The coalition agreement of the future German government is here. During the presentation of the paper, China was only mentioned briefly. Covid naturally dominated the press conference. But the paper contains surprisingly clear words on foreign policy. The new government wants to maintain the status quo in the Taiwan Strait and calls China a “systemic rival.” The coalition members plan to address Beijing directly about the issues of Xinjiang and Hong Kong. They also call for peaceful conduct in the Indo-Pacific. And last but not least, they believe in free and fair trade.
But as the analysis by our political experts Amelie Richter and Felix Lee shows, the governing parties are not adopting a completely new stance. While the document addresses these issues more explicitly and extensively than the previous coalition agreement four years ago, the coalition partners are aligning themselves with EU positions, right down to the wording. These positions already form the basis of the joint Far East policy in Brussels.
Overall, the coalition agreement strikes a decent balance. It signals more self-confidence towards China without resorting to populist slogans. The emphasis on human rights as the basis of civilized politics also has its place in it.
Meanwhile, there is a considerable need for discussion on the human rights front. The whereabouts of tennis player Peng Shuai remain unclear. There is no sign of an independent investigation into her allegations – instead, China is suppressing the MeToo movement. Marcel Grzanna asked around Germany’s sports federations how they see the case. Despite all the concern about Peng, a boycott of the Olympics is out of the question for the officials. Instead, individual athletes should speak out about the situation in China.
The next China-Africa summit will take place next week. Our guest author Robert Kappel from the University of Leipzig classifies the investments of the Silk Road power for us. The economics professor can prove: China’s involvement has not created as many jobs as it was hoped for ten years ago but instead had considerable side effects. China thus does not come to China as the savior it pretends to be.
The case of Peng Shuai puts German sports in a quandary only months before the Winter Olympics in Beijing (February 4-20, 2022). In response to an inquiry by China.Table, the German Olympic Sports Confederation (DOSB) issued a statement. However, it is rather ambiguous. Caught between “responsibility towards the athletes” and its “socio-political responsibility”, the association is trying to find a position. Sports boycott: absolutely not. Diplomatic boycott: others have to decide.
The sports association does not want to be dragged into politics. “In our opinion, a sporting boycott would only instrumentalize athletes in the pursuit of goals that politics have not yet been able to achieve,” the DOSB said in the statement. “Thus, it would be more than unsporting to send the Olympic and Paralympic teams forth, so to speak, and to make a symbolic statement at their expense that is otherwise avoided for political, strategic, and economic reasons.”
Instead, the association would seek “extensive information through talks with the Federal Foreign Office, human rights experts, and NGOs, such as Human Rights Watch, Reporters without Borders, and the Society for Threatened Peoples”. This was done “in particular with a view to the upcoming Winter Olympics in Beijing and the human rights situation in the host country”. At the same time, the association vowed commitment to “inform our athletes about critical issues, so that they can form their own opinion and respond accordingly when asked”.
This sounds all good and well, but in practice, it also means that the DOSB prefers to let its athletes criticize the Chinese government instead of translating its “socio-political responsibility” into rhetoric with public appeal. So far, the DOSB has not done anything other than merely express concern and demand clarity in the Peng case towards the Chinese government. The DOSB is thus following in the footsteps of the International Olympic Committee (IOC), which avoids open criticism of the Beijing leadership.
35-year-old Peng had made her affair with former Vice Premier Zhang Gaoli public in a post on Chinese short message service Weibo on November 2nd. In it, she accused the powerful politician, who until 2017 was a member of the Politburo Standing Committee and belonged to the Communist Party’s innermost circle of power, of forcing her to sexual acts on at least one occasion.
Immediately afterward, the former tennis world number one in doubles disappeared from the public eye and only reappeared after questions about her whereabouts began to mount abroad (China.Table reported). Photos and video sequences were supposed to prove that Peng was going about her normal daily routine and asked for privacy. While Beijing sees this as sufficient evidence that Peng doesn’t have to fear any repercussions in response to her accusations, people outside China remain skeptical.
The relatively new athlete’s association Global Athlete called on the IOC to “immediately suspend the Chinese Olympic Committee” until Peng Shuai could safely leave China and a full and clear investigation into her allegations of sexual assault was conducted. The organization stressed that a video feed did not guarantee that Peng was safe and well. Global Athlete accused IOC President Thomas Bach of “demonstrating an abhorrent indifference to sexual violence and the well-being of female athletes.” During the IOC video call, Bach had invited Peng to dinner in Beijing in the presence of a Chinese female official.
Undoubtedly, the disappearance of the two-time Grand Slam winner and her mysterious signs of life in recent days are an unpleasant topic that the federations do not wish to deal with thoroughly. The German Ski Association (DSV) is “aware” of the events surrounding Peng, but asks for patience and understanding for the fact that it is “very busy” at the moment after the tournament season began last month. As part of the DOSB, the DSV “does not feel qualified to politically classify these events,” as a spokesman stated in an interview with China.Table. The German Ice Hockey Federation (DEB) did not respond to an inquiry.
So far, only the Women’s Tennis Association (WTA) has threatened the People’s Republic with consequences. Association chairman Steve Simon does not rule out the possibility of withdrawing all WTA tournaments from China. He is not only supported by stars of the scene, but also by the German Tennis Federation (DTB). Its president Dietloff von Arnim considers it “a clear positive statement on human rights”. The DTB supports the position of the association. “More important than business are the moral values we stand for. But very few act this way. But gradually it feels like the tide is turning a bit,” von Arnim told Deutschlandfunk radio.
However, there would have been plenty of reasons for a critical evaluation of business interests with the Olympic host country even before the Peng Shuai case. The tennis player is not the first woman in China to draw attention to sexual assault by men in the recent past. A handful of other cases have come to light. But the state is using every means at its disposal to prevent them from being investigated.
For example, the two activists Huang Xueqin and Wang Jianbing have also been missing for several weeks. They supported and encouraged other women to share their experiences with the public. Smear campaigns have been launched against other activists on social media. They are accused of acting as tools of foreign countries to harm the motherland.
For example, Zhou Xiaoxuan, who accused popular TV host Zhu Jun of groping her, received a message telling her to leave the country. “Get out of China, I feel disgusted living with a type of person like you, on the same piece of land,” AP quoted a private message sent to Zhou.
Whether the state is supporting such campaigns with its army of social media commentators is impossible to prove. But while it harshly and swiftly censors accusations of sexual abuse, it allows insults against women’s rights activists and blocks their accounts. In doing so, it deprives them of the chance to openly confront their critics. At the same time, it prevents other users from expressing solidarity.
Rudolf Scharping has been organizing a German-Chinese business conference with top-class speakers from politics, business, and science for eight years. This year, participants spent three days discussing topics such as mobility, trade and logistics, artificial intelligence, and sustainability; China.Table was a cooperation partner. With his consulting firm RSBK, the former German Minister of Defense and SPD Chairman has been supporting companies entering the Chinese market for over 15 years.
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
The motto of this year’s RSBK China Conference is “shaping the future together”. Where do the current challenges lie from the attendees’ point of view?
The conference also has the intention to promote mutual understanding, convey information, exchange experiences, and define areas of cooperation and also identify new areas. Attendees from Germany and also from China appreciate that they can obtain additional information, better assess future trends and also establish contacts.
What would be such information conveyed from China?
One example is: German companies continue to invest heavily in China. This primarily concerns research, development, and innovation. But high levels of investment also continue to flow into the areas of data processing, artificial intelligence, materials, and resource efficiency. We are closely intertwined, both economies, also in the field of innovation. Europe, with it Germany, China – they need each other. In my eyes, it is nonsense to talk about decoupling. Don’t forget: Universities, science, culture – we should strive to understand each other better and work together anywhere we can.
Do you have an example of such a recent technology investment?
There is, for example, the cooperation between Continental AG and the Chinese company Horizon Robotics. Or the long list of companies that conduct research and development in China in order to advance, as a colleague from BMW put it, not only “Made in China” but also “Created in China”.
How do you and the conferees assess the current irregularities along the supply chain?
They are a huge problem at present. Basically, supply chains have to become more resilient. So companies also need to diversify so that they are not dependent on one location or two locations around the world. That is one point. The other is the question: what comes from which country? And how can this be fairly and sensibly arranged? But there is a third level. It concerns everything that has to do with the assumption that an economy could decouple. So using difficulties in supply chains, bottlenecks in materials, higher shipping costs, and the like more as an excuse to decouple or cut off from others. The German economy is currently making efforts to reduce dependencies. But decoupling is in nobody’s interest and is not desired.
Did the companies give concrete examples?
The commonly known problem is semiconductors; or the shortage of magnesium. In China, there is the issue of budgeting power volumes and the resulting production losses. All companies complain about this, as they suddenly can only operate at a level of sometimes 30 or 40 percent of their production capacity. China is decoupling its growth from power consumption, just as Germany did in the past. Sometimes China overdoes it with administrative pressure in this area.
The risk of a real estate crisis as a result of Evergrande’s payment difficulties – is this currently a dominant topic in business circles?
Yes, but my assessment is that this is a domestic issue. This is more about people who have made down payments on an apartment. This is an issue that China will solve. If investors lose money in the process, China will put up with it as long as it doesn’t become a global problem. The Chinese themselves sometimes scoff that this is their kind of rent cap.
Joe Biden has used the word independence in connection with Taiwan, which seems risky at first. Is there concern about the relationship between the two Pacific superpowers?
Sure, even if that was not a conference topic. But I can only say with regard to Germany and Europe that they would be wise to stick to the “one China policy”. My prediction is that the US and China will also make every effort to cooperate, tackle global issues together, and consequently contain conflicts as far as possible.
What about the EU’s trade policy?
Together with Japan, South Korea, Australia, New Zealand, and the ASEAN states, i.e. with Southeast Asian states regardless of their political constitution, the Chinese have founded the RCEP free trade zone. Its scope will soon surpass that of the European single market. We cannot afford to let our own agreement with China, the CAI, freeze in the fridge.
So you’re in favor of ratifying it quickly?
I am in favor of thinking more broadly in political terms; after all, the agreement can be put into practice without having to ratify it straight away. Above all, politics must not be limited to trade or the economy and investment.
Another topical issue at the moment is climate policy. How do you assess the status of cooperation with China?
It could be very interesting to achieve something between the three large economic areas, that is China, the USA, and Europe, in the area of CO2 taxing. Thanks to an industrious initiative from Germany, worldwide minimum taxation of companies has been achieved. A highly interesting initiative could be to tackle the issue of climate change jointly on a global scale by taking effective measures to protect the rainforests. There is another issue that needs to be discussed very intensively with China. After all, the demand for wood in China or in Europe – we have just been talking about bottlenecks – is much greater than is good for the environment as a whole. So we also have to talk about such issues on a global scale.
Are you willing to commit to such a climate initiative and to set up something tangible between the two countries?
If I talk about it, you can assume that I’m already doing that. None of the great challenges on this earth and those concerning the survival of mankind or security and peace, none of the questions of survival on this small globe, none of them can be answered better and more forward-looking without China or even against China than with China.
China regularly claims that Chinese involvement is good for the development of African countries. There is no doubt that Africa’s foreign trade with China has soared. A few years ago, China was even praised for coming to Africa’s aid to bridge the technological and economic divide. The People’s Republic was more willing to invest than Europe and the US. China has been involved in infrastructure development like no other country to date. Some observers have even gone so far as to claim that Chinese private companies’ investments in recent decades have spurred Africa’s industrialization and ignited a surge in employment, improving people’s lives. But upon closer inspection, these statements prove to be less than credible.
China’s direct investment in Africa increased to a value of over $56 billion by the end of 2020 (stock). Chinese investment inflows into sub-Saharan Africa have increased (chart 1). In 2020, they amounted to $4.2 billion. The following countries are among the major recipients: South Africa (about 14 percent), DR Congo (12.5 percent), Angola (6.5 percent), Zambia (6.5 percent), Ethiopia (5.6 percent), and Ghana (4.1 percent).
A look at individual countries shows that China is not only concerned with raw materials and power, but also with market access: Chinese investment in Nigeria is focused on manufacturing industries, including the production of building materials, furniture, food, beverages, and packaging. In many of these sectors, Chinese firms have since displaced Nigerian companies. Most of the companies are now in Chinese hands. However, the majority of the workforce is local. In the Lekki Free Trade Zone (the lagoon off Lagos on the Gulf of Guinea, editor’s note), for example, 70 percent of the workforce of Chinese companies was Nigerian. Chinese investment in Tanzania is largely in the textile and garment industry. In 2016, there were 400 Chinese-owned companies in Kenya, most of which were involved in light manufacturing, construction, tourism, and natural resource exploitation. In addition, Chinese companies invested in metal, communications, and automotive industries in Kenya.
Many African countries impose fewer government regulations on businesses, so increasingly stringent environmental regulations in China have also prompted many Chinese companies to invest overseas. The prospect of growing markets and middle classes is another draw for Chinese companies. Finally, tariff exemptions for trade with the United States and the European Union are attracting export-oriented Chinese manufacturers to Africa.
It is therefore fair to say that China is a key economic player on the African continent.
Chinese investment has a positive impact on employment and economic growth in sub-Saharan Africa. A one percent increase in Chinese investment led to a marginal 0.2 percent increase in employment and a 0.17 percent increase in economic growth. This leaves China far behind European investors.
A key aspect of Chinese investment in Africa is its sectoral focus. Except for a relatively small proportion of greenfield investments in the manufacturing sector, the bulk of Chinese investment or lending is directed towards China’s strategic objectives. Against this background, it is not surprising that Chinese investments have created only few jobs (only 1.8 employees per one million US dollars invested) – whereas German investors have created as many as 4.6.
There is a lot of commotion in the West over Chinese investment. Observers believe that Chinese companies will create millions of jobs in Africa because of rising wages in China, which could leave Europe even further behind. In 2011, for example, the World Bank’s former chief economist and Senior Vice President for development economics, Justin Lin, stated that China is on the verge of moving away from low-skilled manufacturing jobs and becoming a ‘leading dragon.’ This would free up nearly millions of labor-intensive jobs in China, enough to more than quadruple manufacturing employment in low-income countries.
Many observers even believed that Africa would be the world’s next great manufacturing hub, as the Chinese industry could produce in lower-cost regions and 100 million jobs could shift from China to Africa. If this were true, China could indeed be seen as Africa’s “development escalator,” as more jobs than ever before would be created, higher growth generated, and poverty eliminated.
Indeed, Chinese companies and the Chinese state have invested and also created jobs for Africans – but on a much smaller scale. For example, according to the Ethiopian Investment Commission, there were about 620 active Chinese investment projects in 2020 (mostly in the manufacturing and construction sectors), employing about 200,000 workers. In Ethiopia’s special economic zones, this amounted to about 86,000 jobs in 2020 (about 29,000 in 2018) and only 74,000 in early 2021 due to the pandemic. In other countries, the figures are much lower. Overall, Chinese investment in the African continent created an average of about 19,000 jobs annually between 2010 and 2019 – far more than US firms are contributing, but also far fewer than any European investors.
Many authors argue that the possibility of increasing investment in sub-Saharan Africa is based on the fact that wages in China are rising, and Africa may thus become a destination for foreign direct investment in the manufacturing sector. However, the low-wage argument is not very convincing. In African countries, unit labor costs are usually high compared to many Asian countries. Moreover, most Chinese investments are made in the power and commodity sectors, i.e. they are capital- and resource-intensive investments made not due to possible wage differentials but because of the rising demand for commodities created by the modernization of the Chinese economy.
Compared to China, unit labor costs in African countries remain higher. In addition, inadequate and expensive infrastructure (roads, power, weak information and communication technologies; low research activities) and weak institutions have a negative impact on the business environment for foreign investment. Especially the Asian low-income countries Bangladesh or Vietnam have a clear advantage over African countries, which is why Chinese investors tend to invest in the neighboring region rather than in African countries.
And what’s more:
African countries should not make the mistake of regarding China as a benevolent actor. It is no different from other global powers pursuing their economic and foreign policy interests. There are structural asymmetries between China and Africa, most evident in trade and investment patterns: China mainly imports raw materials from Africa, while Africa mainly imports higher value-added industrial and consumer goods. These imports also impair African industrial development.
In the eyes of the Chinese government, the last China-Africa Summit (FOCAC) was a success, and the planned projects were largely implemented: Industrial promotion, infrastructure connectivity, trade facilitation, eco-friendly development, capacity building, health care, deeper exchange in education as well as in peace and security. However, many African countries do not see cooperation in such a positive light. More and more African countries are beginning to criticize China’s activities. After all, many promises were broken or were associated with high costs (debt trap). And so, the contribution to the industrialization of Africa has been very low so far.
Among the topics to be discussed at the 2021 FOCAC Summit in Dakar are:
If China is truly interested in a successful investment and cooperation strategy in Africa, the Chinese government will have to redirect and shift the focus of its investment more towards labor-intensive manufacturing, agriculture, and service sectors, and local cooperation with domestic companies.
Child vaccination in a primary school in Hohhot: China is now swiftly providing the protective jab for 3- to 11-year-olds. The widespread vaccination is intended to lay the foundation for finding a way out of strict containment measures. But given the limited effectiveness of the vaccine against delta, it may be quite a while before that happens – despite the vaccination campaign’s thorough coverage of all age groups.
The coalition agreement of the future German government is here. During the presentation of the paper, China was only mentioned briefly. Covid naturally dominated the press conference. But the paper contains surprisingly clear words on foreign policy. The new government wants to maintain the status quo in the Taiwan Strait and calls China a “systemic rival.” The coalition members plan to address Beijing directly about the issues of Xinjiang and Hong Kong. They also call for peaceful conduct in the Indo-Pacific. And last but not least, they believe in free and fair trade.
But as the analysis by our political experts Amelie Richter and Felix Lee shows, the governing parties are not adopting a completely new stance. While the document addresses these issues more explicitly and extensively than the previous coalition agreement four years ago, the coalition partners are aligning themselves with EU positions, right down to the wording. These positions already form the basis of the joint Far East policy in Brussels.
Overall, the coalition agreement strikes a decent balance. It signals more self-confidence towards China without resorting to populist slogans. The emphasis on human rights as the basis of civilized politics also has its place in it.
Meanwhile, there is a considerable need for discussion on the human rights front. The whereabouts of tennis player Peng Shuai remain unclear. There is no sign of an independent investigation into her allegations – instead, China is suppressing the MeToo movement. Marcel Grzanna asked around Germany’s sports federations how they see the case. Despite all the concern about Peng, a boycott of the Olympics is out of the question for the officials. Instead, individual athletes should speak out about the situation in China.
The next China-Africa summit will take place next week. Our guest author Robert Kappel from the University of Leipzig classifies the investments of the Silk Road power for us. The economics professor can prove: China’s involvement has not created as many jobs as it was hoped for ten years ago but instead had considerable side effects. China thus does not come to China as the savior it pretends to be.
The case of Peng Shuai puts German sports in a quandary only months before the Winter Olympics in Beijing (February 4-20, 2022). In response to an inquiry by China.Table, the German Olympic Sports Confederation (DOSB) issued a statement. However, it is rather ambiguous. Caught between “responsibility towards the athletes” and its “socio-political responsibility”, the association is trying to find a position. Sports boycott: absolutely not. Diplomatic boycott: others have to decide.
The sports association does not want to be dragged into politics. “In our opinion, a sporting boycott would only instrumentalize athletes in the pursuit of goals that politics have not yet been able to achieve,” the DOSB said in the statement. “Thus, it would be more than unsporting to send the Olympic and Paralympic teams forth, so to speak, and to make a symbolic statement at their expense that is otherwise avoided for political, strategic, and economic reasons.”
Instead, the association would seek “extensive information through talks with the Federal Foreign Office, human rights experts, and NGOs, such as Human Rights Watch, Reporters without Borders, and the Society for Threatened Peoples”. This was done “in particular with a view to the upcoming Winter Olympics in Beijing and the human rights situation in the host country”. At the same time, the association vowed commitment to “inform our athletes about critical issues, so that they can form their own opinion and respond accordingly when asked”.
This sounds all good and well, but in practice, it also means that the DOSB prefers to let its athletes criticize the Chinese government instead of translating its “socio-political responsibility” into rhetoric with public appeal. So far, the DOSB has not done anything other than merely express concern and demand clarity in the Peng case towards the Chinese government. The DOSB is thus following in the footsteps of the International Olympic Committee (IOC), which avoids open criticism of the Beijing leadership.
35-year-old Peng had made her affair with former Vice Premier Zhang Gaoli public in a post on Chinese short message service Weibo on November 2nd. In it, she accused the powerful politician, who until 2017 was a member of the Politburo Standing Committee and belonged to the Communist Party’s innermost circle of power, of forcing her to sexual acts on at least one occasion.
Immediately afterward, the former tennis world number one in doubles disappeared from the public eye and only reappeared after questions about her whereabouts began to mount abroad (China.Table reported). Photos and video sequences were supposed to prove that Peng was going about her normal daily routine and asked for privacy. While Beijing sees this as sufficient evidence that Peng doesn’t have to fear any repercussions in response to her accusations, people outside China remain skeptical.
The relatively new athlete’s association Global Athlete called on the IOC to “immediately suspend the Chinese Olympic Committee” until Peng Shuai could safely leave China and a full and clear investigation into her allegations of sexual assault was conducted. The organization stressed that a video feed did not guarantee that Peng was safe and well. Global Athlete accused IOC President Thomas Bach of “demonstrating an abhorrent indifference to sexual violence and the well-being of female athletes.” During the IOC video call, Bach had invited Peng to dinner in Beijing in the presence of a Chinese female official.
Undoubtedly, the disappearance of the two-time Grand Slam winner and her mysterious signs of life in recent days are an unpleasant topic that the federations do not wish to deal with thoroughly. The German Ski Association (DSV) is “aware” of the events surrounding Peng, but asks for patience and understanding for the fact that it is “very busy” at the moment after the tournament season began last month. As part of the DOSB, the DSV “does not feel qualified to politically classify these events,” as a spokesman stated in an interview with China.Table. The German Ice Hockey Federation (DEB) did not respond to an inquiry.
So far, only the Women’s Tennis Association (WTA) has threatened the People’s Republic with consequences. Association chairman Steve Simon does not rule out the possibility of withdrawing all WTA tournaments from China. He is not only supported by stars of the scene, but also by the German Tennis Federation (DTB). Its president Dietloff von Arnim considers it “a clear positive statement on human rights”. The DTB supports the position of the association. “More important than business are the moral values we stand for. But very few act this way. But gradually it feels like the tide is turning a bit,” von Arnim told Deutschlandfunk radio.
However, there would have been plenty of reasons for a critical evaluation of business interests with the Olympic host country even before the Peng Shuai case. The tennis player is not the first woman in China to draw attention to sexual assault by men in the recent past. A handful of other cases have come to light. But the state is using every means at its disposal to prevent them from being investigated.
For example, the two activists Huang Xueqin and Wang Jianbing have also been missing for several weeks. They supported and encouraged other women to share their experiences with the public. Smear campaigns have been launched against other activists on social media. They are accused of acting as tools of foreign countries to harm the motherland.
For example, Zhou Xiaoxuan, who accused popular TV host Zhu Jun of groping her, received a message telling her to leave the country. “Get out of China, I feel disgusted living with a type of person like you, on the same piece of land,” AP quoted a private message sent to Zhou.
Whether the state is supporting such campaigns with its army of social media commentators is impossible to prove. But while it harshly and swiftly censors accusations of sexual abuse, it allows insults against women’s rights activists and blocks their accounts. In doing so, it deprives them of the chance to openly confront their critics. At the same time, it prevents other users from expressing solidarity.
Rudolf Scharping has been organizing a German-Chinese business conference with top-class speakers from politics, business, and science for eight years. This year, participants spent three days discussing topics such as mobility, trade and logistics, artificial intelligence, and sustainability; China.Table was a cooperation partner. With his consulting firm RSBK, the former German Minister of Defense and SPD Chairman has been supporting companies entering the Chinese market for over 15 years.
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
The motto of this year’s RSBK China Conference is “shaping the future together”. Where do the current challenges lie from the attendees’ point of view?
The conference also has the intention to promote mutual understanding, convey information, exchange experiences, and define areas of cooperation and also identify new areas. Attendees from Germany and also from China appreciate that they can obtain additional information, better assess future trends and also establish contacts.
What would be such information conveyed from China?
One example is: German companies continue to invest heavily in China. This primarily concerns research, development, and innovation. But high levels of investment also continue to flow into the areas of data processing, artificial intelligence, materials, and resource efficiency. We are closely intertwined, both economies, also in the field of innovation. Europe, with it Germany, China – they need each other. In my eyes, it is nonsense to talk about decoupling. Don’t forget: Universities, science, culture – we should strive to understand each other better and work together anywhere we can.
Do you have an example of such a recent technology investment?
There is, for example, the cooperation between Continental AG and the Chinese company Horizon Robotics. Or the long list of companies that conduct research and development in China in order to advance, as a colleague from BMW put it, not only “Made in China” but also “Created in China”.
How do you and the conferees assess the current irregularities along the supply chain?
They are a huge problem at present. Basically, supply chains have to become more resilient. So companies also need to diversify so that they are not dependent on one location or two locations around the world. That is one point. The other is the question: what comes from which country? And how can this be fairly and sensibly arranged? But there is a third level. It concerns everything that has to do with the assumption that an economy could decouple. So using difficulties in supply chains, bottlenecks in materials, higher shipping costs, and the like more as an excuse to decouple or cut off from others. The German economy is currently making efforts to reduce dependencies. But decoupling is in nobody’s interest and is not desired.
Did the companies give concrete examples?
The commonly known problem is semiconductors; or the shortage of magnesium. In China, there is the issue of budgeting power volumes and the resulting production losses. All companies complain about this, as they suddenly can only operate at a level of sometimes 30 or 40 percent of their production capacity. China is decoupling its growth from power consumption, just as Germany did in the past. Sometimes China overdoes it with administrative pressure in this area.
The risk of a real estate crisis as a result of Evergrande’s payment difficulties – is this currently a dominant topic in business circles?
Yes, but my assessment is that this is a domestic issue. This is more about people who have made down payments on an apartment. This is an issue that China will solve. If investors lose money in the process, China will put up with it as long as it doesn’t become a global problem. The Chinese themselves sometimes scoff that this is their kind of rent cap.
Joe Biden has used the word independence in connection with Taiwan, which seems risky at first. Is there concern about the relationship between the two Pacific superpowers?
Sure, even if that was not a conference topic. But I can only say with regard to Germany and Europe that they would be wise to stick to the “one China policy”. My prediction is that the US and China will also make every effort to cooperate, tackle global issues together, and consequently contain conflicts as far as possible.
What about the EU’s trade policy?
Together with Japan, South Korea, Australia, New Zealand, and the ASEAN states, i.e. with Southeast Asian states regardless of their political constitution, the Chinese have founded the RCEP free trade zone. Its scope will soon surpass that of the European single market. We cannot afford to let our own agreement with China, the CAI, freeze in the fridge.
So you’re in favor of ratifying it quickly?
I am in favor of thinking more broadly in political terms; after all, the agreement can be put into practice without having to ratify it straight away. Above all, politics must not be limited to trade or the economy and investment.
Another topical issue at the moment is climate policy. How do you assess the status of cooperation with China?
It could be very interesting to achieve something between the three large economic areas, that is China, the USA, and Europe, in the area of CO2 taxing. Thanks to an industrious initiative from Germany, worldwide minimum taxation of companies has been achieved. A highly interesting initiative could be to tackle the issue of climate change jointly on a global scale by taking effective measures to protect the rainforests. There is another issue that needs to be discussed very intensively with China. After all, the demand for wood in China or in Europe – we have just been talking about bottlenecks – is much greater than is good for the environment as a whole. So we also have to talk about such issues on a global scale.
Are you willing to commit to such a climate initiative and to set up something tangible between the two countries?
If I talk about it, you can assume that I’m already doing that. None of the great challenges on this earth and those concerning the survival of mankind or security and peace, none of the questions of survival on this small globe, none of them can be answered better and more forward-looking without China or even against China than with China.
China regularly claims that Chinese involvement is good for the development of African countries. There is no doubt that Africa’s foreign trade with China has soared. A few years ago, China was even praised for coming to Africa’s aid to bridge the technological and economic divide. The People’s Republic was more willing to invest than Europe and the US. China has been involved in infrastructure development like no other country to date. Some observers have even gone so far as to claim that Chinese private companies’ investments in recent decades have spurred Africa’s industrialization and ignited a surge in employment, improving people’s lives. But upon closer inspection, these statements prove to be less than credible.
China’s direct investment in Africa increased to a value of over $56 billion by the end of 2020 (stock). Chinese investment inflows into sub-Saharan Africa have increased (chart 1). In 2020, they amounted to $4.2 billion. The following countries are among the major recipients: South Africa (about 14 percent), DR Congo (12.5 percent), Angola (6.5 percent), Zambia (6.5 percent), Ethiopia (5.6 percent), and Ghana (4.1 percent).
A look at individual countries shows that China is not only concerned with raw materials and power, but also with market access: Chinese investment in Nigeria is focused on manufacturing industries, including the production of building materials, furniture, food, beverages, and packaging. In many of these sectors, Chinese firms have since displaced Nigerian companies. Most of the companies are now in Chinese hands. However, the majority of the workforce is local. In the Lekki Free Trade Zone (the lagoon off Lagos on the Gulf of Guinea, editor’s note), for example, 70 percent of the workforce of Chinese companies was Nigerian. Chinese investment in Tanzania is largely in the textile and garment industry. In 2016, there were 400 Chinese-owned companies in Kenya, most of which were involved in light manufacturing, construction, tourism, and natural resource exploitation. In addition, Chinese companies invested in metal, communications, and automotive industries in Kenya.
Many African countries impose fewer government regulations on businesses, so increasingly stringent environmental regulations in China have also prompted many Chinese companies to invest overseas. The prospect of growing markets and middle classes is another draw for Chinese companies. Finally, tariff exemptions for trade with the United States and the European Union are attracting export-oriented Chinese manufacturers to Africa.
It is therefore fair to say that China is a key economic player on the African continent.
Chinese investment has a positive impact on employment and economic growth in sub-Saharan Africa. A one percent increase in Chinese investment led to a marginal 0.2 percent increase in employment and a 0.17 percent increase in economic growth. This leaves China far behind European investors.
A key aspect of Chinese investment in Africa is its sectoral focus. Except for a relatively small proportion of greenfield investments in the manufacturing sector, the bulk of Chinese investment or lending is directed towards China’s strategic objectives. Against this background, it is not surprising that Chinese investments have created only few jobs (only 1.8 employees per one million US dollars invested) – whereas German investors have created as many as 4.6.
There is a lot of commotion in the West over Chinese investment. Observers believe that Chinese companies will create millions of jobs in Africa because of rising wages in China, which could leave Europe even further behind. In 2011, for example, the World Bank’s former chief economist and Senior Vice President for development economics, Justin Lin, stated that China is on the verge of moving away from low-skilled manufacturing jobs and becoming a ‘leading dragon.’ This would free up nearly millions of labor-intensive jobs in China, enough to more than quadruple manufacturing employment in low-income countries.
Many observers even believed that Africa would be the world’s next great manufacturing hub, as the Chinese industry could produce in lower-cost regions and 100 million jobs could shift from China to Africa. If this were true, China could indeed be seen as Africa’s “development escalator,” as more jobs than ever before would be created, higher growth generated, and poverty eliminated.
Indeed, Chinese companies and the Chinese state have invested and also created jobs for Africans – but on a much smaller scale. For example, according to the Ethiopian Investment Commission, there were about 620 active Chinese investment projects in 2020 (mostly in the manufacturing and construction sectors), employing about 200,000 workers. In Ethiopia’s special economic zones, this amounted to about 86,000 jobs in 2020 (about 29,000 in 2018) and only 74,000 in early 2021 due to the pandemic. In other countries, the figures are much lower. Overall, Chinese investment in the African continent created an average of about 19,000 jobs annually between 2010 and 2019 – far more than US firms are contributing, but also far fewer than any European investors.
Many authors argue that the possibility of increasing investment in sub-Saharan Africa is based on the fact that wages in China are rising, and Africa may thus become a destination for foreign direct investment in the manufacturing sector. However, the low-wage argument is not very convincing. In African countries, unit labor costs are usually high compared to many Asian countries. Moreover, most Chinese investments are made in the power and commodity sectors, i.e. they are capital- and resource-intensive investments made not due to possible wage differentials but because of the rising demand for commodities created by the modernization of the Chinese economy.
Compared to China, unit labor costs in African countries remain higher. In addition, inadequate and expensive infrastructure (roads, power, weak information and communication technologies; low research activities) and weak institutions have a negative impact on the business environment for foreign investment. Especially the Asian low-income countries Bangladesh or Vietnam have a clear advantage over African countries, which is why Chinese investors tend to invest in the neighboring region rather than in African countries.
And what’s more:
African countries should not make the mistake of regarding China as a benevolent actor. It is no different from other global powers pursuing their economic and foreign policy interests. There are structural asymmetries between China and Africa, most evident in trade and investment patterns: China mainly imports raw materials from Africa, while Africa mainly imports higher value-added industrial and consumer goods. These imports also impair African industrial development.
In the eyes of the Chinese government, the last China-Africa Summit (FOCAC) was a success, and the planned projects were largely implemented: Industrial promotion, infrastructure connectivity, trade facilitation, eco-friendly development, capacity building, health care, deeper exchange in education as well as in peace and security. However, many African countries do not see cooperation in such a positive light. More and more African countries are beginning to criticize China’s activities. After all, many promises were broken or were associated with high costs (debt trap). And so, the contribution to the industrialization of Africa has been very low so far.
Among the topics to be discussed at the 2021 FOCAC Summit in Dakar are:
If China is truly interested in a successful investment and cooperation strategy in Africa, the Chinese government will have to redirect and shift the focus of its investment more towards labor-intensive manufacturing, agriculture, and service sectors, and local cooperation with domestic companies.
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