could potentially endanger national security.

Economy Minister Robert Habeck (Greens), whose department proposed the ban, defended the decision: Investments in Germany are generally welcome, as the economy thrives on trade. However, technology critical to public order must be protected. Thus, the transaction was prohibited. “And that is the right thing to do.” Interior Minister Nancy Faeser (SPD) cited “security policy reasons” in Berlin.

MAN Energy’s gas turbines are used for power generation or pipeline propulsion. Volkswagen had attempted to address the government’s concerns. According to insiders, the company presented reports aiming to refute the applicability of MAN gas turbines or their underlying technology for powering warships. Fundamentally, these turbines would be significantly more efficient for such purposes than the commonly used diesel engines. MAN Energy has been supplying gas turbines for civilian purposes to China for a long time. rtr

  • Autoindustrie

Cybersecurity: Why Microsoft employees in China must switch to iPhones

According to a report by Bloomberg, Microsoft has instructed its employees in China to use only iPhones for work-related tasks and to remove Android devices from the corporate network. This measure is part of Microsoft’s global Secure Future Initiative (SFI) aimed at enhancing cybersecurity. Microsoft will provide its employees with the latest iPhone models.

The decision stems from the fragmentation of Android app stores in China. With the Google Play Store not officially available there, numerous alternative marketplaces are operated by local providers like Huawei and Xiaomi. Microsoft is under increasing pressure to strengthen its security protocols.

The company has recently suffered a series of cyberattacks, including one in January allegedly linked to Russia that targeted several US government agencies. In 2023, Chinese hackers also stole a signature key from Microsoft, using it to breach the email accounts of numerous organizations. In response, Microsoft announced the most comprehensive overhaul of its security measures in two decades. fpe

  • Daten

Heads

Keir Starmer – hopeful leader and foreign policy enigma

Labour Party leader Keir Starmer listens to a question from port workers during a general election campaign event Southampton Docks in Southampton, England, Monday, June 17, 2024.

As the new British Prime Minister, Keir Starmer has significant leeway in shaping the relationship with China. A balanced and coherent China strategy will be at the top of the new government’s agenda. In recent years, London’s approach to the People’s Republic has been erratic: What began under Prime Minister David Cameron as business opportunism ended under Liz Truss in ideological hostility.

Starmer’s predecessor, Rishi Sunak, did not prioritize China during his tenure. Sunak never met with China’s President Xi Jinping, nor did they even have a phone call during his nearly two-year term.

Now, Starmer has the opportunity to establish a more balanced diplomatic relationship with Beijing. His Labour Party intends to initiate a review of China policy through an “audit” to be conducted within the first 100 days of his tenure. Starmer might also seek a bilateral meeting with Xi at the G-20 summit in November in Brazil.

Special focus on Hong Kong

Labour has already outlined a rough framework for addressing relations with China. Their election manifesto describes a three-part approach: “We will co-operate where we can, compete where we need to and challenge where we must.” This resembles the EU’s tripartite approach of partner, competitor and systemic rival – and in London, it could mean almost anything depending on the emphasis placed on each point. Unlike Labour’s domestic plans, the foreign policy agenda remains unclear, analysts noted in the days following the election.

The former British colony of Hong Kong receives special mention in the manifesto: “We will stand by and support members of the Hong Kong community who have moved to Britain.” Starmer will face pressure from his party to promptly address human rights issues from Hong Kong to Xinjiang – issues that were also a focus of his work as a lawyer.

Human rights focus as a lawyer

Keir Starmer was practically born into the Labour Party: His parents, a toolmaker and a nurse, named their son after Labour’s first leader, Keir Hardie. The 61-year-old is married to Victoria Alexander, who works in the NHS, and they have two children. Starmer is an enthusiastic Arsenal fan.

After finishing school, Starmer studied law at the University of Leeds and then earned a Bachelor of Civil Law from the University of Oxford. He was admitted as a barrister in 1987. As a lawyer, he often worked pro bono, with clients including peace and environmental activists. From 2003, he served as a human rights advisor to the Northern Ireland Police Board.

From 2008 to 2013, Starmer served as the Director of Public Prosecutions for England and Wales, responsible for the country’s criminal prosecutions. During his tenure, he advocated for justice system reforms and was involved in several significant decisions that influenced the UK’s criminal law system.

Keir Starmer entered Parliament in 2015 as the MP for Holborn and St Pancras. He quickly established himself as a prominent voice within the Labour Party, particularly on issues of justice and human rights. He was a notable critic of the Conservative government’s Brexit policy and advocated for a second referendum.

Challenging balance between expectations and reality

After Labour’s defeat in the 2019 general election and Jeremy Corbyn’s resignation, Starmer was elected party leader in April 2020. He promised to renew the party and make it electable again by appealing to both traditional Labour voters and new audiences.

In opposition, Starmer and his designated Foreign Secretary David Lammy were outspoken critics of China’s actions in Xinjiang. However, now in government, this stance might soften, observers speculate: Labour needs to deliver economically and wants to avoid antagonizing Beijing. This could conflict with expectations of Starmer and his background as a human rights lawyer. Relatives of imprisoned Hong Kong publisher Jimmy Lai are looking to the new Starmer government for a potential release.

  • China-Strategie

Executive Moves

Eva Langerbeck is the new delegate of the German Trade Office Taipei. Most recently, she worked as Deputy Managing Director and Head of Corporate Services at AHK Malaysia in Kuala Lumpur.

Lorenzo Busan has been Program Engineer Interior China at FACC AG since June. The Austrian company with a Chinese core shareholder develops and produces fiber composite components and systems for the aviation industry. Busan is based in Changzhou in the Jiangsu province.

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

Dessert

Amid media buzz, artifacts for the exhibition “On Top of the Pyramid: The Civilization of Ancient Egypt” are gradually arriving in China. The exhibition will take place at the Shanghai Museum from July 19, 2024, to Aug. 17, 2025. All online tickets are already sold out through September. The exhibition, created in collaboration with Egypt’s Supreme Council of Antiquities, is eagerly anticipated by younger Chinese audiences. The reason: On selected evenings, visitors can bring their pet cats to the museum to pose them next to statues of the Egyptian cat goddess Bastet.

China.Table editorial team

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    Yes, China’s leadership supports the Putin regime with microelectronics for weapon production. And yes, Chinese soldiers were involved in military exercises in Belarus near the border with NATO member Poland in recent days. Nevertheless, Europeans should not allow NATO to expand its involvement in the Asia-Pacific region, as the US and NATO Secretary General Stoltenberg apparently intend. NATO was not created for this purpose. Michael Radunski fears in his Feature that mistrust is growing on both sides and warns of an escalation that neither side can afford.

    In the trade dispute between the EU and China, Beijing is now ramping up its approach. On Wednesday, the Chinese Ministry of Commerce initiated a formal investigation into the EU’s economic practices. The target: The Foreign Subsidies Regulation (FSR), which has been in force for just over a year and has already led to the withdrawal of Chinese companies from two tenders. Beijing sees this as an unfair restriction on Chinese companies in Europe, for example, in locomotives, photovoltaics and wind energy. This sounds aggressive, but what the Ministry of Commerce plans is still vaguely formulated, as Amelie Richter and Finn Mayer-Kuckuk report.

    Your
    Felix Lee
    Image of Felix  Lee

    Feature

    NATO summit: Why mutual mistrust is growing

    China views the current NATO summit with anger and frustration. The meeting in Washington has turned into a rumor mill, mainly brewing the theory of a Chinese threat, according to the Chinese newspaper Global Times. “Under the hype from the US and NATO, it seems that China has become the ‘key’ to the survival of Europe, controlling the fate of the Russia-Ukraine conflict like a ‘decisive power’.”

    The Chinese Foreign Ministry echoes this sentiment: “We firmly reject NATO’s vilification and blame-shifting against China. NATO should not use China to justify its insertion into the Asia-Pacific and attempt to disrupt regional dynamics.”

    One could retort with similar fervor, branding China’s increasingly assertive foreign policy as regionally hegemonic. Countries in China’s neighborhood like Japan, South Korea, Australia or the Philippines could say much about this. Yet, one must acknowledge that China’s criticism is somewhat understandable. NATO is indeed shifting its focus toward Asia.

    NATO strengthens cooperation in China’s neighborhood

    At the NATO summit, not only member states are present, but also for the third time, the so-called AP4: Australia, Japan, New Zealand and South Korea. In Washington, NATO aims to agree on several projects with its Indo-Pacific partners, covering areas such as cybersecurity, disinformation, artificial intelligence, joint support for Ukraine, as well as new technologies and the defense industry.

    NATO Secretary General Jens Stoltenberg makes no secret of NATO’s orientation. “Europe’s security affects Asia, and Asia’s security affects Europe,” he writes in an essay for Foreign Affairs magazine. His argument: Security is no longer a regional matter. “Russia would be incapable of sustaining this war without the support of its authoritarian friends in Asia.”

    NATO secretary general increases pressure on China

    Stoltenberg specifically names China alongside Iran and North Korea. “Publicly, Chinese President Xi Jinping wants the world to believe he seeks peace. However, he secretly fuels the conflict by providing Russia with cutting-edge technologies like semiconductors and microelectronics, which Moscow uses to produce missiles, tanks, and aircraft.” Indeed, Chinese customs data, US intelligence information and battlefield finds in Ukraine reveal the extent of China’s support for Russia’s war machine.

    At this point, the NATO secretary general puts pressure on China. “Simultaneously, Xi wants to maintain good relations with the West to avoid sanctions and sustain trade. But he cannot have both. Eventually, China’s support for Russia’s illegal war must come at a price.” This approach makes sense: defining core interests and presenting them unitedly to the outside world.

    China exploits Western disunity

    While China has pursued this policy for years, the West struggles with defining and jointly representing its interests. This is evident within the European Union, with the latest example being Hungarian Prime Minister Viktor Orbán’s “Peace Mission 3.0”. China has long known how to exploit this disunity in the West to its advantage. Hungary frequently vetoes EU proposals condemning China for human rights violations or issues regarding Hong Kong or Taiwan.

    There are also disagreements regarding NATO’s direction. France, in particular, wants to avoid the appearance that NATO is expanding its presence in the Indo-Pacific. French President Emmanuel Macron opposed a liaison office in Japan. “If we push NATO to expand its scope and geography, we are making a big mistake,” argues Macron.

    China also moves closer to NATO borders

    Overall, China’s anger towards NATO is understandable. Yet, there are two sides to this. Not only is NATO looking towards Asia, but China is also advancing its foreign policy towards NATO borders and beyond. Chinese troops are participating in military exercises in Belarus, near Brest, a Belarusian city on the border with NATO member Poland. A reminder: Belarusian leader Alexander Lukashenko allowed Putin’s troops free access to attack Ukraine from the north.

    Furthermore, Beijing is enhancing cooperation with NATO member Turkey. For years, Turkey has participated in summits of the Shanghai Cooperation Organization (SCO). Turkey is not yet an SCO member, but President Recep Tayyip Erdogan has repeatedly expressed his desire to join. This is problematic for NATO, as Turkey hosts important NATO facilities.

    Thus, there is cause for concern on both sides – in China and NATO capitals. Mutual mistrust is growing, which is dangerous. Given this situation, it is crucial to engage in direct dialogue. Interests and intentions must be clearly defined and communicated. An escalation – even if only due to misunderstandings – serves no one’s interest.

    • EU
    • Europapolitik
    • European policy
    • Geopolitics
    • Nato
    • Russland
    • Ukraine
    • USA
    Translation missing.

    Tariff dispute with the EU: China strikes back

    Chinese electric cars on their way to export (Suzhou Port).

    The first outlines of China’s response in the tariff dispute with the EU are beginning to emerge. On Wednesday, China’s Ministry of Commerce announced an investigation into trade barriers on the EU’s side. This investigation had been planned for some time: Back in late June, a spokesperson for the ministry announced that they were reviewing a corresponding request from the China Chamber of Commerce to the EU (CCCEU). The matter has now entered the next phase.

    The investigation follows a set mechanism, which the Chinese government transparently outlines on its website. If the review finds that the EU is unfairly closing its market to China, the Ministry of Commerce has three options:

    • consultations with the EU to remove the barriers,
    • appealing to international organizations, namely the World Trade Organization (WTO), for arbitration, or
    • “other appropriate measures”.

    The third option leaves all possibilities open, including counter-tariffs and other potentially unpleasant escalations.

    The review is not directly targeting electric car tariffs

    The investigation is set to last six months. The announcement does not specify which sectors and trade barriers are being targeted. It concerns “trade and investment barriers related to the EU’s practices in investigating Chinese companies under the decision to review foreign subsidies.” The ministry’s statement explicitly mentions:

    • locomotives,
    • solar cells,
    • wind turbines and
    • security equipment.

    At first glance, no general market barriers apply here. In the solar industry, the EU has recently refrained from examining tariffs. The EU has also refrained from initiating proceedings in the wind power sector for the time being.

    At the same time, however, a pattern can be recognized. In all cases, these are industries in which the EU has initiated an anti-subsidy investigation. It has had this instrument for almost exactly a year, with the Foreign Subsidies Regulation (FSR) coming into force in July 2023. It is particularly annoying for the Chinese side because it is much quicker and more hands-on than the good old anti-dumping investigations, which often dragged on forever. The investigations of Chinese suppliers for inappropriate state subsidies included

    Symmetrical approach to the EU customs procedure

    The first phase for the ministry is to research how the EU might be violating a range of rules defined in the implementing regulations. This includes breaches of agreements between the economies, as well as more ambiguous cases such as “causing market entry barriers for our country” or “harming the competitiveness [of Chinese] firms”. Another broadly defined point is: “[The trade measure] could hinder export opportunities for a [Chinese] product.”

    The tools for examining the facts on the Chinese side include:

    • questionnaires,
    • public hearings and
    • on-site investigations.

    These are similar to the tools the EU used to scrutinize the Chinese vehicle industry in setting electric car tariffs.

    China shows off its trade weapons, but remains moderate

    China is making it clear that it will not accept the EU tariffs quietly or consider them fair, as Trade Commissioner Valdis Dombrovskis had hoped. There will be a robust response, not limited to specific products like cognac or pork. China wants to show that it won’t be pushed around.

    However, this does not necessarily mean an uncontrolled spiral of ever-higher tariffs and other barriers. Even with the US, China generally responded with roughly equivalent trade measures when first Donald Trump and then Joe Biden imposed new tariffs and restrictions.

    Beijing relies on exports and has no interest in closed markets, as it has repeatedly emphasized. China will probably also proceed according to the same principle with the EU: tit for tat.

    • Duties
    • Solar
    • Trade
    Translation missing.

    News

    Consumer prices: Why the risk of deflation is not averted

    Despite China’s economic recovery, the threat of harmful deflation is not averted. Consumer prices in China have risen for the fifth consecutive month in June, but weak demand caused them to fall short of expectations. The Consumer Price Index (CPI) rose by 0.2 percent in June compared to the same month last year, following a 0.3 percent increase in May, the National Bureau of Statistics (NBS) reported on Wednesday. This is the slowest increase in three months and below the 0.4 percent predicted by economists in a Reuters poll.

    Producer prices, which are due at the factory gate before products enter the market, are considered an early indicator of future price trends. These prices have been falling for some time but only dropped by 0.8 percent in June, the smallest decline in 17 months. Experts attribute this mainly to a statistical base effect. “The risk of deflation in China is not averted. Domestic demand remains weak,” warned Zhiwei Zhang, chief economist at Pinpoint Asset Management.

    The economy, severely affected by strict COVID-19 measures, gained unexpected momentum in the first quarter due to booming exports: Gross Domestic Product (GDP) grew by 5.3 percent from January to March compared to the previous year. Despite numerous measures by the government and central bank to stimulate the economy, fundamental problems such as the real estate crisis and labor market uncertainty remain. These issues weigh on consumption and industrial production, amplifying calls for more effective political measures.

    Chinese retailers have lowered prices for goods ranging from coffee to cars to stay competitive amid weak consumer spending and uncertain economic prospects. Repeated government appeals for consumers to “dare to spend money” have largely fallen flat. Experts see the central bank under pressure as a result. “Low inflation and weak credit data provide a compelling argument for further easing of monetary policy by the Chinese central bank in the coming months,” said Lynn Song, chief economist for China at ING. rtr

    • Deflation

    Solar: Why overproduction is also a problem for China

    China intends to curb the overproduction of solar panels domestically by implementing tougher capital requirements. The Ministry of Industry released a new regulation mandating that solar companies must maintain a minimum capital ratio of 30 percent for both expansions and new production facilities. Previously, the requirement was 20 percent. The Ministry did not provide a more detailed definition of the capital ratio. Additionally, new efficiency standards for various types of solar module production were established. Comments on the draft regulation can be submitted until July 15.

    Jessica Jin, an analyst at “S&P Global Commodity Insight”, views this as an attempt to prevent the credit-driven expansion of solar production. Furthermore, it is evident that consolidation in the sector and the phasing out of outdated capacities are planned.

    China dominates the global solar panel market. In Germany, almost exclusively Chinese modules are installed. Experts estimate that China can meet global demand until 2032 with its existing and firmly planned factories. The current overproduction has led to a price decline, which has recently fueled the solar boom in Germany.

    However, China’s dominance has been viewed critically in Europe for years. EU import tariffs have not changed this situation. Plans to at least preserve the remnants of production in Europe have not yet been implemented. rtr

    • Technologie

    After veto against sale: VW shuts down MAN gas turbine plant

    Following the federal government’s veto on the sale of the division to China, Volkswagen subsidiary MAN Energy Solutions will cease the production and development of gas turbines. “We respect the government’s decision,” a spokesperson for the Augsburg-based company stated on Wednesday. MAN Energy will wind down the new development of gas turbines over the coming months. The MAN Energy division encompasses a total of 100 employees in Oberhausen and Zurich.

    The federal government had blocked the planned sale to the Chinese CSIC Longjiang GH Gas Turbine Co (GHGT) citing the Foreign Trade and Payments Act. They feared that China could use the gas turbines not just for civilian purposes but also to power warships.

    GHGT is part of the shipbuilding conglomerate China State Shipbuilding Corp (CSSC), which also constructs ships for the Chinese navy. China aims to modernize its fleet, which is the largest in the world. According to the Foreign Trade and Payments Act, the federal government can prohibit sales to non-EU countries if these sales could potentially endanger national security.

    Economy Minister Robert Habeck (Greens), whose department proposed the ban, defended the decision: Investments in Germany are generally welcome, as the economy thrives on trade. However, technology critical to public order must be protected. Thus, the transaction was prohibited. “And that is the right thing to do.” Interior Minister Nancy Faeser (SPD) cited “security policy reasons” in Berlin.

    MAN Energy’s gas turbines are used for power generation or pipeline propulsion. Volkswagen had attempted to address the government’s concerns. According to insiders, the company presented reports aiming to refute the applicability of MAN gas turbines or their underlying technology for powering warships. Fundamentally, these turbines would be significantly more efficient for such purposes than the commonly used diesel engines. MAN Energy has been supplying gas turbines for civilian purposes to China for a long time. rtr

    • Autoindustrie

    Cybersecurity: Why Microsoft employees in China must switch to iPhones

    According to a report by Bloomberg, Microsoft has instructed its employees in China to use only iPhones for work-related tasks and to remove Android devices from the corporate network. This measure is part of Microsoft’s global Secure Future Initiative (SFI) aimed at enhancing cybersecurity. Microsoft will provide its employees with the latest iPhone models.

    The decision stems from the fragmentation of Android app stores in China. With the Google Play Store not officially available there, numerous alternative marketplaces are operated by local providers like Huawei and Xiaomi. Microsoft is under increasing pressure to strengthen its security protocols.

    The company has recently suffered a series of cyberattacks, including one in January allegedly linked to Russia that targeted several US government agencies. In 2023, Chinese hackers also stole a signature key from Microsoft, using it to breach the email accounts of numerous organizations. In response, Microsoft announced the most comprehensive overhaul of its security measures in two decades. fpe

    • Daten

    Heads

    Keir Starmer – hopeful leader and foreign policy enigma

    Labour Party leader Keir Starmer listens to a question from port workers during a general election campaign event Southampton Docks in Southampton, England, Monday, June 17, 2024.

    As the new British Prime Minister, Keir Starmer has significant leeway in shaping the relationship with China. A balanced and coherent China strategy will be at the top of the new government’s agenda. In recent years, London’s approach to the People’s Republic has been erratic: What began under Prime Minister David Cameron as business opportunism ended under Liz Truss in ideological hostility.

    Starmer’s predecessor, Rishi Sunak, did not prioritize China during his tenure. Sunak never met with China’s President Xi Jinping, nor did they even have a phone call during his nearly two-year term.

    Now, Starmer has the opportunity to establish a more balanced diplomatic relationship with Beijing. His Labour Party intends to initiate a review of China policy through an “audit” to be conducted within the first 100 days of his tenure. Starmer might also seek a bilateral meeting with Xi at the G-20 summit in November in Brazil.

    Special focus on Hong Kong

    Labour has already outlined a rough framework for addressing relations with China. Their election manifesto describes a three-part approach: “We will co-operate where we can, compete where we need to and challenge where we must.” This resembles the EU’s tripartite approach of partner, competitor and systemic rival – and in London, it could mean almost anything depending on the emphasis placed on each point. Unlike Labour’s domestic plans, the foreign policy agenda remains unclear, analysts noted in the days following the election.

    The former British colony of Hong Kong receives special mention in the manifesto: “We will stand by and support members of the Hong Kong community who have moved to Britain.” Starmer will face pressure from his party to promptly address human rights issues from Hong Kong to Xinjiang – issues that were also a focus of his work as a lawyer.

    Human rights focus as a lawyer

    Keir Starmer was practically born into the Labour Party: His parents, a toolmaker and a nurse, named their son after Labour’s first leader, Keir Hardie. The 61-year-old is married to Victoria Alexander, who works in the NHS, and they have two children. Starmer is an enthusiastic Arsenal fan.

    After finishing school, Starmer studied law at the University of Leeds and then earned a Bachelor of Civil Law from the University of Oxford. He was admitted as a barrister in 1987. As a lawyer, he often worked pro bono, with clients including peace and environmental activists. From 2003, he served as a human rights advisor to the Northern Ireland Police Board.

    From 2008 to 2013, Starmer served as the Director of Public Prosecutions for England and Wales, responsible for the country’s criminal prosecutions. During his tenure, he advocated for justice system reforms and was involved in several significant decisions that influenced the UK’s criminal law system.

    Keir Starmer entered Parliament in 2015 as the MP for Holborn and St Pancras. He quickly established himself as a prominent voice within the Labour Party, particularly on issues of justice and human rights. He was a notable critic of the Conservative government’s Brexit policy and advocated for a second referendum.

    Challenging balance between expectations and reality

    After Labour’s defeat in the 2019 general election and Jeremy Corbyn’s resignation, Starmer was elected party leader in April 2020. He promised to renew the party and make it electable again by appealing to both traditional Labour voters and new audiences.

    In opposition, Starmer and his designated Foreign Secretary David Lammy were outspoken critics of China’s actions in Xinjiang. However, now in government, this stance might soften, observers speculate: Labour needs to deliver economically and wants to avoid antagonizing Beijing. This could conflict with expectations of Starmer and his background as a human rights lawyer. Relatives of imprisoned Hong Kong publisher Jimmy Lai are looking to the new Starmer government for a potential release.

    • China-Strategie

    Executive Moves

    Eva Langerbeck is the new delegate of the German Trade Office Taipei. Most recently, she worked as Deputy Managing Director and Head of Corporate Services at AHK Malaysia in Kuala Lumpur.

    Lorenzo Busan has been Program Engineer Interior China at FACC AG since June. The Austrian company with a Chinese core shareholder develops and produces fiber composite components and systems for the aviation industry. Busan is based in Changzhou in the Jiangsu province.

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

    Dessert

    Amid media buzz, artifacts for the exhibition “On Top of the Pyramid: The Civilization of Ancient Egypt” are gradually arriving in China. The exhibition will take place at the Shanghai Museum from July 19, 2024, to Aug. 17, 2025. All online tickets are already sold out through September. The exhibition, created in collaboration with Egypt’s Supreme Council of Antiquities, is eagerly anticipated by younger Chinese audiences. The reason: On selected evenings, visitors can bring their pet cats to the museum to pose them next to statues of the Egyptian cat goddess Bastet.

    China.Table editorial team

    CHINA.TABLE EDITORIAL OFFICE

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