For three years, the Chinese government presented its strict Covid rules to its 1.4 billion citizens as an act of benevolence. For years, the people of China endured everything that Beijing’s zero-Covid decree demanded, without much resistance.
To them, it must now seem grotesque at best that the hardships of the lockdowns of the past years have been completely in vain and that benevolence apparently no longer plays a role. Because in the coming weeks and months, hundreds of thousands of them will die with the virus after the government has decided to make a 180-degree turnaround, as Fabian Kretschmer reports from Beijing.
The West also had to accept inevitable casualties. But they did not bet everything on one card for years. China, of all countries, which constantly portrayed itself as the winner of the Covid pandemic, faces uncertain months. The pandemic’s ground zero has now come full circle. The Chinese healthcare system is at risk of collapse. This would be a major political blow to Xi Jinping.
Meanwhile, a small town in the German state of Brandenburg is looking forward to Chinese millions. A battery recycler from Suzhou wants to invest in a greenfield site in the town of Guben. “Apparently”, the company is very successful in China, according to Guben’s local politicians. Well, even appearances open doors. Which perfectly describes one of the great trump cards of Chinese strategy.
On a final note, Amelie Richter will moderate the last China.Table event of the year on Wednesday (10:30 a.m. CET). Our guests will discuss how the influence and reputation of the People’s Republic fares in Central and Eastern Europe. Which state could be next to withdraw from the 17+1 cooperative? And is the EU doing enough to avoid losing the Western Balkans to China? Click here to participate.
The situation in Beijing shows how unprepared the government opened the country. The last bastion of zero-Covid has become the world’s largest Covid hotspot in only a few days. Media rightly describe the Covid wave in China as a “raging tsunami”. It has built up extremely quickly and considerably damages the economy and society.
The political fallout from the rushed opening will now cause considerable problems for the leadership around CP General Secretary Xi Jinping. After all, it portrayed itself as the protector of the people against the Coronavirus. Even careful estimates predict that hundreds of thousands of people will die with the virus in the coming weeks and months (China.Table reported).
In hospitals from Beijing and Chengdu to Guangzhou, the first signs of a health disaster are emerging. Doctors are forced to go to work Covid-positive in order to keep things running. Even this cannot prevent hour-long waiting lines outside emergency rooms. In Wuhan, of all places, the situation is so critical that one hospital gives patients intravenous infusions in parked cars on the side of the road.
The employee of a state-owned enterprise in the city center reports that more than half of her department is currently experiencing Covid symptoms. A foreign lawyer confirms: In his office, at least one-third of the staff is currently either positive or has a covid case in the household. Reports of high sickness levels are piling up from all sectors. Even the supply of households via delivery couriers on their colorful e-scooters could soon end. In the central district of Dongcheng, mountains of packages already lie by the roadside.
But aside from a deep sense of uncertainty, a feeling of relief is also spreading among many Chinese: After the government already abandoned its rigid lockdown measures earlier this month, it is now also getting rid of the so-called travel app (Tongxin), which was deactivated on Tuesday night. The already stored movement profiles are to be deleted. It had to be presented in order to gain access to hotels, train stations and the like. Citizens dreaded the moment when the green arrow in the travel app turned red.
However, local health apps remain in use. Each province and even each major city has developed its own smartphone application alongside the travel app. Their databases are not linked to each other and their use is under the control of local governments.
So now the Chinese can once again visit other provinces in their country without fear of forced quarantine. And soon, international travel is expected to follow suit, as China’s US Ambassador Qin Gang hinted in a speech in Chicago: “I believe that further adjustments will be made to facilitate travel in the near future.”
Experts speculate that China could replace the mandatory entry quarantine with three-day health monitoring by mid-January at the latest. But for the time being, travel is still out of the question. Most Beijingers do not even dare to step outside at the moment. The fear of infection is too great. So what was previously mandated now happens voluntarily.
The flaws of China’s system have become apparent over the past few days. Comparisons with Japan, Taiwan and South Korea at least suggest that, with good preparation, a gradual relaxation can be achieved without dire consequences. But the CP leadership was so caught up in its zero-Covid mentality that these preparations were not made.
Only now, months too late, state-owned enterprises resume production of high-quality N95 masks, the counterpart to FFP masks. So far, surgical masks were mainly used in China. Antigen tests and fever-reducing medication are also currently in short supply. And even the long-overdue approval of foreign mRNA vaccines is not in sight. Yet these could avert many deaths. In the over-80 age group, the booster rate is still below 40 percent (China.Table reported).
Most importantly, it shows how difficult it is for the Chinese system to accept health transparency. On Monday morning, the National Health Commission reported fewer than 9,000 new infections and zero viral deaths nationwide for the past 24 hours, and only about 1,000 cases for Beijing. These absurdly misleading numbers could lull the elderly into a false sense of security instead of creating incentives to finally get vaccinated.
But there is reason to fear that the high death toll will continue to go unreported to not lose face. “We will see complete bankruptcy of trust in the CCP,” speculates Desmond Shum, real estate developer and regime critic in exile in London, on Twitter. Fabian Kretschmer
The small German town of Guben an der Neiße could become one of the most important locations for battery recycling in Brandenburg in the next few years. The Chinese company Botree Cycling wants to build a demonstration plant. This news raised interest two weeks ago. At that time, the company and the city administration announced that they had already signed a letter of intent in mid-November. 100 jobs are to be created in a high-demand and highly promoted technology field in the automotive industry.
The town with a population of 16,000 is located on the easternmost edge of the German state of Brandenburg. The fact that the Chinese want to establish their first European branch here, of all places, is still an unexpected stroke of luck for Mayor Fred Mahro. “They were looking for a location according to a list of criteria,” the conservative CDU politician told China.Table. “Then there was the decision that it should be Guben.” The recycling company from Beijing wants to invest 100 million euros in the next few years on almost four hectares in the Guben industrial area. Mayor Mahro does not yet know much about the investors: “It could be called a startup. Botree is apparently very successful in China.”
Botree Cycling is a young Chinese company striving to enter the global battery business. It sees itself as a provider of complete solutions for recycling critical battery materials for EVs. CEO Xiao Lin is a member of the national technical committee for the disposal of discarded chemicals of the Chinese Standardization Administration. He wants to contribute his “experience in recycling projects of lithium batteries in Europe and North America, and strengthen the cooperation with Germany and especially Guben,” Xiao said.
The decision to settle in Guben was brokered by Germany Trade & Invest (GTAI) and the Brandenburg Wirtschaftsförderung Brandenburg (WFBB). “Apparently, the company has the financial means and the will to set up such a large-scale production facility in Germany,” GTAI’s China Director Robert Herzner told China.Table. Herzner first noticed the company at a trade fair in 2020, for which he has now managed to find a location on the German-Polish border.
China’s battery industry is shaped by electric scooter recycling. Many companies have specialized in these omnipresent vehicles. China possesses virtually unlimited access to the raw materials for battery production. Herzner notes a tendency in the Chinese market that manufacturers of cars and batteries will become responsible for recycling. Botree Cycling provides the appropriate systems.
The company was founded only a few years ago, but already operates a gigantic production plant in Suzhou near Shanghai. This rapid growth is probably also owed to the high subsidies with which the Chinese government wants to enter the EV market. Estimates put these subsidies at around 12.5 billion dollars for 2016 alone. Meanwhile, of the top 10 companies in the battery sector, six are from China. The largest Chinese battery manufacturer, CATL (Contemporary Amperex Technology), has already set up shop in Erfurt in 2019 – and will soon begin production (China.Table reported). The plant is expected to employ up to 2,000 people.
Botree Cycling is the 25th Chinese investment in Brandenburg that the federal economic development agency has accompanied. “German locations near large industrial parks are interesting for the Chinese,” Robert Herzner emphasizes. “There are quite a lot in Eastern Germany, for example in Brandenburg or in Saxony-Anhalt.” In Ludwigsfelde, Brandenburg, the battery manufacturer Microvast invested, which belongs to owners from the USA, Germany and China. For Microvast, as well as CATL, the proximity to Tesla may have been a deciding factor (China.Table reported).
Elon Musk’s Gigafactory in Gruenheide in Brandenburg acts like a magnet for recycling companies. In addition to Botree Cycling, the Canadian lithium hydroxide manufacturer Rock Tech also wants to settle in Guben. This small German town, which used to be a center of the textile industry and later fiber chemistry, could become a battery hub.
Helpful in bringing Botree to Guben was the available space, which can be immediately developed. There is also enough room to expand. Solar fields in the surrounding area provide access to green electricity, which would otherwise hardly attract any industrial investors. 90 percent of the site is owned by the municipal utility company, which plans to decide on a possible sale or partial sale early next year. Christine Keilholz
For German SMEs, the decision to become active in China is usually reserved for the top management. Smaller companies in particular lack specialists who can provide analyses of the market, suitable business sites and competent partners. If their customers ‘force’ a supplier to follow them to China as a subcontractor, this has advantages.
The choice of a business site is simple, and there is already an existing business volume to start with. But how else can a company find the ideal location for its investment in a country that is roughly the size of Europe and still difficult to access for many in Europe due to its language, cultural differences and distance?
Economic zones trying to attract foreign investment make a lot of promises. These promises are not always kept, especially when it comes to “small” investments. Up to 300 employees is still considered a small company in China. Medium-sized companies have between 250 and 2000 employees. As a result, certain standard production halls are completely oversized for medium-sized companies that want to gradually enter the market.
All too often, the enthusiasm of a business location cools rapidly once it becomes clear that potential investors do not want to invest millions straight away. Attractive sites near metropolitan areas are thus reserved for large corporations. Small investments are pushed into outlying areas and further inland.
This amplifies another competitive disadvantage small companies face in the market: Their appeal as employers. In the annual surveys conducted by the German Chamber of Foreign Trade in China, finding and binding qualified employees has been one of the biggest challenges in business operations for years.
Chinese employees tend to prefer internationally known companies. The chances of them knowing about the hidden champion from the Black Forest or the internationally successful family business from the Upper Palatinate are low. Accordingly, the effort such a company must make to attract skilled employees and then keep them in the long term is high. Modern human resources management, flexibility and creativity are necessary to meet the growing demand for the work-life balance of Chinese employees.
The list of examples why the road to China for SMEs is difficult beyond the obvious barriers goes on. Three years of Covid restrictions have exacerbated them. The much-needed exchange on a business and technical level could only happen via screen. Already established companies were at least able to build on the existing trust with their local employees when the Covid crisis hit.
For some local employees, the situation even turned out to be an opportunity to emancipate themselves and take on more responsibilities. But for ventures that had just started in China, the travel restrictions meant that they never had the chance to bring their staff to Germany for training and familiarize them with their corporate culture.
Nor could technical service personnel be sent to China. Those who had foreign managers on site had to fear or accept that they would leave the country after almost three years of restrictions. The sudden departure from zero-Covid gives hope that the human exchange so urgently needed at all levels can be resumed in the coming year.
And yet, more than 5,000 German companies have successfully settled in China. A broad network of local service providers, foreign chambers of commerce, German Centers and country representations are certainly helpful in this regard. Private service providers have also specialized in supporting SMEs entering the Chinese market. Perhaps the secret of success lies precisely in the fact that these decisions are reserved for the top management of small and medium-sized enterprises. Good preparation, realistic expectations and a step-by-step approach ensure the long-term success of their investments.
Julia Guesten is the managing partner of Sharehouse (Nanjing) Co., Ltd. She has lived in China since 1994. Before Sharehouse, she established and managed the logistics department of a German subsidiary in South China and worked for 17 years in Nanjing as a representative of the State of Baden-Wuerttemberg and Managing Director of Baden-Wuerttemberg International (bw-i).
This article is part of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday, December 15, 2022 (11:00 CET) Julia Guesten (Sharehouse (Nanjing) Co., Ltd) and Claudia Glaeser (Glaeser GmbH) will discuss the topic: “German SMEs in the Chinese Market: What are the Current Challenges and Opportunities?”. China.Table is the media partner of the event series.
One of Asia’s biggest horse racing events ended on Sunday with the victory of the gelding Romantic Warrior. In the prestigious Hong Kong Cup on the course in Sha Tin, the 1.8:1 favorite brought his New Zealand jockey James McDonald to the finish line first. The race over 2000 meters was endowed with 4.1 million euros.
For three years, the Chinese government presented its strict Covid rules to its 1.4 billion citizens as an act of benevolence. For years, the people of China endured everything that Beijing’s zero-Covid decree demanded, without much resistance.
To them, it must now seem grotesque at best that the hardships of the lockdowns of the past years have been completely in vain and that benevolence apparently no longer plays a role. Because in the coming weeks and months, hundreds of thousands of them will die with the virus after the government has decided to make a 180-degree turnaround, as Fabian Kretschmer reports from Beijing.
The West also had to accept inevitable casualties. But they did not bet everything on one card for years. China, of all countries, which constantly portrayed itself as the winner of the Covid pandemic, faces uncertain months. The pandemic’s ground zero has now come full circle. The Chinese healthcare system is at risk of collapse. This would be a major political blow to Xi Jinping.
Meanwhile, a small town in the German state of Brandenburg is looking forward to Chinese millions. A battery recycler from Suzhou wants to invest in a greenfield site in the town of Guben. “Apparently”, the company is very successful in China, according to Guben’s local politicians. Well, even appearances open doors. Which perfectly describes one of the great trump cards of Chinese strategy.
On a final note, Amelie Richter will moderate the last China.Table event of the year on Wednesday (10:30 a.m. CET). Our guests will discuss how the influence and reputation of the People’s Republic fares in Central and Eastern Europe. Which state could be next to withdraw from the 17+1 cooperative? And is the EU doing enough to avoid losing the Western Balkans to China? Click here to participate.
The situation in Beijing shows how unprepared the government opened the country. The last bastion of zero-Covid has become the world’s largest Covid hotspot in only a few days. Media rightly describe the Covid wave in China as a “raging tsunami”. It has built up extremely quickly and considerably damages the economy and society.
The political fallout from the rushed opening will now cause considerable problems for the leadership around CP General Secretary Xi Jinping. After all, it portrayed itself as the protector of the people against the Coronavirus. Even careful estimates predict that hundreds of thousands of people will die with the virus in the coming weeks and months (China.Table reported).
In hospitals from Beijing and Chengdu to Guangzhou, the first signs of a health disaster are emerging. Doctors are forced to go to work Covid-positive in order to keep things running. Even this cannot prevent hour-long waiting lines outside emergency rooms. In Wuhan, of all places, the situation is so critical that one hospital gives patients intravenous infusions in parked cars on the side of the road.
The employee of a state-owned enterprise in the city center reports that more than half of her department is currently experiencing Covid symptoms. A foreign lawyer confirms: In his office, at least one-third of the staff is currently either positive or has a covid case in the household. Reports of high sickness levels are piling up from all sectors. Even the supply of households via delivery couriers on their colorful e-scooters could soon end. In the central district of Dongcheng, mountains of packages already lie by the roadside.
But aside from a deep sense of uncertainty, a feeling of relief is also spreading among many Chinese: After the government already abandoned its rigid lockdown measures earlier this month, it is now also getting rid of the so-called travel app (Tongxin), which was deactivated on Tuesday night. The already stored movement profiles are to be deleted. It had to be presented in order to gain access to hotels, train stations and the like. Citizens dreaded the moment when the green arrow in the travel app turned red.
However, local health apps remain in use. Each province and even each major city has developed its own smartphone application alongside the travel app. Their databases are not linked to each other and their use is under the control of local governments.
So now the Chinese can once again visit other provinces in their country without fear of forced quarantine. And soon, international travel is expected to follow suit, as China’s US Ambassador Qin Gang hinted in a speech in Chicago: “I believe that further adjustments will be made to facilitate travel in the near future.”
Experts speculate that China could replace the mandatory entry quarantine with three-day health monitoring by mid-January at the latest. But for the time being, travel is still out of the question. Most Beijingers do not even dare to step outside at the moment. The fear of infection is too great. So what was previously mandated now happens voluntarily.
The flaws of China’s system have become apparent over the past few days. Comparisons with Japan, Taiwan and South Korea at least suggest that, with good preparation, a gradual relaxation can be achieved without dire consequences. But the CP leadership was so caught up in its zero-Covid mentality that these preparations were not made.
Only now, months too late, state-owned enterprises resume production of high-quality N95 masks, the counterpart to FFP masks. So far, surgical masks were mainly used in China. Antigen tests and fever-reducing medication are also currently in short supply. And even the long-overdue approval of foreign mRNA vaccines is not in sight. Yet these could avert many deaths. In the over-80 age group, the booster rate is still below 40 percent (China.Table reported).
Most importantly, it shows how difficult it is for the Chinese system to accept health transparency. On Monday morning, the National Health Commission reported fewer than 9,000 new infections and zero viral deaths nationwide for the past 24 hours, and only about 1,000 cases for Beijing. These absurdly misleading numbers could lull the elderly into a false sense of security instead of creating incentives to finally get vaccinated.
But there is reason to fear that the high death toll will continue to go unreported to not lose face. “We will see complete bankruptcy of trust in the CCP,” speculates Desmond Shum, real estate developer and regime critic in exile in London, on Twitter. Fabian Kretschmer
The small German town of Guben an der Neiße could become one of the most important locations for battery recycling in Brandenburg in the next few years. The Chinese company Botree Cycling wants to build a demonstration plant. This news raised interest two weeks ago. At that time, the company and the city administration announced that they had already signed a letter of intent in mid-November. 100 jobs are to be created in a high-demand and highly promoted technology field in the automotive industry.
The town with a population of 16,000 is located on the easternmost edge of the German state of Brandenburg. The fact that the Chinese want to establish their first European branch here, of all places, is still an unexpected stroke of luck for Mayor Fred Mahro. “They were looking for a location according to a list of criteria,” the conservative CDU politician told China.Table. “Then there was the decision that it should be Guben.” The recycling company from Beijing wants to invest 100 million euros in the next few years on almost four hectares in the Guben industrial area. Mayor Mahro does not yet know much about the investors: “It could be called a startup. Botree is apparently very successful in China.”
Botree Cycling is a young Chinese company striving to enter the global battery business. It sees itself as a provider of complete solutions for recycling critical battery materials for EVs. CEO Xiao Lin is a member of the national technical committee for the disposal of discarded chemicals of the Chinese Standardization Administration. He wants to contribute his “experience in recycling projects of lithium batteries in Europe and North America, and strengthen the cooperation with Germany and especially Guben,” Xiao said.
The decision to settle in Guben was brokered by Germany Trade & Invest (GTAI) and the Brandenburg Wirtschaftsförderung Brandenburg (WFBB). “Apparently, the company has the financial means and the will to set up such a large-scale production facility in Germany,” GTAI’s China Director Robert Herzner told China.Table. Herzner first noticed the company at a trade fair in 2020, for which he has now managed to find a location on the German-Polish border.
China’s battery industry is shaped by electric scooter recycling. Many companies have specialized in these omnipresent vehicles. China possesses virtually unlimited access to the raw materials for battery production. Herzner notes a tendency in the Chinese market that manufacturers of cars and batteries will become responsible for recycling. Botree Cycling provides the appropriate systems.
The company was founded only a few years ago, but already operates a gigantic production plant in Suzhou near Shanghai. This rapid growth is probably also owed to the high subsidies with which the Chinese government wants to enter the EV market. Estimates put these subsidies at around 12.5 billion dollars for 2016 alone. Meanwhile, of the top 10 companies in the battery sector, six are from China. The largest Chinese battery manufacturer, CATL (Contemporary Amperex Technology), has already set up shop in Erfurt in 2019 – and will soon begin production (China.Table reported). The plant is expected to employ up to 2,000 people.
Botree Cycling is the 25th Chinese investment in Brandenburg that the federal economic development agency has accompanied. “German locations near large industrial parks are interesting for the Chinese,” Robert Herzner emphasizes. “There are quite a lot in Eastern Germany, for example in Brandenburg or in Saxony-Anhalt.” In Ludwigsfelde, Brandenburg, the battery manufacturer Microvast invested, which belongs to owners from the USA, Germany and China. For Microvast, as well as CATL, the proximity to Tesla may have been a deciding factor (China.Table reported).
Elon Musk’s Gigafactory in Gruenheide in Brandenburg acts like a magnet for recycling companies. In addition to Botree Cycling, the Canadian lithium hydroxide manufacturer Rock Tech also wants to settle in Guben. This small German town, which used to be a center of the textile industry and later fiber chemistry, could become a battery hub.
Helpful in bringing Botree to Guben was the available space, which can be immediately developed. There is also enough room to expand. Solar fields in the surrounding area provide access to green electricity, which would otherwise hardly attract any industrial investors. 90 percent of the site is owned by the municipal utility company, which plans to decide on a possible sale or partial sale early next year. Christine Keilholz
For German SMEs, the decision to become active in China is usually reserved for the top management. Smaller companies in particular lack specialists who can provide analyses of the market, suitable business sites and competent partners. If their customers ‘force’ a supplier to follow them to China as a subcontractor, this has advantages.
The choice of a business site is simple, and there is already an existing business volume to start with. But how else can a company find the ideal location for its investment in a country that is roughly the size of Europe and still difficult to access for many in Europe due to its language, cultural differences and distance?
Economic zones trying to attract foreign investment make a lot of promises. These promises are not always kept, especially when it comes to “small” investments. Up to 300 employees is still considered a small company in China. Medium-sized companies have between 250 and 2000 employees. As a result, certain standard production halls are completely oversized for medium-sized companies that want to gradually enter the market.
All too often, the enthusiasm of a business location cools rapidly once it becomes clear that potential investors do not want to invest millions straight away. Attractive sites near metropolitan areas are thus reserved for large corporations. Small investments are pushed into outlying areas and further inland.
This amplifies another competitive disadvantage small companies face in the market: Their appeal as employers. In the annual surveys conducted by the German Chamber of Foreign Trade in China, finding and binding qualified employees has been one of the biggest challenges in business operations for years.
Chinese employees tend to prefer internationally known companies. The chances of them knowing about the hidden champion from the Black Forest or the internationally successful family business from the Upper Palatinate are low. Accordingly, the effort such a company must make to attract skilled employees and then keep them in the long term is high. Modern human resources management, flexibility and creativity are necessary to meet the growing demand for the work-life balance of Chinese employees.
The list of examples why the road to China for SMEs is difficult beyond the obvious barriers goes on. Three years of Covid restrictions have exacerbated them. The much-needed exchange on a business and technical level could only happen via screen. Already established companies were at least able to build on the existing trust with their local employees when the Covid crisis hit.
For some local employees, the situation even turned out to be an opportunity to emancipate themselves and take on more responsibilities. But for ventures that had just started in China, the travel restrictions meant that they never had the chance to bring their staff to Germany for training and familiarize them with their corporate culture.
Nor could technical service personnel be sent to China. Those who had foreign managers on site had to fear or accept that they would leave the country after almost three years of restrictions. The sudden departure from zero-Covid gives hope that the human exchange so urgently needed at all levels can be resumed in the coming year.
And yet, more than 5,000 German companies have successfully settled in China. A broad network of local service providers, foreign chambers of commerce, German Centers and country representations are certainly helpful in this regard. Private service providers have also specialized in supporting SMEs entering the Chinese market. Perhaps the secret of success lies precisely in the fact that these decisions are reserved for the top management of small and medium-sized enterprises. Good preparation, realistic expectations and a step-by-step approach ensure the long-term success of their investments.
Julia Guesten is the managing partner of Sharehouse (Nanjing) Co., Ltd. She has lived in China since 1994. Before Sharehouse, she established and managed the logistics department of a German subsidiary in South China and worked for 17 years in Nanjing as a representative of the State of Baden-Wuerttemberg and Managing Director of Baden-Wuerttemberg International (bw-i).
This article is part of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday, December 15, 2022 (11:00 CET) Julia Guesten (Sharehouse (Nanjing) Co., Ltd) and Claudia Glaeser (Glaeser GmbH) will discuss the topic: “German SMEs in the Chinese Market: What are the Current Challenges and Opportunities?”. China.Table is the media partner of the event series.
One of Asia’s biggest horse racing events ended on Sunday with the victory of the gelding Romantic Warrior. In the prestigious Hong Kong Cup on the course in Sha Tin, the 1.8:1 favorite brought his New Zealand jockey James McDonald to the finish line first. The race over 2000 meters was endowed with 4.1 million euros.
