Ruinous discount battles are always bad for the automotive industry. Margins plummet to rock bottom while consumers quickly learn to demand higher discounts.
In China, suppliers are currently undercutting each other with discounts – even in the old segment of internal combustion engines, where German providers do their business. Although VW, BMW and Mercedes have only cautiously lowered prices so far, as Christian Domke Seidel reports. But the trend does not bode well for the emerging business with EVs. Here, the Germans have no premium nimbus that would justify higher prices.
Money is also the topic of our Feature on the state of Chinese ambitions to raise their currency to world-class levels. The financial press has been discussing the issue for 20 years; it is a story of bold predictions that have not all come true.
The yuan is actually increasingly being used internationally – albeit not at the level of the euro and dollar, but at the level of the yen and franc. This is also due to the desire of many countries in the Global South for an alternative to the dollar, as well as China’s growing integration with their economies.
Trade in yuan is, therefore, also an important topic for Xi’s next guest: Lula is on the way. The Brazilian president has now recovered from pneumonia. He travels to Beijing with a massive delegation to strengthen political and business relationships. At the same time, Annalena Baerbock is in Beijing. The Chinese protocol must be working overtime.
“Business as usual” seems to be a foreign concept to the Chinese automotive market. Record years for combustion engines were followed by the EV boom. The pandemic and supply chain problems caused the boom to falter. No sooner do these wild times seem to have been overcome than manufacturers of every type of drive try to outdo each other with discounts. Chang’an Automobile is giving around $5,800 off each model. Chery Automobile presented a budget for discounts totaling $1.4 billion. And Dongfeng Motor offered its Citroën C6 at a 40 percent discount ($13,000). They are all united by a desire to gain market share in a competitive market.
Consumers are used to the discounts offered by the EV market. Fierce competition and generous subsidies have ensured lively pricing here. Even before the subsidies expired at the beginning of 2023, manufacturers were advertising lavish discounts. It’s a trend that has now reached traditional cars as well. “OEMs coming from the internal combustion sector want to keep selling their vehicles until they have completely converted production, to the extent that the internal combustion line does not continue. And that will take a few more years,” explains Beatrix Frisch. She worked for many years for various car companies in China and is now an expert for the market at Car Future, Ferdinand Dudenhoeffer’s consulting and analysis company. OEMs refers to car manufacturers.
“Sell off” also because stricter emissions standards will apply in China from July 1, 2023. By then, many models already built will have to be off the assembly line. Even though the China Passenger Car Association (CPCA) has already applied to the Communist Party to postpone this regulation until the end of the year.
But instead of lush sales, 2023 began with a sales shock. In January and February, sales fell by 19.8 percent compared with the previous year. Combustion engines (down 29 percent) were hit much harder.
March did not start promisingly either, with an eight percent downturn in the first two weeks. “There are very many influences that trigger an extensive price reduction and then a cycle occurs. When Tesla started, others followed suit,” said market expert Frisch. However, the US company also had a good reason for the discounts. “With the Chinese customer, the government’s ‘buy Chinese’ mandate plays a big role, which is an additional factor in the buying decision.”
Not every brand is responding to price pressure. European manufacturers tend to stay out of the price wars, Frisch believes. “They want to convince with quality, performance and consistency. But the nervousness is there; after all, market share is at stake.”
This is precisely what could become a problem. Strictly speaking, there are currently two types of car markets in China. One is the internal combustion engine, which still accounts for around 70 percent of sales. And the New Energy Vehicle (NEV), which accounts for 30 percent. But the shares are currently shifting massively in favor of NEVs. Industry observers predict that the NEV market will grow by around 30 percent in 2023, while internal combustion vehicles can, at best, hope for stagnation. European manufacturers are, therefore, strong in a market that will lose importance in the medium and long term.
The internal combustion engine is disappearing at the request of the Communist Party, as Frisch points out. If the discounts on internal combustion cars lead to them experiencing a renaissance in China, politicians could quickly intervene. “It’s almost common in China for the government to pass laws or subsidies overnight if the market doesn’t develop according to plan. Should it come to an EV market crash, it could happen again. I can’t imagine the government watching internal combustion cars regain market share.”
The discounts are different in the EV market. Here, manufacturers are foregoing higher margins in exchange for growing market share. Or forego profits altogether. Neither Nio nor Xpeng, for example, were able to generate profits. That’s why the current discounts aren’t a problem for these companies, he said. They would not weigh on quarterly reports at a level relevant to stakeholders and sharholders. “The rebates are priced into the NEV brands. It’s currently less about making a profit and more about showing that you can build vehicles that can be exported and are technically at the highest level.”
However, German manufacturers have so far failed to offer EVs of the highest technical standard in the Chinese car market. While the cars can keep up in terms of driving technology, they cannot in terms of technology. Accordingly, the brands from the VW Group, BMW and Mercedes are not perceived as manufacturers of NEVs. Frisch emphasizes that the brands urgently need to make up for this positioning. “For the many start-ups in China, it’s about being established and recognized as an NEV provider. There is still a lot of catching up to do. In Western markets, it’s easier because the OEMs there have a different status and we have to deal with fewer startups as the established OEMs bring NEVs to the market.”
The current discounts could also usher in a shakeout, believes Xiao Yong, general manager at Aion. This is an EV brand of GAC. He even said to Caixin Global that companies that do not offer discounts now would disappear from the market. Zhu Huarong, general manager of Chang’an Auto, agrees. In the next three to five years, 80 percent of the manufacturers that produce internal combustion engines will disappear from the market.
Horror scenarios with which Frisch can do little. “The government has wanted a market shakeout ever since the first Automotive Policy of 1997. In 2009, 2012 and 2015, too, the government repeatedly propagated in the relevant policies who the leading OEMs were – this was thus almost predefined. None of this has really materialized.”
Brazil’s President Luiz Inácio Lula da Silva is being accompanied to China by an impressive delegation: A total of seven ministers, five governors and more than 200 entrepreneurs and managers have flown with him to the People’s Republic for the five-day state visit. Brasilia wants to raise cooperation with Beijing to a new level.
There are already initial signs of this: In Brazil, the yuan is now the second most important reserve currency after the dollar, with a share of 5.37 percent – ahead of the euro at 4.74 percent. This is one of the reasons why Brazil and China recently decided to settle their trade directly in yuan.
The yuan is gaining more and more momentum as a competitor to the US dollar. This is because the desire for an alternative to the US dollar is growing among emerging countries. There are two reasons for this: It is cheaper to conduct trade between two countries directly or via the yuan. And: You don’t have to depend on just one dominant currency. “The US dollar plays a far too dominant role in global finance,” says British economist Jim O’Neill, who invented the term BRICS more than 20 years ago to describe the emerging economies of Brazil, Russia, India, China and South Africa.
These two reasons make it very likely that a second world currency will emerge. The yuan, and not the euro, has the greatest chance for this. Beijing has been much more active in this endeavor than the Europeans with the euro for years. Now Beijing is reaping the harvest on the occasion of President Lula’s official state visit to China, which begins on Thursday.
The trade of the two countries amounts to 170 billion dollars. Brazil’s Banco BOCOM BBM has announced that from now on, it will use the China Interbank Payment System (CIPS), which was established in 2015. SWIFT, on the other hand, was founded in Brussels in 1973 and has dominated the world financial system based on the US dollar ever since. However, the two systems are only comparable to a limited extent. CIPS executes and settles transactions in RMB. SWIFT, on the other hand, is a messaging protocol that allows banks to communicate with each other in a binding manner. In the end, CIPS also needs SWIFT.
That China will create its own SWIFT is considered very likely. SWIFT is used by 11,000 institutions in 200 countries. CIPS is used by 1,200 institutions in 103 countries. More than 30 countries already settle their trade transactions in yuan; Russia since the beginning of this year, completely due to Western sanctions. The yuan is now the most traded currency in Russia.
Iran, on which the West has also imposed sanctions, has relied on the yuan for some time. Iran is the world’s fourth-largest oil producer, with exports of oil and gas up 35 percent last year – despite the punitive measures. Countries such as the United Arab Emirates, India, Singapore, Venezuela, Turkey, Indonesia and Belarus are also transacting more and more trade in yuan.
Most recently, the Chinese currency reached another milestone: Saudi Crown Prince Mohammed bin Salman and Xi Jinping recently agreed that the Saudis would sell some of their oil to the Chinese in yuan. However, the quantity has not yet been determined.
The Saudis are the world’s largest oil exporter, and the Chinese are their best customers. They buy 25 percent of Saudi oil, worth about $25 billion a year. The Saudis, in turn, import goods from China worth a good $30 billion. So it is quite realistic to transact everything in yuan without Saudi Arabia having to accumulate mountains of yuan – a currency that is stable but not yet freely tradable.
The Saudi deal marks the end of an era that began in the 1970s when the Saudis were firmly tied to the US dollar. At that time, the US was their biggest customer. In 1977, they bought about 70 percent of their oil from OPEC, the Saudi-led cartel. By 2020, that figure was down to 11 percent. With its own fracking oil, the US is now one of the Saudis’ biggest competitors as an oil seller. This is another reason why the relationship is weakening.
But the Chinese are also getting more involved in the international oil business: In late March, France’s Total Energies inked a yuan deal with China National Offshore Oil Corporation (CNOOC), China’s largest gas and oil producer through the Shanghai Petroleum and Natural Gas Exchange (SHPGX): 65,000 tons of liquefied natural gas from the United Arab Emirates. It is the first-ever international LNG deal to be settled in yuan.
At the end of March, the governors of the ASEAN central banks and the finance ministers declared themselves in favor of no longer settling their trade in dollars, euros or Japanese yen but in their own currencies. The yuan is to play a central role in this, as China is ASEAN’s most important trading partner. Malaysia, Singapore, the Philippines and Thailand had already agreed on this last November.
At the same time, Malaysian Prime Minister Anwar Ibrahim recently launched an initiative with China to establish an Asian Monetary Fund. Meanwhile, India and Malaysia also agreed in late March to settle their trade transactions in Indian rupees as well. The same is true for India’s dealings with Russia. Delhi has opened a ruble-rupee trading system.
India has increased its share of Russian oil imports from one percent to 35 percent since the start of the Ukraine war. Regional currency swaps in Asia are on the rise. This is a legally binding contract between two parties to exchange two currencies at a later date and at an exchange rate that has already been fixed in advance. ASEAN plus China, Japan and South Korea already consummate swaps worth $380 billion a year. All of this comes at the expense of the US dollar, and the biggest winner is the yuan. Global trade transactions in yuan rose 37 percent last year.
Nevertheless, in terms of volume, the yuan still plays a small role compared to the dollar. 88 percent of currency trading still takes place in US dollars. In the statistics of the payment processor SWIFT, the yuan comes in fifth place after the Japanese yen, the British pound, the euro and the dollar. The Chinese currency has a share of just over two percent.
The dollar’s share of global currency reserves, the gold standard of a world currency, has fallen from 72 percent at the beginning of the century to below 60 percent now for the first time but still dominates. The yuan, on the other hand, is just under three percent behind the euro (20 percent), the yen and the British pound. Measured against China’s share of the global economy, the Chinese yuan is, therefore, strongly undervalued.
In terms of purchasing power, China has a 34 percent share, while the EU has only a 14 percent share. It is, therefore, very likely that the yuan – now that political conditions are more favorable than ever for Beijing – will catch up rapidly. Beijing knows, of course, that they do not need to hold the majority of the world’s foreign exchange reserves to be able to determine the framework of the world financial system: When the US dollar-dominated monetary system was established at Bretton Woods in 1944, the US had only four billion US dollars in world reserves, while the British Empire, as an old world power, still had over ten billion US dollars.
President Lula, at any rate, is desperate to have the yuan as an alternative world currency. It is no coincidence that Dilma Rousseff, who succeeded him as president of Brazil in 2011, recently became head of the Shanghai-based New Development Bank. This is also called the BRICS bank. For the BRICS countries, the yuan is the central global currency in perspective.
When Patrick Koellner applied for a position as a scientific expert on Japanese domestic policy at the Institute of Asian Studies in 1995, he only intended to stay for two to three years. However, over 27 years later, the native of Hamburg is still active at the German Institute for Global and Area Studies (GIGA), now as Vice President of GIGA and Director of the Institute for Asian Studies (IAS).
According to Koellner, one unique aspect of GIGA is that it is a research institute with think tank functions. This means that research and influencing academic discourse form the core of the institute’s work. At the same time, knowledge transfer to the broader society and exchange with political and economic decision-makers also play an important role, explains Koellner, who also holds a professorship in political science with a focus on Asia at the University of Hamburg. The opportunity to combine all these aspects is what makes his work exciting to this day.
Koellner initially studied public administration in Konstanz in 1988 and then went to Essex in the UK, where he focused on Japan in his studies. His interest in Asia is based on his fascination with Japanese art and culture, as well as the country’s rapid rise in the 1980s. He then completed a doctorate on South Korea’s management of technological dependence on Japan at Humboldt University in Berlin and a habilitation in Trier.
One of his research focuses – and that of GIGA in general – is the comparative analysis of political developments. The goal is to better understand local perspectives and identify the causes of similarities and differences. For example, Australia and New Zealand, which are often considered together from a German perspective, do not have identical policies towards China – as a small power, New Zealand is more focused on balancing, while the middle power Australia is firmly integrated into the US alliance system. Similarly, Pacific countries are often viewed in the context of great power competition, but on the ground, global climate change is seen as the greater threat.
According to Koellner, the importance of geopolitics has increased enormously in recent years. Until recently, the term “strategy” was very difficult to discuss in Germany, except in the context of companies. Now, geopolitical strategies are being discussed everywhere – a dramatic change.
However, the scientist also emphasizes the importance of “not looking at everything only through the geopolitical lens”. There are many global issues and challenges, such as biodiversity, climate change and pandemics, for which cooperation with the largest possible number of partners, including China, is needed. However, partnership is based on reciprocity. Clemens Ruben
No, not a traditional temple somewhere in historic Henan, but part of the zoo in Memphis, Tennessee: On the occasion of the 20-year partnership of the US zoo with the Chinese Association of Zoological Gardens, the Tennessee Happy Kung Fu team performed in the US southern state. The temple complex is not built of wood and stone but sprayed concrete. Admittedly, some temples in Henan are not constructed that much differently nowadays.
Ruinous discount battles are always bad for the automotive industry. Margins plummet to rock bottom while consumers quickly learn to demand higher discounts.
In China, suppliers are currently undercutting each other with discounts – even in the old segment of internal combustion engines, where German providers do their business. Although VW, BMW and Mercedes have only cautiously lowered prices so far, as Christian Domke Seidel reports. But the trend does not bode well for the emerging business with EVs. Here, the Germans have no premium nimbus that would justify higher prices.
Money is also the topic of our Feature on the state of Chinese ambitions to raise their currency to world-class levels. The financial press has been discussing the issue for 20 years; it is a story of bold predictions that have not all come true.
The yuan is actually increasingly being used internationally – albeit not at the level of the euro and dollar, but at the level of the yen and franc. This is also due to the desire of many countries in the Global South for an alternative to the dollar, as well as China’s growing integration with their economies.
Trade in yuan is, therefore, also an important topic for Xi’s next guest: Lula is on the way. The Brazilian president has now recovered from pneumonia. He travels to Beijing with a massive delegation to strengthen political and business relationships. At the same time, Annalena Baerbock is in Beijing. The Chinese protocol must be working overtime.
“Business as usual” seems to be a foreign concept to the Chinese automotive market. Record years for combustion engines were followed by the EV boom. The pandemic and supply chain problems caused the boom to falter. No sooner do these wild times seem to have been overcome than manufacturers of every type of drive try to outdo each other with discounts. Chang’an Automobile is giving around $5,800 off each model. Chery Automobile presented a budget for discounts totaling $1.4 billion. And Dongfeng Motor offered its Citroën C6 at a 40 percent discount ($13,000). They are all united by a desire to gain market share in a competitive market.
Consumers are used to the discounts offered by the EV market. Fierce competition and generous subsidies have ensured lively pricing here. Even before the subsidies expired at the beginning of 2023, manufacturers were advertising lavish discounts. It’s a trend that has now reached traditional cars as well. “OEMs coming from the internal combustion sector want to keep selling their vehicles until they have completely converted production, to the extent that the internal combustion line does not continue. And that will take a few more years,” explains Beatrix Frisch. She worked for many years for various car companies in China and is now an expert for the market at Car Future, Ferdinand Dudenhoeffer’s consulting and analysis company. OEMs refers to car manufacturers.
“Sell off” also because stricter emissions standards will apply in China from July 1, 2023. By then, many models already built will have to be off the assembly line. Even though the China Passenger Car Association (CPCA) has already applied to the Communist Party to postpone this regulation until the end of the year.
But instead of lush sales, 2023 began with a sales shock. In January and February, sales fell by 19.8 percent compared with the previous year. Combustion engines (down 29 percent) were hit much harder.
March did not start promisingly either, with an eight percent downturn in the first two weeks. “There are very many influences that trigger an extensive price reduction and then a cycle occurs. When Tesla started, others followed suit,” said market expert Frisch. However, the US company also had a good reason for the discounts. “With the Chinese customer, the government’s ‘buy Chinese’ mandate plays a big role, which is an additional factor in the buying decision.”
Not every brand is responding to price pressure. European manufacturers tend to stay out of the price wars, Frisch believes. “They want to convince with quality, performance and consistency. But the nervousness is there; after all, market share is at stake.”
This is precisely what could become a problem. Strictly speaking, there are currently two types of car markets in China. One is the internal combustion engine, which still accounts for around 70 percent of sales. And the New Energy Vehicle (NEV), which accounts for 30 percent. But the shares are currently shifting massively in favor of NEVs. Industry observers predict that the NEV market will grow by around 30 percent in 2023, while internal combustion vehicles can, at best, hope for stagnation. European manufacturers are, therefore, strong in a market that will lose importance in the medium and long term.
The internal combustion engine is disappearing at the request of the Communist Party, as Frisch points out. If the discounts on internal combustion cars lead to them experiencing a renaissance in China, politicians could quickly intervene. “It’s almost common in China for the government to pass laws or subsidies overnight if the market doesn’t develop according to plan. Should it come to an EV market crash, it could happen again. I can’t imagine the government watching internal combustion cars regain market share.”
The discounts are different in the EV market. Here, manufacturers are foregoing higher margins in exchange for growing market share. Or forego profits altogether. Neither Nio nor Xpeng, for example, were able to generate profits. That’s why the current discounts aren’t a problem for these companies, he said. They would not weigh on quarterly reports at a level relevant to stakeholders and sharholders. “The rebates are priced into the NEV brands. It’s currently less about making a profit and more about showing that you can build vehicles that can be exported and are technically at the highest level.”
However, German manufacturers have so far failed to offer EVs of the highest technical standard in the Chinese car market. While the cars can keep up in terms of driving technology, they cannot in terms of technology. Accordingly, the brands from the VW Group, BMW and Mercedes are not perceived as manufacturers of NEVs. Frisch emphasizes that the brands urgently need to make up for this positioning. “For the many start-ups in China, it’s about being established and recognized as an NEV provider. There is still a lot of catching up to do. In Western markets, it’s easier because the OEMs there have a different status and we have to deal with fewer startups as the established OEMs bring NEVs to the market.”
The current discounts could also usher in a shakeout, believes Xiao Yong, general manager at Aion. This is an EV brand of GAC. He even said to Caixin Global that companies that do not offer discounts now would disappear from the market. Zhu Huarong, general manager of Chang’an Auto, agrees. In the next three to five years, 80 percent of the manufacturers that produce internal combustion engines will disappear from the market.
Horror scenarios with which Frisch can do little. “The government has wanted a market shakeout ever since the first Automotive Policy of 1997. In 2009, 2012 and 2015, too, the government repeatedly propagated in the relevant policies who the leading OEMs were – this was thus almost predefined. None of this has really materialized.”
Brazil’s President Luiz Inácio Lula da Silva is being accompanied to China by an impressive delegation: A total of seven ministers, five governors and more than 200 entrepreneurs and managers have flown with him to the People’s Republic for the five-day state visit. Brasilia wants to raise cooperation with Beijing to a new level.
There are already initial signs of this: In Brazil, the yuan is now the second most important reserve currency after the dollar, with a share of 5.37 percent – ahead of the euro at 4.74 percent. This is one of the reasons why Brazil and China recently decided to settle their trade directly in yuan.
The yuan is gaining more and more momentum as a competitor to the US dollar. This is because the desire for an alternative to the US dollar is growing among emerging countries. There are two reasons for this: It is cheaper to conduct trade between two countries directly or via the yuan. And: You don’t have to depend on just one dominant currency. “The US dollar plays a far too dominant role in global finance,” says British economist Jim O’Neill, who invented the term BRICS more than 20 years ago to describe the emerging economies of Brazil, Russia, India, China and South Africa.
These two reasons make it very likely that a second world currency will emerge. The yuan, and not the euro, has the greatest chance for this. Beijing has been much more active in this endeavor than the Europeans with the euro for years. Now Beijing is reaping the harvest on the occasion of President Lula’s official state visit to China, which begins on Thursday.
The trade of the two countries amounts to 170 billion dollars. Brazil’s Banco BOCOM BBM has announced that from now on, it will use the China Interbank Payment System (CIPS), which was established in 2015. SWIFT, on the other hand, was founded in Brussels in 1973 and has dominated the world financial system based on the US dollar ever since. However, the two systems are only comparable to a limited extent. CIPS executes and settles transactions in RMB. SWIFT, on the other hand, is a messaging protocol that allows banks to communicate with each other in a binding manner. In the end, CIPS also needs SWIFT.
That China will create its own SWIFT is considered very likely. SWIFT is used by 11,000 institutions in 200 countries. CIPS is used by 1,200 institutions in 103 countries. More than 30 countries already settle their trade transactions in yuan; Russia since the beginning of this year, completely due to Western sanctions. The yuan is now the most traded currency in Russia.
Iran, on which the West has also imposed sanctions, has relied on the yuan for some time. Iran is the world’s fourth-largest oil producer, with exports of oil and gas up 35 percent last year – despite the punitive measures. Countries such as the United Arab Emirates, India, Singapore, Venezuela, Turkey, Indonesia and Belarus are also transacting more and more trade in yuan.
Most recently, the Chinese currency reached another milestone: Saudi Crown Prince Mohammed bin Salman and Xi Jinping recently agreed that the Saudis would sell some of their oil to the Chinese in yuan. However, the quantity has not yet been determined.
The Saudis are the world’s largest oil exporter, and the Chinese are their best customers. They buy 25 percent of Saudi oil, worth about $25 billion a year. The Saudis, in turn, import goods from China worth a good $30 billion. So it is quite realistic to transact everything in yuan without Saudi Arabia having to accumulate mountains of yuan – a currency that is stable but not yet freely tradable.
The Saudi deal marks the end of an era that began in the 1970s when the Saudis were firmly tied to the US dollar. At that time, the US was their biggest customer. In 1977, they bought about 70 percent of their oil from OPEC, the Saudi-led cartel. By 2020, that figure was down to 11 percent. With its own fracking oil, the US is now one of the Saudis’ biggest competitors as an oil seller. This is another reason why the relationship is weakening.
But the Chinese are also getting more involved in the international oil business: In late March, France’s Total Energies inked a yuan deal with China National Offshore Oil Corporation (CNOOC), China’s largest gas and oil producer through the Shanghai Petroleum and Natural Gas Exchange (SHPGX): 65,000 tons of liquefied natural gas from the United Arab Emirates. It is the first-ever international LNG deal to be settled in yuan.
At the end of March, the governors of the ASEAN central banks and the finance ministers declared themselves in favor of no longer settling their trade in dollars, euros or Japanese yen but in their own currencies. The yuan is to play a central role in this, as China is ASEAN’s most important trading partner. Malaysia, Singapore, the Philippines and Thailand had already agreed on this last November.
At the same time, Malaysian Prime Minister Anwar Ibrahim recently launched an initiative with China to establish an Asian Monetary Fund. Meanwhile, India and Malaysia also agreed in late March to settle their trade transactions in Indian rupees as well. The same is true for India’s dealings with Russia. Delhi has opened a ruble-rupee trading system.
India has increased its share of Russian oil imports from one percent to 35 percent since the start of the Ukraine war. Regional currency swaps in Asia are on the rise. This is a legally binding contract between two parties to exchange two currencies at a later date and at an exchange rate that has already been fixed in advance. ASEAN plus China, Japan and South Korea already consummate swaps worth $380 billion a year. All of this comes at the expense of the US dollar, and the biggest winner is the yuan. Global trade transactions in yuan rose 37 percent last year.
Nevertheless, in terms of volume, the yuan still plays a small role compared to the dollar. 88 percent of currency trading still takes place in US dollars. In the statistics of the payment processor SWIFT, the yuan comes in fifth place after the Japanese yen, the British pound, the euro and the dollar. The Chinese currency has a share of just over two percent.
The dollar’s share of global currency reserves, the gold standard of a world currency, has fallen from 72 percent at the beginning of the century to below 60 percent now for the first time but still dominates. The yuan, on the other hand, is just under three percent behind the euro (20 percent), the yen and the British pound. Measured against China’s share of the global economy, the Chinese yuan is, therefore, strongly undervalued.
In terms of purchasing power, China has a 34 percent share, while the EU has only a 14 percent share. It is, therefore, very likely that the yuan – now that political conditions are more favorable than ever for Beijing – will catch up rapidly. Beijing knows, of course, that they do not need to hold the majority of the world’s foreign exchange reserves to be able to determine the framework of the world financial system: When the US dollar-dominated monetary system was established at Bretton Woods in 1944, the US had only four billion US dollars in world reserves, while the British Empire, as an old world power, still had over ten billion US dollars.
President Lula, at any rate, is desperate to have the yuan as an alternative world currency. It is no coincidence that Dilma Rousseff, who succeeded him as president of Brazil in 2011, recently became head of the Shanghai-based New Development Bank. This is also called the BRICS bank. For the BRICS countries, the yuan is the central global currency in perspective.
When Patrick Koellner applied for a position as a scientific expert on Japanese domestic policy at the Institute of Asian Studies in 1995, he only intended to stay for two to three years. However, over 27 years later, the native of Hamburg is still active at the German Institute for Global and Area Studies (GIGA), now as Vice President of GIGA and Director of the Institute for Asian Studies (IAS).
According to Koellner, one unique aspect of GIGA is that it is a research institute with think tank functions. This means that research and influencing academic discourse form the core of the institute’s work. At the same time, knowledge transfer to the broader society and exchange with political and economic decision-makers also play an important role, explains Koellner, who also holds a professorship in political science with a focus on Asia at the University of Hamburg. The opportunity to combine all these aspects is what makes his work exciting to this day.
Koellner initially studied public administration in Konstanz in 1988 and then went to Essex in the UK, where he focused on Japan in his studies. His interest in Asia is based on his fascination with Japanese art and culture, as well as the country’s rapid rise in the 1980s. He then completed a doctorate on South Korea’s management of technological dependence on Japan at Humboldt University in Berlin and a habilitation in Trier.
One of his research focuses – and that of GIGA in general – is the comparative analysis of political developments. The goal is to better understand local perspectives and identify the causes of similarities and differences. For example, Australia and New Zealand, which are often considered together from a German perspective, do not have identical policies towards China – as a small power, New Zealand is more focused on balancing, while the middle power Australia is firmly integrated into the US alliance system. Similarly, Pacific countries are often viewed in the context of great power competition, but on the ground, global climate change is seen as the greater threat.
According to Koellner, the importance of geopolitics has increased enormously in recent years. Until recently, the term “strategy” was very difficult to discuss in Germany, except in the context of companies. Now, geopolitical strategies are being discussed everywhere – a dramatic change.
However, the scientist also emphasizes the importance of “not looking at everything only through the geopolitical lens”. There are many global issues and challenges, such as biodiversity, climate change and pandemics, for which cooperation with the largest possible number of partners, including China, is needed. However, partnership is based on reciprocity. Clemens Ruben
No, not a traditional temple somewhere in historic Henan, but part of the zoo in Memphis, Tennessee: On the occasion of the 20-year partnership of the US zoo with the Chinese Association of Zoological Gardens, the Tennessee Happy Kung Fu team performed in the US southern state. The temple complex is not built of wood and stone but sprayed concrete. Admittedly, some temples in Henan are not constructed that much differently nowadays.
