Table.Briefing: China

Chip crisis + StratCom taskforce + Hydrogen + IMF forecast + Bernhard Weber

  • No end to the chip shortage
  • The EU and Chinese disinformation – struggle for the sovereignty of interpretation
  • Solar giant Longi invests in hydrogen
  • IMF raises growth forecast to 8.4 percent
  • Propaganda offensive for the party’s birthday
  • Profile: Bernhard Weber
Dear reader,

It sounded like a small admission of defeat, but one wrapped up in the best EU style: “We have very little resources to study disinformation from China,” EU High Representative for Foreign Affairs Josep Borrell told an EU parliamentary committee in early March.

In concrete terms, this means that three members of the European External Action Service’s Strategic Communications Unit are currently working on a China Desk to deal with disinformation within the EU steered from Beijing – and are confronted with an army of thousands of fake accounts, trolls and Twitter accounts loyal to the government. Marcel Grzanna took a closer look at the EU’s position in the fight against disinformation from the Far East and spoke to insiders.

Other ends are also currently lacking: microchips from Taiwan. Felix Lee and Finn Mayer-Kuckuk get to the bottom of the shortage of the small components and analyze the consequences of the “toilet paper effect” in the semiconductor sector for the German and Chinese industry.

Your
Amelie Richter
Image of Amelie  Richter

Feature

No end to the chip shortage

Sony‘s new gaming console has been sold out for months, and laptops and tablets are in short supply. The Volkswagen Group is also suffering from a shortage of the coveted parts, especially in China. Country manager Stephan Wöllenstein spoke of a “significant shortage of electronic parts.” In December, VW was able to produce around 50,000 fewer cars in China than planned. The shortage is also making itself felt in the domestic market. In car plants in Germany, the reason for short-time work is not COVID, but a lack of electronics deliveries. Audi CEO Markus Duesmann announced that a good 10,000 fewer cars would be built in the current quarter as a result. The shortage is expected to last until the second half of the year – or even longer.

As we all know, nothing works today without these small components. If an industrial company is missing just one chip, it cannot manufacture the complete product. But where does the shortage of semiconductors come from? After all, the industry has managed to meet a high demand quite accurately for decades. But the coronavirus and the trade war have led to a series of miscalculations and panic reactions that have cranked each other up like a natural phenomenon. For long-term planning, on the other hand, it is important to reduce dependence on a few manufacturers.

China’s chip crisis – chips from Taiwan

What is striking from a German perspective is how much the electronics nations in East Asia themselves have been affected by the shortage. The Chinese car manufacturer Nio had to stop its production. So did the South Korean conglomerate Hyundai: from April 7 to 14, the number one plant in the southeastern city of Ulsan will be shut down. Hyundai needs high-tech chips for the front-view camera system of the Kona SUV and power electronics modules for the Ioniq 5.

Now, consequently, prices will rise. The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC), has asked its customers to accept the higher prices. That’s the only way the company can increase investment to cope with a “structural and fundamental increase” in chip demand, according to a letter from chief executive C.C. Wei quoted by the Nikkei business daily. In it, the TSMC chief promises to invest more than $100 billion in the three years to 2023. This year alone, TSMC will pour $28 billion into semiconductor technology. The Taiwanese company produces chips for Apple, Qualcomm and AMD, among others.

These measures are intended to make a mismatch between supply and demand less likely in the future. In fact, however, it is precisely Taiwan’s key position that has been a decisive factor in the current dilemma. In the overall picture, a chain of circumstances can be traced that actually began in the US.

First trade war, then problems at Intel

The first factor was the US-Chinese trade war and, in the wake of this, US sanctions against, among others, the Chinese technology group Huawei, the world’s leading network equipment manufacturer. In 2019, then US President Donald Trump used semiconductor exports as political leverage for the first time in his trade war with China. The People’s Republic has indeed caught up strongly technologically in many areas in the years before, and is even the world leader in some areas, such as battery technology for EVs. However, in the semiconductor industry, the leadership in Beijing has not yet succeeded in making itself independent of imports from abroad, despite billions of euros in subsidies. So far, China has not been able to produce high-tech chips itself. It is dependent on US technology.

The US under Trump had identified this very eye of the needle and initially cut off Huawei from US technologies in 2019. Last year, he also succeeded in preventing suppliers from third countries that depend on US components from doing business with the Chinese company. With effect: Huawei promptly slipped from the world’s most successful smartphone producer out of the top 5 producers.

For its part, the Huawei Group reacted by hastily buying as many high-tech chips as it could get its hands on. Whether and how much Huawei is hoarding in chips is not officially known. But other tech companies that rely on these chips also quickly began stockpiling.

The next disruption also originated in the USA. There were setbacks in the introduction of Intel chips with a structure width of 7 nanometers. The lower the structure widths, the more transistors fit on the same area, the more efficient the chips become. TSMC has had a handle on the 7-nanometer process since 2017 – a clear win for Team Taiwan. Intel competitor AMD, among others, recently benefited from this, as did Huawei, whose premium-segment mobile phone processors are based on TSMC technology.

Intel, on the other hand, had to admit to problems with its in-house production processes last summer. The company’s 7-nanometer chips are now not scheduled to hit the market until 2023. This shifted demand further to Taiwan, and a sense of shortage spread through the industry.

In the industry, an effect set in that consumers in Germany are familiar with from the empty shelves for toilet paper and flour last year. As soon as the first customers start hoarding, even the originally rather relaxed shoppers prefer to take a few extra packages. Those who come to the supermarket later and see empty shelves try even harder to stock up somewhere else. The result is an apparent shortage of a product of which the production side has just provided enough for everyone.

Industry fails to recognize pandemic consequences

COVID came into this situation. Industrial managers around the world used their experience from the 2008 financial crisis to respond to the new crisis. They anticipated unemployment and a collapse in demand. They, therefore, reduced their replenishment orders. In the summer, it became clear that this was a complete misjudgment. Bored at home, people ordered Playstations and soundbars, notebooks were available for the home office – and the subway suddenly no longer seemed as comfortable as their own car. Demand for consumer goods rose while suppliers were still responding to the cancellations.

The shortage of chips on the world market was self-reinforcing from now on: Those who had good access to chip suppliers tried to fill their stocks, while TMSC could no longer keep up with production. Since then, China’s head of state Xi Jinping has been working at full speed on “technological self-sufficiency“. According to Chinese state media, at the National People’s Congress in early March, where the new five-year plan was approved among other things, no term was mentioned as much as “Xinpian” (芯片), the Chinese word for chips. The response of China’s leadership to this dependence on foreign countries is the concept of so-called “dual circulation”. In this way, it has set itself the goal of becoming even more rapidly independent of imports from abroad in system-relevant technologies.

The investments are correspondingly high: In 2020 alone, Beijing supported semiconductor companies with direct payments of at least $35 billion, according to research by the trade medium Technode. This is an increase of over 400 percent compared to the previous year. The use of private venture capital rose almost as steeply in the same period.

Despite the staggering figures, the progress of the Chinese semiconductor industry has been small so far. Experts firmly believe that the economic planners in Beijing will fall well short of their goal – to source around 70 percent of semiconductors for their own market from domestic production by 2025. Currently, the figure is around 30 percent. Markus Taube, China economist at the University of Duisburg-Essen, suspects that it will take at least three, more likely five to ten years, before China catches up in this area as well. That may not sound like much. But a lot can go wrong in those years.

Germany and EU lag behind

The Semiconductor Industry Association, which represents most US chipmakers, announced Thursday that it found more than 50 places in the supply chain where a single region has more than 65 percent of the market. The manufacturing of the most advanced chips is entirely in Asia – 92 percent of it in Taiwan. If Taiwan couldn’t make chips for a year, it would cost the global electronics industry nearly half a trillion dollars in revenue. The report noted, “The global electronics supply chain would grind to a halt.” German Economics Minister Peter Altmaier is therefore also allowing investment in chip sites in the interests of “Germany’s technological sovereignty”. When it comes to high-tech components, however, experts say the European Union lags behind the US and Taiwan just as much as China. Felix Lee / Finn Mayer-Kuckuk

  • Car Industry

Brussels’ restrained fight against Chinese disinformation

In 2019, a light went on in Europe. As millions of people in Hong Kong took to the streets to protest growing Chinese control in the city, the European External Action Service’s (EEAS) Strategic Communications Division (StratCom Taskforce) noticed a new dimension of Chinese influence on public opinion in Europe. The information machinery “made in China”, controlled from Beijing, and directed to all parts of the world, massively increased its torque.

Virtually overnight, the number of diplomatic or patriotic accounts increased with tens of thousands of followers on the Twitter short message service. The scale and nature of the campaign set alarm bells ringing in Brussels, not least because it became clear what technical means the Chinese were using. From then on, StratCom also took a closer look at pro-Chinese communication channels. It aimed to identify networks, analyze their actions and warn of a possible influence on public opinion in EU member states – but only four years after the department had started targeting fake news and disinformation from Russia.

Why so much time passed is obvious to Didi-Kirsten Tatlow of the Asia Program of the German Council on Foreign Relations (DGAP) in Berlin. “There are powerful economic interests that ensure that Europeans don’t look too closely at the Chinese. For decades, the country was perceived only as a source of growth. This attitude is very convenient, and it makes it difficult for Europeans to recognize the real role of China as their rival,” Tatlow tells China.Table.

StratCom was right on the money after the outbreak of COVID-19, as the rhetorical arsenal of the People’s Republic was further upgraded in the battle for interpretive sovereignty over the COVID-19 pandemic. Across all social media, official Chinese mouthpieces were rapidly fuelling discussions about the origin and control of the virus. When the first wave of the COVID-19 pandemic hit the world in March 2020, the number of posts from Chinese diplomats’ tweets climbed from 9,000 to 15,000 per week.

The comments on the diplomatic online channels deliberately moved along a spectrum between official statements by the State Department and cyber-bullying. A kind of grey zone, as StratCom puts it. It was not so much classic false reporting as finger-pointing, shaping interpretations to suit Beijing’s leadership, or even suppressing narratives that displeased China – all backed by the use of a lot of money, a lot of personnel, and sophisticated technology.

‘Pure bureaucracy’

The reaction to Chinese interference came very late, but at least the problem now seemed to be addressed with the necessary urgency. But how seriously does the EU really take the threat? “The EU likes to talk about how important the fight against disinformation is, most recently, especially in the context of COVID-19. One might therefore get the impression that it is on the right track. But StratCom’s work has been reduced to a purely bureaucratic matter. It is no more than the EU paying lip service to European values,” says Monika Richter, a former StratCom employee in an interview with China.Table.

In May 2020, a Czech person with Canadian and US citizenship had left StratCom after a dispute with her superiors and was hired at a private company in Washington. Internally, the 29-year-old had accused the institution of “self-censorship” after an EU report on China was modified before publication. It had initially said Beijing wanted to “deflect blame for the pandemic outbreak and improve its international image” with a global disinformation campaign, adding that both “overt and covert tactics” had been observed. After threats from the Chinese, the passage was removed. StratCom argued that, after careful consideration, it had not found sufficient evidence to uphold the passage and had therefore changed the report. Richter was told she was not an activist but an employee of the EEAS, she says.

At StratCom, a department with a total of 38 employees headed by the German Lutz Güllner, three experts at the so-called China Desk are currently dealing with disinformation from the Far East. Three against thousands. The team is supported by two staff members from the EEAS country desk as well as by several external sources and data analysts. The goal is not to counter, let alone end, the hail of disinformation with narratives of their own, but to get the problem into the minds of Europeans, they say. It is likely that the team will soon be expanded to four China experts. But StratCom knows that this increase is only a drop in the ocean.

Borrell: insufficient financial and human resources

EEAS President and EU Foreign Affairs Representative Josep Borrell complained at the beginning of March that there were neither sufficient financial nor human resources available to deal with China as intensively as with Russia. The department’s budget was successively increased to currently €11 million. However, in addition to Russia and China, the department also deals with the Western Balkans, North Africa, and the Middle East. With the money, the department needs to set up structures to monitor intelligence flows, organize exchanges with member states and buy in external analysis to gain a better understanding of the strategy and aims of damaging sources. It is said that the European Parliament will soon revisit the budget question for StratCom.

Richter believes the money argument is only a symptom of a fundamental problem. She has identified a “dramatic lack of political will“. The EU has failed to “acknowledge the serious threat of foreign authoritarian influence on European democracies”. Indeed, in 2015, the European Council of EU leaders gave the EEAS an official mandate to expose Russian propaganda and communicate it to member states through the development of its own networks. The Council still does not have a comparable mandate for China. Borrell had also referred to this.

Limited resources force StratCom to set priorities. Not every single case can be documented, which is why a patchy picture emerges. The department’s only option is to keep putting the problem on the agenda and backing it up with facts. In the end, it is up to the member states to decide how to deal with it. “There needs to be greater investment in research and analysis to understand Chinese intentions and behavior. With more funding, we would be able to counter manipulation better,” says Nad’a Kovalčíková of the Alliance for Securing Democracy, a research program of the German Marshall Fund. China uses a range of numerous tools, such as disinformation, but also economic constraints imposed on other states or cyberattacks. “The EU must be able to make the connections between these different aspects to identify the underlying strategy,” says Kovalčíková.

China wants to polish up its image

StratCom reportedly found a clear difference between Russian and Chinese disinformation. The Russians were trying to undermine the social underbelly in the European Union. To do this, they use much more misinformation than the Chinese do. On the website euvsdisinfo.eu, StratCom documents thousands of examples since 2015. China, on the other hand, is focused on polishing up its image in the world. To this end, misinformation is less useful than manipulation in a particular context. China would also consistently suppress narratives, both in the case of COVID-19 and human rights crimes in Xinjiang, the destruction of Hong Kong’s rule of law, and also the Tibet and Taiwan issues.

In this way, Chinese propaganda succeeded in strengthening the edges of opinion spectrums and fuelling discussion about whether Beijing’s argumentation was not the right one after all. Ex-StratCom employee Richter says: “Chinese manipulation attempts seemed much less aggressive, while Russian manipulation was very conspicuous.” This is one of the reasons why StratCom has significantly more employees dealing with Russia than with China.

StratCom wants to counteract this with the Rapid Alert System. The instrument is a kind of network of experts in the member states who are in a position to use and forward tips on disinformation and their intentions in the European interest. In many of the 27 EU states, these tips would otherwise come to nothing because they lack the structures to take them up accordingly. Until three years ago, there was no such networking.

“The processing procedures in the individual EU countries are very different,” says Kovalčíková of the GMF. The Swedes show how it’s done. Well over a year before the last parliamentary election in 2018, the government had already begun preparing its citizens, media, and administration for the possibility that foreign forces might try to influence the outcome of the election. One indicator that the strategy worked was the fact that a shift to the right was avoided. Kovalčíková: “Nevertheless, a lot of work remains. Attention to the danger of influence by third countries must extend beyond the election cycle. It is crucial to permanently raise awareness of this problem among the population.”

  • Chinese Communist Party
  • Civil Society
  • EEAS
  • Geopolitics

News

Solar giant Longi invests in hydrogen

The leading global manufacturer of solar modules, Longi, is moving into the hydrogen sector, as the business portal Caixin reports. Together with a private equity fund, Longi has founded the hydrogen subsidiary Xi’an Longi Hydrogen Technology with a start-up capital of the equivalent of €38 million. State-owned energy companies such as Sinopec have also already invested in the hydrogen sector to advance Beijing’s goal of peaking CO2 emissions by 2030.

Hydrogen could become an important storage medium in the future to store surplus solar and wind energy and make it available during lulls. Last year, China reported a record number of new wind turbines installed. Solar power capacity is also expected to continue to increase. Accordingly, demand for storage capacity will grow as well. “The solar-to-hydro model could effectively solve the problem [of insufficient storage capacity],” Longi wrote in a post on one of the company’s social media channels. nib

  • Batteries
  • Renewable energies

IMF raises growth forecast to 8.4 percent

Yestarday, the International Monetary Fund (IMF) announced, that it has raised its growth forecast for China for 2021 to 8.4 percent. The new forecast is 0.3 percentage points higher than expected in January. According to the IMF, the People’s Republic would thus record the strongest growth rate since 2011.

“Effective containment measures, a vigorous response with public investment, and central bank liquidity support” have enabled China’s “strong recovery”, the IMF said. The People’s Republic had already regained its pre-COVID-19 pandemic gross domestic product by 2020 – many other countries will not manage that until “well into 2023”, the IMF said.

The IMF continues to forecast global growth of 5.6 percent. The organization warned that geopolitical conflicts between Washington and Beijing could weigh on the recovery: “Tensions between the United States and China remain high on numerous fronts, including international trade, intellectual property, and cybersecurity,” it said. ari

  • Domestic policy of the CP China
  • Economy
  • IMF

Propaganda offensive for the party’s birthday

On the occasion of the 100th birthday of the Chinese Communist Party (China.Table reports), cinemas in the People’s Republic are to show propaganda films twice a week. Until the end of the year, movie theaters “in every province, region, and city” are to show works that “revolve around love for the Party, love for the country, and love for socialism,” according to China’s National Film Administration. According to the statement, two cinema chains will even show selected propaganda films at least five times a week. The plan is to mobilize Party members, officials, and other viewers to ensure that the cinemas are well attended during the screenings.

The 12 films selected by authorities include seven works from the 1950s and 1960s, one from the 1980s, and three recent films and one new release (“Landmine War”) – most of the works are war films. In addition to film screenings, exhibitions and theatrical performances will also reflect “the great achievements and valuable experiences” of the CCP, Wang Xiaohui, director of the National Film Administration and a leading official of the propaganda department, told a news conference. The CCP celebrates its 100th birthday on July 1st (all about the CCP on China.Table). nib

  • 100 Years of the Chinese Communist Party
  • Chinese Communist Party
  • Culture
  • Film
  • Propaganda

Profile

Bernhard Weber

Managing Director of Baden-Württemberg International in Nanjing and Representative of the State of Baden-Württemberg in China

Bernhard Weber first came to China in the early 1980s as a student at Shandong University. “At that time, it was a country with practically no cars. A city like Shanghai probably had hardly more than 500 passenger cars,” Weber recounts, to illustrate the rapid development. In the meantime, the 62-year-old is the managing director of the Chinese branch of the Baden-Württemberg International (BW-I), a state agency based in the six-million metropolis of Nanjing in the eastern Chinese province of Jiangsu. He supports companies from Baden-Württemberg in gaining a foothold in the Chinese market.

The pool of companies that Weber looks after comprises around 20 small and medium-sized enterprises. But this number could be significantly higher, as Weber thinks: “China is still a market that is very far away, especially for smaller companies. Many entrepreneurs are very conservative in this respect.” Therefore, too few still dare to take even this low-risk step of seeking advice in exploring the Chinese market.

Still, Weber can’t complain about a lack of work, even in the current pandemic. “The companies that set up shop here before the pandemic are benefiting from the fact that the economy here has hardly been affected by COVID.” And even last year, two companies took advantage of BW-I’s service and entered the China business. Weber believes that the cooperation with the companies is only a temporary solution. For example, Baden-Württemberg International provides office infrastructure and personnel management for German investors in China. This enables the entrepreneurs to start their business without any lead time and has less bureaucratic work.

Bernhard Weber in Nanjing before skyscrapers

In addition to day-to-day business, Weber is also responsible for representing Baden-Württemberg in the two partner provinces of Jiangsu and Liaoning. Normally, this involves maintaining contact with various government agencies as well as an annual meeting of regional government representatives. “Of course, all of that was canceled last year.”

Weber owes his path to China to his affinity for languages – and to a Japanese man he befriended in a French language course. He said to me, “You’d better learn Chinese. They’re just opening up shop, and in the future, they’ll need people from abroad who speak their language.” At the time, there were three universities offering Sinology degrees with modern Chinese. Weber got his first job in China at a joint venture of the Siemens subsidiary KWU. Weber and his family have now lived in Nanjing for 26 years. He was there even before the city got its skyscrapers and the world discovered the Chinese market. David Renke

  • Bernhard Weber
  • China Strategy 2022
  • Geopolitics
  • Germany
  • Jiangsu
  • Liaoning
  • Nanjing
  • Trade

Dessert

Kaffeebohnen fallen in einen großen Metallkessel.

Nowhere in the world are there more coffee shops than in Shanghai. According to a report by that’s-Mag, there are over 7,000 of them in China’s metropolis of 26 million. This means Shanghai beats London (3,233), Tokyo (3,826), and New York with 1,591 coffee shops. London remains the leader in coffee shops per capita, with 3.69 shops per 10,000 inhabitants. In Shanghai, the figure is “only” 2.85.

China.Table Editors

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    • No end to the chip shortage
    • The EU and Chinese disinformation – struggle for the sovereignty of interpretation
    • Solar giant Longi invests in hydrogen
    • IMF raises growth forecast to 8.4 percent
    • Propaganda offensive for the party’s birthday
    • Profile: Bernhard Weber
    Dear reader,

    It sounded like a small admission of defeat, but one wrapped up in the best EU style: “We have very little resources to study disinformation from China,” EU High Representative for Foreign Affairs Josep Borrell told an EU parliamentary committee in early March.

    In concrete terms, this means that three members of the European External Action Service’s Strategic Communications Unit are currently working on a China Desk to deal with disinformation within the EU steered from Beijing – and are confronted with an army of thousands of fake accounts, trolls and Twitter accounts loyal to the government. Marcel Grzanna took a closer look at the EU’s position in the fight against disinformation from the Far East and spoke to insiders.

    Other ends are also currently lacking: microchips from Taiwan. Felix Lee and Finn Mayer-Kuckuk get to the bottom of the shortage of the small components and analyze the consequences of the “toilet paper effect” in the semiconductor sector for the German and Chinese industry.

    Your
    Amelie Richter
    Image of Amelie  Richter

    Feature

    No end to the chip shortage

    Sony‘s new gaming console has been sold out for months, and laptops and tablets are in short supply. The Volkswagen Group is also suffering from a shortage of the coveted parts, especially in China. Country manager Stephan Wöllenstein spoke of a “significant shortage of electronic parts.” In December, VW was able to produce around 50,000 fewer cars in China than planned. The shortage is also making itself felt in the domestic market. In car plants in Germany, the reason for short-time work is not COVID, but a lack of electronics deliveries. Audi CEO Markus Duesmann announced that a good 10,000 fewer cars would be built in the current quarter as a result. The shortage is expected to last until the second half of the year – or even longer.

    As we all know, nothing works today without these small components. If an industrial company is missing just one chip, it cannot manufacture the complete product. But where does the shortage of semiconductors come from? After all, the industry has managed to meet a high demand quite accurately for decades. But the coronavirus and the trade war have led to a series of miscalculations and panic reactions that have cranked each other up like a natural phenomenon. For long-term planning, on the other hand, it is important to reduce dependence on a few manufacturers.

    China’s chip crisis – chips from Taiwan

    What is striking from a German perspective is how much the electronics nations in East Asia themselves have been affected by the shortage. The Chinese car manufacturer Nio had to stop its production. So did the South Korean conglomerate Hyundai: from April 7 to 14, the number one plant in the southeastern city of Ulsan will be shut down. Hyundai needs high-tech chips for the front-view camera system of the Kona SUV and power electronics modules for the Ioniq 5.

    Now, consequently, prices will rise. The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC), has asked its customers to accept the higher prices. That’s the only way the company can increase investment to cope with a “structural and fundamental increase” in chip demand, according to a letter from chief executive C.C. Wei quoted by the Nikkei business daily. In it, the TSMC chief promises to invest more than $100 billion in the three years to 2023. This year alone, TSMC will pour $28 billion into semiconductor technology. The Taiwanese company produces chips for Apple, Qualcomm and AMD, among others.

    These measures are intended to make a mismatch between supply and demand less likely in the future. In fact, however, it is precisely Taiwan’s key position that has been a decisive factor in the current dilemma. In the overall picture, a chain of circumstances can be traced that actually began in the US.

    First trade war, then problems at Intel

    The first factor was the US-Chinese trade war and, in the wake of this, US sanctions against, among others, the Chinese technology group Huawei, the world’s leading network equipment manufacturer. In 2019, then US President Donald Trump used semiconductor exports as political leverage for the first time in his trade war with China. The People’s Republic has indeed caught up strongly technologically in many areas in the years before, and is even the world leader in some areas, such as battery technology for EVs. However, in the semiconductor industry, the leadership in Beijing has not yet succeeded in making itself independent of imports from abroad, despite billions of euros in subsidies. So far, China has not been able to produce high-tech chips itself. It is dependent on US technology.

    The US under Trump had identified this very eye of the needle and initially cut off Huawei from US technologies in 2019. Last year, he also succeeded in preventing suppliers from third countries that depend on US components from doing business with the Chinese company. With effect: Huawei promptly slipped from the world’s most successful smartphone producer out of the top 5 producers.

    For its part, the Huawei Group reacted by hastily buying as many high-tech chips as it could get its hands on. Whether and how much Huawei is hoarding in chips is not officially known. But other tech companies that rely on these chips also quickly began stockpiling.

    The next disruption also originated in the USA. There were setbacks in the introduction of Intel chips with a structure width of 7 nanometers. The lower the structure widths, the more transistors fit on the same area, the more efficient the chips become. TSMC has had a handle on the 7-nanometer process since 2017 – a clear win for Team Taiwan. Intel competitor AMD, among others, recently benefited from this, as did Huawei, whose premium-segment mobile phone processors are based on TSMC technology.

    Intel, on the other hand, had to admit to problems with its in-house production processes last summer. The company’s 7-nanometer chips are now not scheduled to hit the market until 2023. This shifted demand further to Taiwan, and a sense of shortage spread through the industry.

    In the industry, an effect set in that consumers in Germany are familiar with from the empty shelves for toilet paper and flour last year. As soon as the first customers start hoarding, even the originally rather relaxed shoppers prefer to take a few extra packages. Those who come to the supermarket later and see empty shelves try even harder to stock up somewhere else. The result is an apparent shortage of a product of which the production side has just provided enough for everyone.

    Industry fails to recognize pandemic consequences

    COVID came into this situation. Industrial managers around the world used their experience from the 2008 financial crisis to respond to the new crisis. They anticipated unemployment and a collapse in demand. They, therefore, reduced their replenishment orders. In the summer, it became clear that this was a complete misjudgment. Bored at home, people ordered Playstations and soundbars, notebooks were available for the home office – and the subway suddenly no longer seemed as comfortable as their own car. Demand for consumer goods rose while suppliers were still responding to the cancellations.

    The shortage of chips on the world market was self-reinforcing from now on: Those who had good access to chip suppliers tried to fill their stocks, while TMSC could no longer keep up with production. Since then, China’s head of state Xi Jinping has been working at full speed on “technological self-sufficiency“. According to Chinese state media, at the National People’s Congress in early March, where the new five-year plan was approved among other things, no term was mentioned as much as “Xinpian” (芯片), the Chinese word for chips. The response of China’s leadership to this dependence on foreign countries is the concept of so-called “dual circulation”. In this way, it has set itself the goal of becoming even more rapidly independent of imports from abroad in system-relevant technologies.

    The investments are correspondingly high: In 2020 alone, Beijing supported semiconductor companies with direct payments of at least $35 billion, according to research by the trade medium Technode. This is an increase of over 400 percent compared to the previous year. The use of private venture capital rose almost as steeply in the same period.

    Despite the staggering figures, the progress of the Chinese semiconductor industry has been small so far. Experts firmly believe that the economic planners in Beijing will fall well short of their goal – to source around 70 percent of semiconductors for their own market from domestic production by 2025. Currently, the figure is around 30 percent. Markus Taube, China economist at the University of Duisburg-Essen, suspects that it will take at least three, more likely five to ten years, before China catches up in this area as well. That may not sound like much. But a lot can go wrong in those years.

    Germany and EU lag behind

    The Semiconductor Industry Association, which represents most US chipmakers, announced Thursday that it found more than 50 places in the supply chain where a single region has more than 65 percent of the market. The manufacturing of the most advanced chips is entirely in Asia – 92 percent of it in Taiwan. If Taiwan couldn’t make chips for a year, it would cost the global electronics industry nearly half a trillion dollars in revenue. The report noted, “The global electronics supply chain would grind to a halt.” German Economics Minister Peter Altmaier is therefore also allowing investment in chip sites in the interests of “Germany’s technological sovereignty”. When it comes to high-tech components, however, experts say the European Union lags behind the US and Taiwan just as much as China. Felix Lee / Finn Mayer-Kuckuk

    • Car Industry

    Brussels’ restrained fight against Chinese disinformation

    In 2019, a light went on in Europe. As millions of people in Hong Kong took to the streets to protest growing Chinese control in the city, the European External Action Service’s (EEAS) Strategic Communications Division (StratCom Taskforce) noticed a new dimension of Chinese influence on public opinion in Europe. The information machinery “made in China”, controlled from Beijing, and directed to all parts of the world, massively increased its torque.

    Virtually overnight, the number of diplomatic or patriotic accounts increased with tens of thousands of followers on the Twitter short message service. The scale and nature of the campaign set alarm bells ringing in Brussels, not least because it became clear what technical means the Chinese were using. From then on, StratCom also took a closer look at pro-Chinese communication channels. It aimed to identify networks, analyze their actions and warn of a possible influence on public opinion in EU member states – but only four years after the department had started targeting fake news and disinformation from Russia.

    Why so much time passed is obvious to Didi-Kirsten Tatlow of the Asia Program of the German Council on Foreign Relations (DGAP) in Berlin. “There are powerful economic interests that ensure that Europeans don’t look too closely at the Chinese. For decades, the country was perceived only as a source of growth. This attitude is very convenient, and it makes it difficult for Europeans to recognize the real role of China as their rival,” Tatlow tells China.Table.

    StratCom was right on the money after the outbreak of COVID-19, as the rhetorical arsenal of the People’s Republic was further upgraded in the battle for interpretive sovereignty over the COVID-19 pandemic. Across all social media, official Chinese mouthpieces were rapidly fuelling discussions about the origin and control of the virus. When the first wave of the COVID-19 pandemic hit the world in March 2020, the number of posts from Chinese diplomats’ tweets climbed from 9,000 to 15,000 per week.

    The comments on the diplomatic online channels deliberately moved along a spectrum between official statements by the State Department and cyber-bullying. A kind of grey zone, as StratCom puts it. It was not so much classic false reporting as finger-pointing, shaping interpretations to suit Beijing’s leadership, or even suppressing narratives that displeased China – all backed by the use of a lot of money, a lot of personnel, and sophisticated technology.

    ‘Pure bureaucracy’

    The reaction to Chinese interference came very late, but at least the problem now seemed to be addressed with the necessary urgency. But how seriously does the EU really take the threat? “The EU likes to talk about how important the fight against disinformation is, most recently, especially in the context of COVID-19. One might therefore get the impression that it is on the right track. But StratCom’s work has been reduced to a purely bureaucratic matter. It is no more than the EU paying lip service to European values,” says Monika Richter, a former StratCom employee in an interview with China.Table.

    In May 2020, a Czech person with Canadian and US citizenship had left StratCom after a dispute with her superiors and was hired at a private company in Washington. Internally, the 29-year-old had accused the institution of “self-censorship” after an EU report on China was modified before publication. It had initially said Beijing wanted to “deflect blame for the pandemic outbreak and improve its international image” with a global disinformation campaign, adding that both “overt and covert tactics” had been observed. After threats from the Chinese, the passage was removed. StratCom argued that, after careful consideration, it had not found sufficient evidence to uphold the passage and had therefore changed the report. Richter was told she was not an activist but an employee of the EEAS, she says.

    At StratCom, a department with a total of 38 employees headed by the German Lutz Güllner, three experts at the so-called China Desk are currently dealing with disinformation from the Far East. Three against thousands. The team is supported by two staff members from the EEAS country desk as well as by several external sources and data analysts. The goal is not to counter, let alone end, the hail of disinformation with narratives of their own, but to get the problem into the minds of Europeans, they say. It is likely that the team will soon be expanded to four China experts. But StratCom knows that this increase is only a drop in the ocean.

    Borrell: insufficient financial and human resources

    EEAS President and EU Foreign Affairs Representative Josep Borrell complained at the beginning of March that there were neither sufficient financial nor human resources available to deal with China as intensively as with Russia. The department’s budget was successively increased to currently €11 million. However, in addition to Russia and China, the department also deals with the Western Balkans, North Africa, and the Middle East. With the money, the department needs to set up structures to monitor intelligence flows, organize exchanges with member states and buy in external analysis to gain a better understanding of the strategy and aims of damaging sources. It is said that the European Parliament will soon revisit the budget question for StratCom.

    Richter believes the money argument is only a symptom of a fundamental problem. She has identified a “dramatic lack of political will“. The EU has failed to “acknowledge the serious threat of foreign authoritarian influence on European democracies”. Indeed, in 2015, the European Council of EU leaders gave the EEAS an official mandate to expose Russian propaganda and communicate it to member states through the development of its own networks. The Council still does not have a comparable mandate for China. Borrell had also referred to this.

    Limited resources force StratCom to set priorities. Not every single case can be documented, which is why a patchy picture emerges. The department’s only option is to keep putting the problem on the agenda and backing it up with facts. In the end, it is up to the member states to decide how to deal with it. “There needs to be greater investment in research and analysis to understand Chinese intentions and behavior. With more funding, we would be able to counter manipulation better,” says Nad’a Kovalčíková of the Alliance for Securing Democracy, a research program of the German Marshall Fund. China uses a range of numerous tools, such as disinformation, but also economic constraints imposed on other states or cyberattacks. “The EU must be able to make the connections between these different aspects to identify the underlying strategy,” says Kovalčíková.

    China wants to polish up its image

    StratCom reportedly found a clear difference between Russian and Chinese disinformation. The Russians were trying to undermine the social underbelly in the European Union. To do this, they use much more misinformation than the Chinese do. On the website euvsdisinfo.eu, StratCom documents thousands of examples since 2015. China, on the other hand, is focused on polishing up its image in the world. To this end, misinformation is less useful than manipulation in a particular context. China would also consistently suppress narratives, both in the case of COVID-19 and human rights crimes in Xinjiang, the destruction of Hong Kong’s rule of law, and also the Tibet and Taiwan issues.

    In this way, Chinese propaganda succeeded in strengthening the edges of opinion spectrums and fuelling discussion about whether Beijing’s argumentation was not the right one after all. Ex-StratCom employee Richter says: “Chinese manipulation attempts seemed much less aggressive, while Russian manipulation was very conspicuous.” This is one of the reasons why StratCom has significantly more employees dealing with Russia than with China.

    StratCom wants to counteract this with the Rapid Alert System. The instrument is a kind of network of experts in the member states who are in a position to use and forward tips on disinformation and their intentions in the European interest. In many of the 27 EU states, these tips would otherwise come to nothing because they lack the structures to take them up accordingly. Until three years ago, there was no such networking.

    “The processing procedures in the individual EU countries are very different,” says Kovalčíková of the GMF. The Swedes show how it’s done. Well over a year before the last parliamentary election in 2018, the government had already begun preparing its citizens, media, and administration for the possibility that foreign forces might try to influence the outcome of the election. One indicator that the strategy worked was the fact that a shift to the right was avoided. Kovalčíková: “Nevertheless, a lot of work remains. Attention to the danger of influence by third countries must extend beyond the election cycle. It is crucial to permanently raise awareness of this problem among the population.”

    • Chinese Communist Party
    • Civil Society
    • EEAS
    • Geopolitics

    News

    Solar giant Longi invests in hydrogen

    The leading global manufacturer of solar modules, Longi, is moving into the hydrogen sector, as the business portal Caixin reports. Together with a private equity fund, Longi has founded the hydrogen subsidiary Xi’an Longi Hydrogen Technology with a start-up capital of the equivalent of €38 million. State-owned energy companies such as Sinopec have also already invested in the hydrogen sector to advance Beijing’s goal of peaking CO2 emissions by 2030.

    Hydrogen could become an important storage medium in the future to store surplus solar and wind energy and make it available during lulls. Last year, China reported a record number of new wind turbines installed. Solar power capacity is also expected to continue to increase. Accordingly, demand for storage capacity will grow as well. “The solar-to-hydro model could effectively solve the problem [of insufficient storage capacity],” Longi wrote in a post on one of the company’s social media channels. nib

    • Batteries
    • Renewable energies

    IMF raises growth forecast to 8.4 percent

    Yestarday, the International Monetary Fund (IMF) announced, that it has raised its growth forecast for China for 2021 to 8.4 percent. The new forecast is 0.3 percentage points higher than expected in January. According to the IMF, the People’s Republic would thus record the strongest growth rate since 2011.

    “Effective containment measures, a vigorous response with public investment, and central bank liquidity support” have enabled China’s “strong recovery”, the IMF said. The People’s Republic had already regained its pre-COVID-19 pandemic gross domestic product by 2020 – many other countries will not manage that until “well into 2023”, the IMF said.

    The IMF continues to forecast global growth of 5.6 percent. The organization warned that geopolitical conflicts between Washington and Beijing could weigh on the recovery: “Tensions between the United States and China remain high on numerous fronts, including international trade, intellectual property, and cybersecurity,” it said. ari

    • Domestic policy of the CP China
    • Economy
    • IMF

    Propaganda offensive for the party’s birthday

    On the occasion of the 100th birthday of the Chinese Communist Party (China.Table reports), cinemas in the People’s Republic are to show propaganda films twice a week. Until the end of the year, movie theaters “in every province, region, and city” are to show works that “revolve around love for the Party, love for the country, and love for socialism,” according to China’s National Film Administration. According to the statement, two cinema chains will even show selected propaganda films at least five times a week. The plan is to mobilize Party members, officials, and other viewers to ensure that the cinemas are well attended during the screenings.

    The 12 films selected by authorities include seven works from the 1950s and 1960s, one from the 1980s, and three recent films and one new release (“Landmine War”) – most of the works are war films. In addition to film screenings, exhibitions and theatrical performances will also reflect “the great achievements and valuable experiences” of the CCP, Wang Xiaohui, director of the National Film Administration and a leading official of the propaganda department, told a news conference. The CCP celebrates its 100th birthday on July 1st (all about the CCP on China.Table). nib

    • 100 Years of the Chinese Communist Party
    • Chinese Communist Party
    • Culture
    • Film
    • Propaganda

    Profile

    Bernhard Weber

    Managing Director of Baden-Württemberg International in Nanjing and Representative of the State of Baden-Württemberg in China

    Bernhard Weber first came to China in the early 1980s as a student at Shandong University. “At that time, it was a country with practically no cars. A city like Shanghai probably had hardly more than 500 passenger cars,” Weber recounts, to illustrate the rapid development. In the meantime, the 62-year-old is the managing director of the Chinese branch of the Baden-Württemberg International (BW-I), a state agency based in the six-million metropolis of Nanjing in the eastern Chinese province of Jiangsu. He supports companies from Baden-Württemberg in gaining a foothold in the Chinese market.

    The pool of companies that Weber looks after comprises around 20 small and medium-sized enterprises. But this number could be significantly higher, as Weber thinks: “China is still a market that is very far away, especially for smaller companies. Many entrepreneurs are very conservative in this respect.” Therefore, too few still dare to take even this low-risk step of seeking advice in exploring the Chinese market.

    Still, Weber can’t complain about a lack of work, even in the current pandemic. “The companies that set up shop here before the pandemic are benefiting from the fact that the economy here has hardly been affected by COVID.” And even last year, two companies took advantage of BW-I’s service and entered the China business. Weber believes that the cooperation with the companies is only a temporary solution. For example, Baden-Württemberg International provides office infrastructure and personnel management for German investors in China. This enables the entrepreneurs to start their business without any lead time and has less bureaucratic work.

    Bernhard Weber in Nanjing before skyscrapers

    In addition to day-to-day business, Weber is also responsible for representing Baden-Württemberg in the two partner provinces of Jiangsu and Liaoning. Normally, this involves maintaining contact with various government agencies as well as an annual meeting of regional government representatives. “Of course, all of that was canceled last year.”

    Weber owes his path to China to his affinity for languages – and to a Japanese man he befriended in a French language course. He said to me, “You’d better learn Chinese. They’re just opening up shop, and in the future, they’ll need people from abroad who speak their language.” At the time, there were three universities offering Sinology degrees with modern Chinese. Weber got his first job in China at a joint venture of the Siemens subsidiary KWU. Weber and his family have now lived in Nanjing for 26 years. He was there even before the city got its skyscrapers and the world discovered the Chinese market. David Renke

    • Bernhard Weber
    • China Strategy 2022
    • Geopolitics
    • Germany
    • Jiangsu
    • Liaoning
    • Nanjing
    • Trade

    Dessert

    Kaffeebohnen fallen in einen großen Metallkessel.

    Nowhere in the world are there more coffee shops than in Shanghai. According to a report by that’s-Mag, there are over 7,000 of them in China’s metropolis of 26 million. This means Shanghai beats London (3,233), Tokyo (3,826), and New York with 1,591 coffee shops. London remains the leader in coffee shops per capita, with 3.69 shops per 10,000 inhabitants. In Shanghai, the figure is “only” 2.85.

    China.Table Editors

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