Now that Xi Jinping has put his stamp on the Communist Party with his “historic resolution”, he has the necessary leeway to act. And Xi plans to use it to shape both society and the economy according to his ideas. “common prosperity” is what the head of state calls his principle, which focuses less on redistribution and more on opportunities for advancement. Nico Beckert has taken a close look at Xi’s works on the subject.
Preparations for Expo2020 are underway in Dubai, which like all major events has been postponed due to the Covid pandemic. Marcel Grzanna flew to the Emirate to take a gander at the Chinese pavilion. His verdict: more splendor than substance. Even with the pavilion at the World Expo, China is primarily reflecting its own image.
Meanwhile, lips are shut tight over at Volkswagen about the reasons for the replacement of its China boss Stephan Woellenstein. Sure, EV sales in China are not going as planned. But VW is still the market leader. And who’s responsible for the mess, anyway? Christian Domke Seidel investigated the circumstances surrounding the still unconfirmed personnel change.
I hope you enjoy today’s issue!
Your Christiane Kühl
Feature
‘Common prosperity’ – China’s plans for redistribution
China’s leadership has declared “common prosperity” to be a central political goal for the coming decades. The growing inequality in China worries political leaders: This inequality can not be allowed to become an “unbridgeable gulf,”says President Xi Jinping. He warns that China must prevent the polarization of society, promote common prosperity and achieve social stability.
The concept of common prosperity is not new. Mao Zedong and Deng Xiaoping already used it. But Xi managed to revive the old goal and use it to define his political legacy. The impacts of this concept “for Chinese politics, society, and economy are likely to be far-reaching and long-lasting,” write analysts at consultancy Trivium China.
Rising inequality in China
China’s economic growth over the past 40 years has provided a better life for millions of people. But at the same time, a once homogeneous society has become increasingly split into rich and poor. China now has more billionaires than the US, the motherland of capitalism. And while some celebrate their wealth with expensive cars, Gucci bags, and luxury watches, the promise of rising up has become a distant dream for the vast majority. A host of “gig workers” toil at low wages, for example as delivery men. A part of China’s youth is disillusioned and protests by “doing nothing” (China.Table reported).
The rising inequality is also reflected in numbers: The richest ten percent of Chinese held a good 40 to 50 percent of total wealth in the early 1990s. In 2019, it was 70 percent. The Gini coefficient, used internationally as an indicator of inequality, shows income percentages of different population groups. If the coefficient is zero, all citizens have the same income. If it is one, all income is focused on a single person. In China, according to data by the Chinese statistics office, the coefficient is 0.47. Even a value of 0.4 is considered a warning signal. In addition, there is a massive disparity between urban and ruralareas. “Urban residents roughly earn 2.5 times that of rural residents,” says Chinese economist Li Shi.
So far, there are no concrete steps or measures as to how the goal of “common prosperity” is to be achieved. But an article by Xi, published in the party magazine Qiushi hints at possible content. His statements are a mix of helping others to help themselves, reforms to provide more equal opportunities, and curbing “excessive wealth.”
‘Wealth and happiness through hard work’
Xi’s article makes it clear that radical redistribution is unlikely to happen. Many passages focus on the individual. Common prosperity and happiness will come from “hard work,” Xi writes. Greater opportunities for rising to the middle class are to be achieved through better education and training. Like a Western capitalist, the head of state speaks of “human capital”, which is to be increased through investment.
China will “deepen reform on the household registration system”, says Xi. Reform of the rigid Mao-era hukou system is expected to improve equality of opportunity for migrant workers and their children. This would give them better access to education and health care. Currently, this access is very limited and costly. (China.Table reported).
A Western-style welfare state, on the other hand, is hardly on Xi’s agenda. Access to “basic public services” is to be harmonized by 2035. These include changes to pension and healthcare systems, as well as access to a system of minimum social security. High housing costs are also to be tackled. But at the same time, Xi warns against “the trap of welfare thinking”, which according to him “promotes laziness”.
Xi Jinping does not condemn high incomes per se. He adheres to Deng’s maxim that some Chinese should “get rich first”. But the rich must help the poorer to prosper, in turn. So Xi encourages wealthy people to give to charity. “Excessively high incomes” should be “reasonably limited” by the state, Xi said. Changes could also be made to the tax system: Xi mentions amendments to income taxes, the introduction of a property tax, and adjustments to consumer taxes as possible solutions.
“Common prosperity”: much populism, hardly any real reforms
The topic of “common prosperity” has already caused unease among business representatives. Probably also because Xi’s statements are most contradictory in connection with possible economic reforms. On the one hand, Xi wants to “prevent the disorderly expansion of capital” and draw up a negative list for market access in sensitive sectors. On the other hand, he wants to “facilitate the well-regulated and healthy development of different types of capital” and encourage entrepreneurship. With such statements, Xi is leaving much room to shape economic policy in the future.
Even though leadership cadres frequently make use of the term “common prosperity,” little has happened in China to achieve effective redistribution. To be sure, the government has increased regulation of the tech, real estate, and tutoring sectors. But much of this has rather happened in the form of campaigns. Bullying tech companies and pushing billionaires into philanthropy is much easier than pushing for real reform.
But real redistribution would require such deeper reforms, Mary Gallagher is convinced. She is the director of the Center for Chinese Studies at the University of Michigan. Compared to his predecessor Hu Jintao, Xi has launched very few actual changes, she says. “Xi’s government has not implemented new social welfare reforms or laws that significantly change how the ‘cake’ is divided,” writes Gallagher. “His property tax plans have been curtailed and hukou reform remains thwarted by resistance of both local officials and urban residents.”
The president’s focus on “common prosperity” could usher in a new era in Chinese politics, say Trivium China consultants. Xi Jinping could be trying to put his stamp on the coming decades and break with Deng Xiaoping’s reform era. That’s why Xi is still keeping the wording so vague. So for the time being, all factions of the Chinese Communist Party can find themselves within the concept. The “left” is enthusiastic about reducing inequality, the “right” is enamored by “equal opportunities” and the promise of advancement through hard work. What the outcome will be like remains to be seen.
The political component of the Chinese Expo pavilion is already apparent in the entrance area. None other than the head of state Xi Jinping himself looks over the visitors from a TV-sized photograph on an otherwise blank wall. The picture was taken back in 2018 and shows Xi magnificently framed between Dubai’s Prime Minister Sheikh Mohammed bin Rashid Al Maktoum and the Crown Prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan.
Welcome to the “Light of China”, an outwardly magnificent pavilion in the shape of a lantern. It shines thanks to a 360-degree LED façade built by Swiss temporary construction specialist Nüssli. However, anyone hoping for an imaginative and inspiring display of Chinese visions for the future will be disappointed. The appearance of the second-largest economy at the World Expo in Dubai is a stage presenting China’s self-perception and does not skimp on rather straightforward content.
The Expo’s theme “Connecting Minds, Creating the Future” can be interpreted by any of the 192 participating nations as they see fit. The German pavilion, for example, encourages its visitors to participate and think interactively and presents innovative solutions for urban development or energy efficiency of the future. In contrast, the creative minds behind the Chinese concept have opted for a fireworks display of superlatives. They combined China’s technological achievements in space travel, information technology, transport, artificial intelligence, and smart living with the usual promises to the world: “Win-Win”, as a short film on a ring-shaped cinema screen promises. China will “work with other countries” when it comes to global solutions to the climate crisis.
During the tour, guests are also reminded that the People’s Republic still sees itself as “the largest developing country in the world” and that humanity forms a “community of common destiny”. The term Xi’s creation and is regarded as the Chinese answer to the Universal Declaration of Human Rights. With this term, the People’s Republic wants to free itself from the iron grip of international conventions.
The Chinese pavilion hopes for two million visitors
The creators of the Chinese pavilion wish to attract at least two million visitors by the end of March next year. One of the hostesses claims they are on the right track. On the weekends of the first month of the Expo, there were up to 10,000 visitors.
Several hundred also gather in front of the pavilion every evening. Every day at 8 PM, a light show starts above the building. 150 drones take to the air and form luminous patterns into the night sky. The side wing of the neighboring Austrians remains closed for these minutes. “Just as a precaution”, as the Chinese side requests.
19-year-old Leyla has found a job with the Belarusian neighbors across. She is Canadian with Tunisian roots and has lived with her parents in Dubai for ten years. The Belarusian pavilion benefits – just like Austria on the other side – from the charisma of the Chinese pavilion. Those who stop by China happily take a look at less prominent appearances right next door. After all, the huge Expo site requires efficient route planning. “Many people tell me they are disappointed with the Chinese pavilion,” says Leyla. She hasn’t had time for a visit. “But the light show is cool,” she says.
30-year-old Kamila from Lebanon is one of those who had expected more. She is sitting on a stool in front of a large screen and is playing with her phone. “So far I did not find the pavilion that captivating,” the young woman says. She has no interest in the Shanghai Electric commercial flickering on loop in front of her. She is currently waiting for a ride in the cockpit of a Chinese high-speed train. The China Railway simulator promises an authentic impression of acceleration to 350 km/h.
The virtual trip takes two minutes. It goes from Beijing via Shanghai to the Expo site in Dubai. But the adventure is reserved for only a few dozen guests per day. After all, the technician can’t stand next to the equipment the whole time, a hostess explains. And only he knows all the functions of various buttons in the cockpit. The fact that these are not used at all during the simulation seems to be irrelevant. By limiting demonstrations, the operators are primarily preventing too many people from lingering around the simulator for too long – which would expose its employees to a higher risk of infection.
Zero-Covid even in Dubai: Employees can only eat in the Pavilion Restaurant
Because Covid is also on the minds of Chinese authorities in Dubai. Hostesses and technicians have been instructed to eat only in the in-house restaurant for the entire six-month duration of the Expo to reduce their risk of infection, at least elsewhere on the grounds. The fear that members of Chinese delegations could infect themselves among the staff and thus carry the virus back to the People’s Republicistoogreat. Whether this really makes a difference with several thousand visitors per day in the pavilion remains to be seen. But no one wants to be accused of not having done everything possible to prevent infection. Tourists from Mainland China are almost non-existent anyway. According to the Expo sales department, this is due to the strict quarantine regulations when returning home.
But even without Chinese guests, Expo organizers believe their goal of 25 million visits by the end of March is realistic. Cheap season tickets attract more visitors from the region than from the rest of the world. Anyone who visits the Expo ten times with a season ticket will also be counted ten times in the statistics. Pavilion Employees are also registered upon entry.
China’s pavilion: lots of info, little context
The People’s Republic is hoping for new opportunities for Chinese companies in the region. The concept of the pavilion, therefore, resembles a trade fair booth to a large extent, on which domestic companies present themselves in multimedia: Movies, touch screens, photos. Mundanely presented.
The internet company Tencent and its ideas for a smart city are given just as much space as the state-owned car manufacturer SAIC, which is presenting a concept car for autonomous driving. The hostesses are adequately informed about the products and offer contacts when visitors show interest. Guests like Kamila, who are searching for “fantasy and inspiration” at the Expo, as she says, are somewhat neglected by the “light of China”.
Even the obligatory pandas can’t help. Without context, moving images of the cuddly bears suddenly appear on a large screen shortly before the end of the tour. Beijing likes to lend pandas to other governments in pairs. Why they are part of the Expo presentation is not clear to the guests. Right next to the pandas, a small booth was set up to draw attention to the Winter Olympics in Beijing in February. The verdict: a lot of information, but not enough context.
Large contrast to the German pavilion
The Germans also offer their companies a platform for their own innovations. But not only is this done much more discreetly but is also much more in line with the theme of the Expo. A representative of the Association of German Amusement Parks was also in the 14-member committee that decided on the allocation of the German Expo concept. The goal is to inform and entertain the young and old, experts and laypeople alike in the German pavilion.
China’s approach is much more pragmatic. The country initially generates a lot of attention through spectacle, only to string its messages together in a distant manner. The Germans also notice the difference. “The position of the general commissioner of the Chinese pavilion is a political one. It’s not about providing visitors of the pavilion the best possible experience,” says Dietmar Schmitz, head of the delegation for Germany’s Expo exhibit. Yet, it is said that the Chinese have invested several million euros more in their Expo project than Germany with almost 60 million.
Human Rights
Industry
Technology
Replacement of China boss: VW struggles with own ambitions
It’s not as if Volkswagen hasn’t tried everything in China. The ID.3 and ID.4 models are the vanguards of an EV offensive. The group is currently building an additional EV factory in the province of Anhui. The sales model has been expanded to include ID. city stores. Sales of its EV models are rising steadily – just not as much as the group had hoped. Apparently, the growth of the electric division was not enough for the chief executive of the ambitious group. Stephan Woellenstein, currently still Head of Volkswagen Group China, is about to be replaced, according to various reports. His successor could be Alexander Seitz, who is currently responsible for controlling and accounting on the board of Volkswagen Passenger Cars (China.Table reported).
It is a personnel decision that comes as a surprise. There were no rumors in China about Woellenstein’s imminent replacement. Despite several problems, Woellenstein has at least not been publicly reprimanded. In addition, the 58-year-old has not been doing the job for long – he only took up the post of CEO of VW Group China (VGC) in Beijing in January 2019.
Whatever the reason for the replacement at the top of the VGC, Alexander Seitz would be an obvious choice tosucceed him. He is considered an expert on China. Back in 2013, the Group appointed him First Vice President & Commercial Executive Vice President of SAIC Volkswagen Automotive in Shanghai. At the joint venture, Seitz supervised finance, IT, procurement and was responsible for expatriates at human resources.
Fault in China – or in Wolfsburg?
The company has yet to officially confirm the personnel change. But either way, the speculation points to VW’s problems in China. Whether a new appointment at the top will solve these issues in the world’s largest car market remains to be seen. The Wolfsburg-based group is indeed the market leader in vehicles with combustion engines with its joint ventures. However, VW is not making any headway in electromobility. However, pinning these difficulties on the person of Woellenstein seems exaggerated.
In an interview with Table.Media, industry expert Ferdinand Dudenhoeffer also sees the problems elsewhere. Woellenstein had come “at a time when VW mainly had European products in its portfolio.” There simply had been a market delay, which could still be made up with the launch of the ID.6. Only two types of EVs would sell in China, Dudenhoeffer says: electric SUVs and Tesla-like sedans. The Wolfsburg-based company failed to deliver either.
The ID.3 is a beautiful car, according to Dudenhoeffer. But the car only works for China to a limited extent. There is simply too much competition in electric mobility in the People’s Republic. You can’t make any big leaps there with a European car. It is a problem that Jens Hildebrandt, Head of the Chamber of Commerce Abroad in Beijing, had already pointed out. In an interview with China.Table, Hildebrandt stressed that whether the group remained a market leader in the People’s Republic would depend on the pace with which Volkswagen responded to Chinese customer demands. “This is a sore point in general, where German companies still have to step up their game.”
But whether this is solely Woellenstein’s fault is doubtful. The VGC boss could indeed have intervened much earlier in the vehicle development process. He could have done so when the deficiencies of the infotainment system became apparent. Infotainment is vital for China, and the IT offered by VW did not meet the customers’ demands.
But in Wolfsburg, Group CEO Herbert Diess is personally responsible for the company’s most important market. He is responsible for China on the Executive Board. German business news magazine Wirtschaftswoche had therefore already found Diess partly to blame. Now, however, the latter is pulling Woellenstein away for the time being. Dudenhoeffer, in turn, refused to comment. However, he points out that Woellenstein is now responsible for the Chinese market for the time being, where other problems linger.
China’s press points to sales difficulties
The personnel change received only moderate attention in Chinese business media. Chinese news sites reported on Wednesday citing German news portal Automobilwoche, without adding anything new. They picked up on the narrative that the company was withdrawing Woellenstein from the Chinese market due to a lack of success. In recent years, even the Japanese competition has been able to regain market share.
Tencent News pointed out that the trend in the years up to 2020 was positive. But from January to September 2021, VW sales had dropped 4.1 percent year-on-year. In particular, sales of models made by the SAIC Volkswagen joint venture had crashed disastrously. The year-on-year drop here was 18 percent. The report also mentions the problems with EVs. BYD is currently outpacing VW in this regard.
However, the personnel affair also gave rise to fundamental questions. Phoenix even identifies a “new crisis” at VW due to the difficulties in China. “Will Volkswagen be able to continue the success story from the combustion engine era in China in the future?” asked Tencent News – and predicted: “The market will give the answer.”Christian Domke Seidel
Autoindustrie
News
Even stricter Covid regulations in Beijing
China’s capital is increasing covid regulations for people entering the country from China and overseas. Domestic flights from Corona risk areas have been canceled or greatly reduced. Currently, Chinahas classified more than a hundred cities as risk areas. Since Wednesday, all visitors to Beijing must now provide proof of a negative Covid test no older than 48 hours. In addition, all those who come into work-related contact with frozen imports in Beijing must now be tested for COVID-19 several times a week. This affects around 30,000 people. China had already identified frozen imports as a possible carrier of the virus back in the summer of 2020 and is still sticking to this theory.
The city government had announced details of the new rules on Tuesday. “The virus must not be introduced into Beijing and it must not spread in Beijing,” spokesman Xu Heijian stressed. The Winter Olympics begin in Beijing in 100 days. No fans from abroad will be allowed to attend the games. (China.Table reported). Air travel abroad has been restricted even more than before with the winter flight schedule.
Covid cases remain very low in China due to the consistent zero-covid policy with mass testing and area-wide restrictions. (China.Table reported) On Tuesday, only 31 infections were reported within 24 hours. ck
Beijing
Coronavirus
Health
Aion LX Plus reaches over a thousand kilometers
In the race for ever greater EV ranges, Chinese manufacturer GAC Aion has presented a new version, the LX Plus, which has a maximum range of over 1,000 kilometers on one battery charge. The capacity of this battery is 144.4-kilowatt-hours. According to German EV portal Teslamag, the Aion LX Plus is likely the EV with the largest battery to date. By comparison, the battery of the Mercedes EQS stores 108 kilowatt-hours, while Tesla’s Model S is slightly less than 100 kilowatt-hours. However, the Aion LX Plus is not yet available for purchase. Approval is still pending. flee
Autoindustrie
Xi and Biden discussed disarmament and oil reserves
A day after leader Xi Jinping’s online summit with US President Joe Biden, the first details from the meeting are emerging. The two sides have agreed on a high-level series of talks on nuclear disarmament, Biden’s National Security Adviser Jake Sullivan said on Tuesday evening. According to the statement, Biden had put the issue on the agenda in light of China’s nuclear arsenal buildup. Biden expressed concern over China’s testing of two hypersonic missiles and the militarization of the Indo-Pacific, Sullivan said. The US Defense Department had recently warned that China could already have about 1,000 nuclear warheads ready by 2030 (China.Table reported). The Pentagon has also been calling for disarmament negotiations for some time.
According to Chinese media reports, the two leaders also discussed the possible release of strategic oil reserves. In view of rising oil prices, Biden had asked Xi to jointly release oil reserves onto the market, reports the South China Morning Post, among others, citing an anonymous source. Biden is under pressure by high inflation rates, especially as OPEC has so far refused to increase its oil exports in a way that would affect prices. While China remains open about the idea, it has yet to decide on any concrete measures, the source told the newspaper.
In parallel with the summit, progress was made in talks on the situation of US journalists in China. According to a US government spokesperson, Beijing agreed to issue visas to “a group of US reporters” provided they are “eligible under all applicable laws and regulations”. China would also extend the validity period of journalist visas for Americans to one year and allow US journalists already present in the People’s Republic to enter and leave the country freely. “We welcome these advances but see them only as first steps,” the spokesman said, according to the AFP news agency. China had expelled correspondents of several major US newspapers, including the New York Times and Washington Post, in March 2020.
Meanwhile, Republican Senator Marco Rubio blocked the appointment of Nicholas Burns as US ambassador to Beijing. Burns does not recognize the threat posed by the Chinese leadership, Rubio said. The procedural deadlock, which is possible in the US Senate even by a single senator, will at least delay Burns’ posting. The US has been without an ambassador to Beijing for nine months. ck
Geopolitics
Joe Biden
Media
Military
USA
Xi Jinping
Report: EU Commission postpones Taiwan plan
The European Union has postponed the presentation of a plan to deepen trade relations with Taiwan. The EU Commission had planned to present a strategy paper on cooperation with the island last Friday, the South China Morning Post reported, citing EU circles and a source in the European Parliament.
The plan was supposed to include initiatives for cooperation in areas such as semiconductor production and the announcement of regular high-level meetings between Brussels and Taipei. However, the responsible Directorate-General for Trade then canceled the presentation on short notice, the report said. Initially, DG Trade did not officially confirm this. It is currently being assessed how to get in touch with Taiwan. This is an ongoing process, the General Directorate told China.Table.
The EU Parliament in particular has been calling for closer cooperation between Brussels and Taiwan for some time, for example through a bilateral investment agreement. As the EU Commission adheres to the “one-China policy” demanded by Beijing, it is currently looking for ways to cooperate with Taipei without angering China.
If and when the Taiwan plan will be presented initially remained unclear. This week, the EU Commission had already postponed the presentation of the “Global Gateway” initiative, which is to become an alternative to China’s “Belt and Road”. According to circles, the publication is now expected for December. ari
EU
global gateway
Semiconductor
Taiwan
Tools
China’s new export control and sanctions law: Should the world be afraid?
by Hartmut Henninger and Patrick Heid, law firm Graf von Westphalen
The basic concept of China’s Export Control Law (ECL) corresponds to the EU Dual-Use Regulation: The export of goods listed as critical requires a license. This list of goods includes dual-use goods, military goods, nuclear goods, and those concerning China’s national security and national interests.
The term goods cover goods and technology, but services as well. The exporter receives authorization only if he is deemed reliable and submits a declaration by the third-country recipient on the end-user and the end-use of the goods.
At present, however, all this is largely a gray theory. There is not yet a consolidated list of goods. And authorities have not yet received instructions on how to implement these regulations. Until they do, companies in China will have to continue to comply with the separated export regulations that have been in place since the 1990s in some cases. However, companies should already adapt their respective export control programs – MOFCOM has already provided detailed guidelines for this purpose. In particular, export control clauses in contracts should be amended to not create vulnerability.
An explicit provision on re-export control was removed from the ECL at the last moment. China does reserve the right in some provisions of the ECL to take measures with extraterritorial effect if it sees its interests at risk. For companies outside China, however, the decisive factor is whether they have to operate a structured re-export control in the EU concerning listed components from China. This is currently not (yet) the case, and they currently only have to comply with any commitments agreed upon in end-use declarations.
Unreliable Entity List
The concept of an Unreliable Entity List is known from the USA. If a foreign company is placed on this list, Chinese companies may only engage in business activities with it when certain conditions are met. Companies can be put on this list if they discriminate or harm Chinese companies due to measures taken by their countries, or endanger China’s interests.
If companies restrict their business with these and many other Chinese companies on the US Entity List, they run the risk of being placed on the Unreliable Entity List themselves. This also affects EU companies if they do not supply listed US goods to Chinese companies in order not to violate US (re-)export controls.
Blocking Rules and Anti-Sanctions Law (ASL)
Blocking Rules are aimed at companies in China. China prohibits these countries to comply with regulations with extraterritorial features issued by third countries. As with the EU Blocking Rules, such third-country regulations must be explicitly identified. These blocking rules may be particularly relevant for Chinese subsidiaries of EU companies that (have to) comply with EU and US export control and sanctions law due to cross-group export control in China.
The ASL corresponds to restrictive measures of EU sanctions lists. The assets of listed persons or entities in China may be frozen and business dealings prohibited. In addition, individuals can be denied entry. The ASL is directly aimed at individuals and organizations that were or are involved in the creation of sanctions against China, i.e. politicians, political institutions, and NGOs. It is also possible, however, that companies could be sanctioned if, as part of their ESG policy, they support initiatives that, from Chinese perception, affect internal concerns of the People’s Republic, above all, human rights.
Both instruments provide that if Chinese companies feel they have been treated unfairly by the practices of their business partners, they can hold them accountable in Chinese courts. This option gives companies considerable bargaining power. There is concern that this will be exercised in the future.
What can be done?
Companies in China should not hesitate to set up an internal export control program, as is common in the EU or the US if they meet the risk profile. Even if individual elements of the ECL are still unclear or implementation regulations are lacking, these mechanisms will take full effect sooner or later.
As in other areas of Chinese intervention administration, companies are well-advised to establish close contact with the authorities to personally identify any obligations. Second, caution should always be exercised if one’s conduct can be interpreted as discriminatory towards China or Chinese companies, especially if the conduct is motivated by EU or US sanctions regulations. Companies should then stop and consider how they can reconcile their obligations under EU, US, and Chinese sanctions regimes in light of the new rules. This will not always be easy and will not always succeed.
Finally, companies must bear in mind that their employees in China may feel personally threatened by possible sanctions and may find themselves in an irresolvable dilemma as a result of action taken in conjunction with EU and US regulations.
So far, the Chinese leadership has mainly revealed its toolbox. The legislative project was initially directed primarily against US President Trump and his trade wars. Since the change of administration in the US, while the tone has undoubtedly improved, the existing conflicts have not been resolved but rather deepened and multiplied. Unfortunately, these are not circumstances that allow a positive prognosis for the application of the laws and regulations described here. If it serves China’s interests, these instruments will be applied to instill fear in the world.
Sanctions
USA
Executive Moves
Tara Joseph is stepping down next year as President of the US Chamber of Commerce in Hong Kong at her own request. Among other things, she cited frustration with the quarantine regulations.
Liang Mengsong and Jiang Shangyi are stepping down from their board positions at state-controlled semiconductor manufacturer SMIC. SMIC has a key role for China in overcoming the semiconductor shortage.
Dessert
Shanghai already has a Disneyland. Now it’s getting a Legoland, too. On Wednesday, construction began on the future Legoland Shanghai Resort, which the city fathers say will open in 2024 in the southwestern district of Jinshan. The park will cover about 318,000 square meters, coming in at just over one-third the size of Disneyland. Even smaller is the miniature made of Lego bricks that was presented at the start of construction – and which is seen here by a photographer.
Now that Xi Jinping has put his stamp on the Communist Party with his “historic resolution”, he has the necessary leeway to act. And Xi plans to use it to shape both society and the economy according to his ideas. “common prosperity” is what the head of state calls his principle, which focuses less on redistribution and more on opportunities for advancement. Nico Beckert has taken a close look at Xi’s works on the subject.
Preparations for Expo2020 are underway in Dubai, which like all major events has been postponed due to the Covid pandemic. Marcel Grzanna flew to the Emirate to take a gander at the Chinese pavilion. His verdict: more splendor than substance. Even with the pavilion at the World Expo, China is primarily reflecting its own image.
Meanwhile, lips are shut tight over at Volkswagen about the reasons for the replacement of its China boss Stephan Woellenstein. Sure, EV sales in China are not going as planned. But VW is still the market leader. And who’s responsible for the mess, anyway? Christian Domke Seidel investigated the circumstances surrounding the still unconfirmed personnel change.
I hope you enjoy today’s issue!
Your Christiane Kühl
Feature
‘Common prosperity’ – China’s plans for redistribution
China’s leadership has declared “common prosperity” to be a central political goal for the coming decades. The growing inequality in China worries political leaders: This inequality can not be allowed to become an “unbridgeable gulf,”says President Xi Jinping. He warns that China must prevent the polarization of society, promote common prosperity and achieve social stability.
The concept of common prosperity is not new. Mao Zedong and Deng Xiaoping already used it. But Xi managed to revive the old goal and use it to define his political legacy. The impacts of this concept “for Chinese politics, society, and economy are likely to be far-reaching and long-lasting,” write analysts at consultancy Trivium China.
Rising inequality in China
China’s economic growth over the past 40 years has provided a better life for millions of people. But at the same time, a once homogeneous society has become increasingly split into rich and poor. China now has more billionaires than the US, the motherland of capitalism. And while some celebrate their wealth with expensive cars, Gucci bags, and luxury watches, the promise of rising up has become a distant dream for the vast majority. A host of “gig workers” toil at low wages, for example as delivery men. A part of China’s youth is disillusioned and protests by “doing nothing” (China.Table reported).
The rising inequality is also reflected in numbers: The richest ten percent of Chinese held a good 40 to 50 percent of total wealth in the early 1990s. In 2019, it was 70 percent. The Gini coefficient, used internationally as an indicator of inequality, shows income percentages of different population groups. If the coefficient is zero, all citizens have the same income. If it is one, all income is focused on a single person. In China, according to data by the Chinese statistics office, the coefficient is 0.47. Even a value of 0.4 is considered a warning signal. In addition, there is a massive disparity between urban and ruralareas. “Urban residents roughly earn 2.5 times that of rural residents,” says Chinese economist Li Shi.
So far, there are no concrete steps or measures as to how the goal of “common prosperity” is to be achieved. But an article by Xi, published in the party magazine Qiushi hints at possible content. His statements are a mix of helping others to help themselves, reforms to provide more equal opportunities, and curbing “excessive wealth.”
‘Wealth and happiness through hard work’
Xi’s article makes it clear that radical redistribution is unlikely to happen. Many passages focus on the individual. Common prosperity and happiness will come from “hard work,” Xi writes. Greater opportunities for rising to the middle class are to be achieved through better education and training. Like a Western capitalist, the head of state speaks of “human capital”, which is to be increased through investment.
China will “deepen reform on the household registration system”, says Xi. Reform of the rigid Mao-era hukou system is expected to improve equality of opportunity for migrant workers and their children. This would give them better access to education and health care. Currently, this access is very limited and costly. (China.Table reported).
A Western-style welfare state, on the other hand, is hardly on Xi’s agenda. Access to “basic public services” is to be harmonized by 2035. These include changes to pension and healthcare systems, as well as access to a system of minimum social security. High housing costs are also to be tackled. But at the same time, Xi warns against “the trap of welfare thinking”, which according to him “promotes laziness”.
Xi Jinping does not condemn high incomes per se. He adheres to Deng’s maxim that some Chinese should “get rich first”. But the rich must help the poorer to prosper, in turn. So Xi encourages wealthy people to give to charity. “Excessively high incomes” should be “reasonably limited” by the state, Xi said. Changes could also be made to the tax system: Xi mentions amendments to income taxes, the introduction of a property tax, and adjustments to consumer taxes as possible solutions.
“Common prosperity”: much populism, hardly any real reforms
The topic of “common prosperity” has already caused unease among business representatives. Probably also because Xi’s statements are most contradictory in connection with possible economic reforms. On the one hand, Xi wants to “prevent the disorderly expansion of capital” and draw up a negative list for market access in sensitive sectors. On the other hand, he wants to “facilitate the well-regulated and healthy development of different types of capital” and encourage entrepreneurship. With such statements, Xi is leaving much room to shape economic policy in the future.
Even though leadership cadres frequently make use of the term “common prosperity,” little has happened in China to achieve effective redistribution. To be sure, the government has increased regulation of the tech, real estate, and tutoring sectors. But much of this has rather happened in the form of campaigns. Bullying tech companies and pushing billionaires into philanthropy is much easier than pushing for real reform.
But real redistribution would require such deeper reforms, Mary Gallagher is convinced. She is the director of the Center for Chinese Studies at the University of Michigan. Compared to his predecessor Hu Jintao, Xi has launched very few actual changes, she says. “Xi’s government has not implemented new social welfare reforms or laws that significantly change how the ‘cake’ is divided,” writes Gallagher. “His property tax plans have been curtailed and hukou reform remains thwarted by resistance of both local officials and urban residents.”
The president’s focus on “common prosperity” could usher in a new era in Chinese politics, say Trivium China consultants. Xi Jinping could be trying to put his stamp on the coming decades and break with Deng Xiaoping’s reform era. That’s why Xi is still keeping the wording so vague. So for the time being, all factions of the Chinese Communist Party can find themselves within the concept. The “left” is enthusiastic about reducing inequality, the “right” is enamored by “equal opportunities” and the promise of advancement through hard work. What the outcome will be like remains to be seen.
The political component of the Chinese Expo pavilion is already apparent in the entrance area. None other than the head of state Xi Jinping himself looks over the visitors from a TV-sized photograph on an otherwise blank wall. The picture was taken back in 2018 and shows Xi magnificently framed between Dubai’s Prime Minister Sheikh Mohammed bin Rashid Al Maktoum and the Crown Prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan.
Welcome to the “Light of China”, an outwardly magnificent pavilion in the shape of a lantern. It shines thanks to a 360-degree LED façade built by Swiss temporary construction specialist Nüssli. However, anyone hoping for an imaginative and inspiring display of Chinese visions for the future will be disappointed. The appearance of the second-largest economy at the World Expo in Dubai is a stage presenting China’s self-perception and does not skimp on rather straightforward content.
The Expo’s theme “Connecting Minds, Creating the Future” can be interpreted by any of the 192 participating nations as they see fit. The German pavilion, for example, encourages its visitors to participate and think interactively and presents innovative solutions for urban development or energy efficiency of the future. In contrast, the creative minds behind the Chinese concept have opted for a fireworks display of superlatives. They combined China’s technological achievements in space travel, information technology, transport, artificial intelligence, and smart living with the usual promises to the world: “Win-Win”, as a short film on a ring-shaped cinema screen promises. China will “work with other countries” when it comes to global solutions to the climate crisis.
During the tour, guests are also reminded that the People’s Republic still sees itself as “the largest developing country in the world” and that humanity forms a “community of common destiny”. The term Xi’s creation and is regarded as the Chinese answer to the Universal Declaration of Human Rights. With this term, the People’s Republic wants to free itself from the iron grip of international conventions.
The Chinese pavilion hopes for two million visitors
The creators of the Chinese pavilion wish to attract at least two million visitors by the end of March next year. One of the hostesses claims they are on the right track. On the weekends of the first month of the Expo, there were up to 10,000 visitors.
Several hundred also gather in front of the pavilion every evening. Every day at 8 PM, a light show starts above the building. 150 drones take to the air and form luminous patterns into the night sky. The side wing of the neighboring Austrians remains closed for these minutes. “Just as a precaution”, as the Chinese side requests.
19-year-old Leyla has found a job with the Belarusian neighbors across. She is Canadian with Tunisian roots and has lived with her parents in Dubai for ten years. The Belarusian pavilion benefits – just like Austria on the other side – from the charisma of the Chinese pavilion. Those who stop by China happily take a look at less prominent appearances right next door. After all, the huge Expo site requires efficient route planning. “Many people tell me they are disappointed with the Chinese pavilion,” says Leyla. She hasn’t had time for a visit. “But the light show is cool,” she says.
30-year-old Kamila from Lebanon is one of those who had expected more. She is sitting on a stool in front of a large screen and is playing with her phone. “So far I did not find the pavilion that captivating,” the young woman says. She has no interest in the Shanghai Electric commercial flickering on loop in front of her. She is currently waiting for a ride in the cockpit of a Chinese high-speed train. The China Railway simulator promises an authentic impression of acceleration to 350 km/h.
The virtual trip takes two minutes. It goes from Beijing via Shanghai to the Expo site in Dubai. But the adventure is reserved for only a few dozen guests per day. After all, the technician can’t stand next to the equipment the whole time, a hostess explains. And only he knows all the functions of various buttons in the cockpit. The fact that these are not used at all during the simulation seems to be irrelevant. By limiting demonstrations, the operators are primarily preventing too many people from lingering around the simulator for too long – which would expose its employees to a higher risk of infection.
Zero-Covid even in Dubai: Employees can only eat in the Pavilion Restaurant
Because Covid is also on the minds of Chinese authorities in Dubai. Hostesses and technicians have been instructed to eat only in the in-house restaurant for the entire six-month duration of the Expo to reduce their risk of infection, at least elsewhere on the grounds. The fear that members of Chinese delegations could infect themselves among the staff and thus carry the virus back to the People’s Republicistoogreat. Whether this really makes a difference with several thousand visitors per day in the pavilion remains to be seen. But no one wants to be accused of not having done everything possible to prevent infection. Tourists from Mainland China are almost non-existent anyway. According to the Expo sales department, this is due to the strict quarantine regulations when returning home.
But even without Chinese guests, Expo organizers believe their goal of 25 million visits by the end of March is realistic. Cheap season tickets attract more visitors from the region than from the rest of the world. Anyone who visits the Expo ten times with a season ticket will also be counted ten times in the statistics. Pavilion Employees are also registered upon entry.
China’s pavilion: lots of info, little context
The People’s Republic is hoping for new opportunities for Chinese companies in the region. The concept of the pavilion, therefore, resembles a trade fair booth to a large extent, on which domestic companies present themselves in multimedia: Movies, touch screens, photos. Mundanely presented.
The internet company Tencent and its ideas for a smart city are given just as much space as the state-owned car manufacturer SAIC, which is presenting a concept car for autonomous driving. The hostesses are adequately informed about the products and offer contacts when visitors show interest. Guests like Kamila, who are searching for “fantasy and inspiration” at the Expo, as she says, are somewhat neglected by the “light of China”.
Even the obligatory pandas can’t help. Without context, moving images of the cuddly bears suddenly appear on a large screen shortly before the end of the tour. Beijing likes to lend pandas to other governments in pairs. Why they are part of the Expo presentation is not clear to the guests. Right next to the pandas, a small booth was set up to draw attention to the Winter Olympics in Beijing in February. The verdict: a lot of information, but not enough context.
Large contrast to the German pavilion
The Germans also offer their companies a platform for their own innovations. But not only is this done much more discreetly but is also much more in line with the theme of the Expo. A representative of the Association of German Amusement Parks was also in the 14-member committee that decided on the allocation of the German Expo concept. The goal is to inform and entertain the young and old, experts and laypeople alike in the German pavilion.
China’s approach is much more pragmatic. The country initially generates a lot of attention through spectacle, only to string its messages together in a distant manner. The Germans also notice the difference. “The position of the general commissioner of the Chinese pavilion is a political one. It’s not about providing visitors of the pavilion the best possible experience,” says Dietmar Schmitz, head of the delegation for Germany’s Expo exhibit. Yet, it is said that the Chinese have invested several million euros more in their Expo project than Germany with almost 60 million.
Human Rights
Industry
Technology
Replacement of China boss: VW struggles with own ambitions
It’s not as if Volkswagen hasn’t tried everything in China. The ID.3 and ID.4 models are the vanguards of an EV offensive. The group is currently building an additional EV factory in the province of Anhui. The sales model has been expanded to include ID. city stores. Sales of its EV models are rising steadily – just not as much as the group had hoped. Apparently, the growth of the electric division was not enough for the chief executive of the ambitious group. Stephan Woellenstein, currently still Head of Volkswagen Group China, is about to be replaced, according to various reports. His successor could be Alexander Seitz, who is currently responsible for controlling and accounting on the board of Volkswagen Passenger Cars (China.Table reported).
It is a personnel decision that comes as a surprise. There were no rumors in China about Woellenstein’s imminent replacement. Despite several problems, Woellenstein has at least not been publicly reprimanded. In addition, the 58-year-old has not been doing the job for long – he only took up the post of CEO of VW Group China (VGC) in Beijing in January 2019.
Whatever the reason for the replacement at the top of the VGC, Alexander Seitz would be an obvious choice tosucceed him. He is considered an expert on China. Back in 2013, the Group appointed him First Vice President & Commercial Executive Vice President of SAIC Volkswagen Automotive in Shanghai. At the joint venture, Seitz supervised finance, IT, procurement and was responsible for expatriates at human resources.
Fault in China – or in Wolfsburg?
The company has yet to officially confirm the personnel change. But either way, the speculation points to VW’s problems in China. Whether a new appointment at the top will solve these issues in the world’s largest car market remains to be seen. The Wolfsburg-based group is indeed the market leader in vehicles with combustion engines with its joint ventures. However, VW is not making any headway in electromobility. However, pinning these difficulties on the person of Woellenstein seems exaggerated.
In an interview with Table.Media, industry expert Ferdinand Dudenhoeffer also sees the problems elsewhere. Woellenstein had come “at a time when VW mainly had European products in its portfolio.” There simply had been a market delay, which could still be made up with the launch of the ID.6. Only two types of EVs would sell in China, Dudenhoeffer says: electric SUVs and Tesla-like sedans. The Wolfsburg-based company failed to deliver either.
The ID.3 is a beautiful car, according to Dudenhoeffer. But the car only works for China to a limited extent. There is simply too much competition in electric mobility in the People’s Republic. You can’t make any big leaps there with a European car. It is a problem that Jens Hildebrandt, Head of the Chamber of Commerce Abroad in Beijing, had already pointed out. In an interview with China.Table, Hildebrandt stressed that whether the group remained a market leader in the People’s Republic would depend on the pace with which Volkswagen responded to Chinese customer demands. “This is a sore point in general, where German companies still have to step up their game.”
But whether this is solely Woellenstein’s fault is doubtful. The VGC boss could indeed have intervened much earlier in the vehicle development process. He could have done so when the deficiencies of the infotainment system became apparent. Infotainment is vital for China, and the IT offered by VW did not meet the customers’ demands.
But in Wolfsburg, Group CEO Herbert Diess is personally responsible for the company’s most important market. He is responsible for China on the Executive Board. German business news magazine Wirtschaftswoche had therefore already found Diess partly to blame. Now, however, the latter is pulling Woellenstein away for the time being. Dudenhoeffer, in turn, refused to comment. However, he points out that Woellenstein is now responsible for the Chinese market for the time being, where other problems linger.
China’s press points to sales difficulties
The personnel change received only moderate attention in Chinese business media. Chinese news sites reported on Wednesday citing German news portal Automobilwoche, without adding anything new. They picked up on the narrative that the company was withdrawing Woellenstein from the Chinese market due to a lack of success. In recent years, even the Japanese competition has been able to regain market share.
Tencent News pointed out that the trend in the years up to 2020 was positive. But from January to September 2021, VW sales had dropped 4.1 percent year-on-year. In particular, sales of models made by the SAIC Volkswagen joint venture had crashed disastrously. The year-on-year drop here was 18 percent. The report also mentions the problems with EVs. BYD is currently outpacing VW in this regard.
However, the personnel affair also gave rise to fundamental questions. Phoenix even identifies a “new crisis” at VW due to the difficulties in China. “Will Volkswagen be able to continue the success story from the combustion engine era in China in the future?” asked Tencent News – and predicted: “The market will give the answer.”Christian Domke Seidel
Autoindustrie
News
Even stricter Covid regulations in Beijing
China’s capital is increasing covid regulations for people entering the country from China and overseas. Domestic flights from Corona risk areas have been canceled or greatly reduced. Currently, Chinahas classified more than a hundred cities as risk areas. Since Wednesday, all visitors to Beijing must now provide proof of a negative Covid test no older than 48 hours. In addition, all those who come into work-related contact with frozen imports in Beijing must now be tested for COVID-19 several times a week. This affects around 30,000 people. China had already identified frozen imports as a possible carrier of the virus back in the summer of 2020 and is still sticking to this theory.
The city government had announced details of the new rules on Tuesday. “The virus must not be introduced into Beijing and it must not spread in Beijing,” spokesman Xu Heijian stressed. The Winter Olympics begin in Beijing in 100 days. No fans from abroad will be allowed to attend the games. (China.Table reported). Air travel abroad has been restricted even more than before with the winter flight schedule.
Covid cases remain very low in China due to the consistent zero-covid policy with mass testing and area-wide restrictions. (China.Table reported) On Tuesday, only 31 infections were reported within 24 hours. ck
Beijing
Coronavirus
Health
Aion LX Plus reaches over a thousand kilometers
In the race for ever greater EV ranges, Chinese manufacturer GAC Aion has presented a new version, the LX Plus, which has a maximum range of over 1,000 kilometers on one battery charge. The capacity of this battery is 144.4-kilowatt-hours. According to German EV portal Teslamag, the Aion LX Plus is likely the EV with the largest battery to date. By comparison, the battery of the Mercedes EQS stores 108 kilowatt-hours, while Tesla’s Model S is slightly less than 100 kilowatt-hours. However, the Aion LX Plus is not yet available for purchase. Approval is still pending. flee
Autoindustrie
Xi and Biden discussed disarmament and oil reserves
A day after leader Xi Jinping’s online summit with US President Joe Biden, the first details from the meeting are emerging. The two sides have agreed on a high-level series of talks on nuclear disarmament, Biden’s National Security Adviser Jake Sullivan said on Tuesday evening. According to the statement, Biden had put the issue on the agenda in light of China’s nuclear arsenal buildup. Biden expressed concern over China’s testing of two hypersonic missiles and the militarization of the Indo-Pacific, Sullivan said. The US Defense Department had recently warned that China could already have about 1,000 nuclear warheads ready by 2030 (China.Table reported). The Pentagon has also been calling for disarmament negotiations for some time.
According to Chinese media reports, the two leaders also discussed the possible release of strategic oil reserves. In view of rising oil prices, Biden had asked Xi to jointly release oil reserves onto the market, reports the South China Morning Post, among others, citing an anonymous source. Biden is under pressure by high inflation rates, especially as OPEC has so far refused to increase its oil exports in a way that would affect prices. While China remains open about the idea, it has yet to decide on any concrete measures, the source told the newspaper.
In parallel with the summit, progress was made in talks on the situation of US journalists in China. According to a US government spokesperson, Beijing agreed to issue visas to “a group of US reporters” provided they are “eligible under all applicable laws and regulations”. China would also extend the validity period of journalist visas for Americans to one year and allow US journalists already present in the People’s Republic to enter and leave the country freely. “We welcome these advances but see them only as first steps,” the spokesman said, according to the AFP news agency. China had expelled correspondents of several major US newspapers, including the New York Times and Washington Post, in March 2020.
Meanwhile, Republican Senator Marco Rubio blocked the appointment of Nicholas Burns as US ambassador to Beijing. Burns does not recognize the threat posed by the Chinese leadership, Rubio said. The procedural deadlock, which is possible in the US Senate even by a single senator, will at least delay Burns’ posting. The US has been without an ambassador to Beijing for nine months. ck
Geopolitics
Joe Biden
Media
Military
USA
Xi Jinping
Report: EU Commission postpones Taiwan plan
The European Union has postponed the presentation of a plan to deepen trade relations with Taiwan. The EU Commission had planned to present a strategy paper on cooperation with the island last Friday, the South China Morning Post reported, citing EU circles and a source in the European Parliament.
The plan was supposed to include initiatives for cooperation in areas such as semiconductor production and the announcement of regular high-level meetings between Brussels and Taipei. However, the responsible Directorate-General for Trade then canceled the presentation on short notice, the report said. Initially, DG Trade did not officially confirm this. It is currently being assessed how to get in touch with Taiwan. This is an ongoing process, the General Directorate told China.Table.
The EU Parliament in particular has been calling for closer cooperation between Brussels and Taiwan for some time, for example through a bilateral investment agreement. As the EU Commission adheres to the “one-China policy” demanded by Beijing, it is currently looking for ways to cooperate with Taipei without angering China.
If and when the Taiwan plan will be presented initially remained unclear. This week, the EU Commission had already postponed the presentation of the “Global Gateway” initiative, which is to become an alternative to China’s “Belt and Road”. According to circles, the publication is now expected for December. ari
EU
global gateway
Semiconductor
Taiwan
Tools
China’s new export control and sanctions law: Should the world be afraid?
by Hartmut Henninger and Patrick Heid, law firm Graf von Westphalen
The basic concept of China’s Export Control Law (ECL) corresponds to the EU Dual-Use Regulation: The export of goods listed as critical requires a license. This list of goods includes dual-use goods, military goods, nuclear goods, and those concerning China’s national security and national interests.
The term goods cover goods and technology, but services as well. The exporter receives authorization only if he is deemed reliable and submits a declaration by the third-country recipient on the end-user and the end-use of the goods.
At present, however, all this is largely a gray theory. There is not yet a consolidated list of goods. And authorities have not yet received instructions on how to implement these regulations. Until they do, companies in China will have to continue to comply with the separated export regulations that have been in place since the 1990s in some cases. However, companies should already adapt their respective export control programs – MOFCOM has already provided detailed guidelines for this purpose. In particular, export control clauses in contracts should be amended to not create vulnerability.
An explicit provision on re-export control was removed from the ECL at the last moment. China does reserve the right in some provisions of the ECL to take measures with extraterritorial effect if it sees its interests at risk. For companies outside China, however, the decisive factor is whether they have to operate a structured re-export control in the EU concerning listed components from China. This is currently not (yet) the case, and they currently only have to comply with any commitments agreed upon in end-use declarations.
Unreliable Entity List
The concept of an Unreliable Entity List is known from the USA. If a foreign company is placed on this list, Chinese companies may only engage in business activities with it when certain conditions are met. Companies can be put on this list if they discriminate or harm Chinese companies due to measures taken by their countries, or endanger China’s interests.
If companies restrict their business with these and many other Chinese companies on the US Entity List, they run the risk of being placed on the Unreliable Entity List themselves. This also affects EU companies if they do not supply listed US goods to Chinese companies in order not to violate US (re-)export controls.
Blocking Rules and Anti-Sanctions Law (ASL)
Blocking Rules are aimed at companies in China. China prohibits these countries to comply with regulations with extraterritorial features issued by third countries. As with the EU Blocking Rules, such third-country regulations must be explicitly identified. These blocking rules may be particularly relevant for Chinese subsidiaries of EU companies that (have to) comply with EU and US export control and sanctions law due to cross-group export control in China.
The ASL corresponds to restrictive measures of EU sanctions lists. The assets of listed persons or entities in China may be frozen and business dealings prohibited. In addition, individuals can be denied entry. The ASL is directly aimed at individuals and organizations that were or are involved in the creation of sanctions against China, i.e. politicians, political institutions, and NGOs. It is also possible, however, that companies could be sanctioned if, as part of their ESG policy, they support initiatives that, from Chinese perception, affect internal concerns of the People’s Republic, above all, human rights.
Both instruments provide that if Chinese companies feel they have been treated unfairly by the practices of their business partners, they can hold them accountable in Chinese courts. This option gives companies considerable bargaining power. There is concern that this will be exercised in the future.
What can be done?
Companies in China should not hesitate to set up an internal export control program, as is common in the EU or the US if they meet the risk profile. Even if individual elements of the ECL are still unclear or implementation regulations are lacking, these mechanisms will take full effect sooner or later.
As in other areas of Chinese intervention administration, companies are well-advised to establish close contact with the authorities to personally identify any obligations. Second, caution should always be exercised if one’s conduct can be interpreted as discriminatory towards China or Chinese companies, especially if the conduct is motivated by EU or US sanctions regulations. Companies should then stop and consider how they can reconcile their obligations under EU, US, and Chinese sanctions regimes in light of the new rules. This will not always be easy and will not always succeed.
Finally, companies must bear in mind that their employees in China may feel personally threatened by possible sanctions and may find themselves in an irresolvable dilemma as a result of action taken in conjunction with EU and US regulations.
So far, the Chinese leadership has mainly revealed its toolbox. The legislative project was initially directed primarily against US President Trump and his trade wars. Since the change of administration in the US, while the tone has undoubtedly improved, the existing conflicts have not been resolved but rather deepened and multiplied. Unfortunately, these are not circumstances that allow a positive prognosis for the application of the laws and regulations described here. If it serves China’s interests, these instruments will be applied to instill fear in the world.
Sanctions
USA
Executive Moves
Tara Joseph is stepping down next year as President of the US Chamber of Commerce in Hong Kong at her own request. Among other things, she cited frustration with the quarantine regulations.
Liang Mengsong and Jiang Shangyi are stepping down from their board positions at state-controlled semiconductor manufacturer SMIC. SMIC has a key role for China in overcoming the semiconductor shortage.
Dessert
Shanghai already has a Disneyland. Now it’s getting a Legoland, too. On Wednesday, construction began on the future Legoland Shanghai Resort, which the city fathers say will open in 2024 in the southwestern district of Jinshan. The park will cover about 318,000 square meters, coming in at just over one-third the size of Disneyland. Even smaller is the miniature made of Lego bricks that was presented at the start of construction – and which is seen here by a photographer.
