EU Battery Regulation + Forced labor

Dear reader,

The EU aims to secure a long-term slice of the battery business with the Batteries Regulation. Brussels wants to shape the value chains of this key technology in a way that prevents reckless dependence on third countries, above all, on the world market leader China.

The EU’s ambitious plans put Chinese manufacturers under pressure – after all, Europe is their biggest export market. But Christian Domke-Seidel writes that China’s industry has not received the regulation quite as negatively as many would think. On the contrary: For many companies, the new requirements are even an incentive to increase their investments in Europe. Because those who comply with the requirements have a better chance of establishing a fast and broad foothold in this attractive market.

A controversial issue between Europe and China, on the other hand, remains forced labor in supply chains. As has now become known, Uyghurs are reportedly processing fish and seafood for the European market in China’s coastal provinces against their will.

This raises the question of how the import conditions of goods from Xinjiang can be further tightened. The problem: Beijing distributes Uyghur labor to other parts of China, and this makes identifying forced labor much more difficult. Marcel Grzanna’s analysis shows how the forced integration of people into the nationwide job market happens and what consequences the EU can still draw.

Your
Fabian Peltsch

EU Battery Regulation as an incentive

Lithium-ion batteries in many electric cars consist of stacked pouch cells.

By

Christian Domke Seidel

The Battery Regulation is a highly ambitious project of the European Union. It is about structuring a product’s entire life cycle and value chain more sustainably. The aim is to create a circular economy that makes Europe less dependent on third countries. Due to the transport and energy transition, batteries are considered one of the key industries of the future. So far, Europe has been highly dependent on China, which, according to the European Court of Auditors, accounted for a full 76 percent of global production capacity in 2021.

Battery Regulation aims to re-regulate the market

And it is a lucrative business field. The consulting firm McKinsey calculates that the demand for lithium-ion batteries will increase by 27 percent annually through 2030 – from 700 gigawatt to 4.7 terawatt hours. This will create a market with a turnover of 400 billion dollars along the value chain. The Battery Regulation is intended to secure Europe’s market share in the long term.

To achieve this, the Battery Regulation focuses, among other things, on the following core instruments:

Distributors of batteries must disclose the carbon footprint of a battery. Independent third parties must verify the information beforehand. In addition, upper caps will be gradually introduced.
Every battery (over 2 kWh and traction batteries) must have a digital battery passport from 2027. This will contain 90 pieces of information on, among other things, the materials used, the repair and the recycling process.
From 2025 onwards, targets for recycling efficiency, material recovery and recycled content will be gradually introduced.
The distributors are responsible for social and environmental risks along the entire value chain.

“Overall, the idea of the Battery Regulation is to build sustainable business models in the context of the EU Green Deal and to incentivize them to not fall behind in global competition,” Achim Teuber sums up the Battery Regulation. Teuber is an analyst at the sustainability consultancy SystemIQ.

Christoph Lienemann, Managing Director at PEM Motion – a consulting firm and engineering service provider in the field of e-mobility – argues that the Battery Regulation also pursues geopolitical goals despite all the sustainability considerations. “Since we still have a comparatively small battery industry in Germany and Europe, it is also a matter of keeping as many raw materials as possible here on site and finding energy- and resource-efficient solutions for production and recycling. This minimizes dependencies – and we are not only competing with Asia here.”

China sees battery regulation as an incentive

This creates an enormous pressure situation for China as the world market leader. Europe is the largest export market for manufacturers from the People’s Republic. Its market share in car batteries alone is 34 percent. However, the new regulations have not been received as negatively as the media often made them out to be. “In discussions with Chinese suppliers, it is clear that they are already beginning to prepare for the requirements and are willing to comply with them. For instance, the largest manufacturer in China has publicly announced that production will be CO2-neutral by 2025 and the entire supply chain by 2035,” says Teuber.

And Gerrit Bockey, expert for Battery Production Technologies at PEM Motion and head of Battery-News, adds: “Basically, there were discussions about whether this was green protectionism. But there was much more discussion about it being an incentive to become more established in the market.” One example is the carbon footprint. Batteries from China come to Europe packing 105 grams of CO2 per kilowatt-hour – partly because of the energy mix during production. Local producers (including Chinese ones, of course) are 20 to 30 percent below that. “There are companies along the entire value chain that are setting up in Europe to have some advantage when entering the market within the framework of the Battery Regulation. It incentivizes them to leave their home market and invest in Europe,” Bockey adds.

Billions in investment needed

It is also clear that compliance with the Battery Regulation will be difficult without Chinese investment. According to Teuber, it would take an additional investment of 62 billion euros by 2030 to comply with the Battery Regulation targets – 44 billion for cell production, 12 billion for cathode material production and 6 billion for anode material production. “What matters is who makes the investments and who has the capabilities to implement them. Currently, 90 percent of anodes and cathodes come from China and 60 percent of EVs. For these companies, it is, of course, interesting to make their investments here and comply with the requirements,” Teuber concludes.

This is one reason why investments from China in the battery sector have increased. The Mercator Institute for China Studies (MERICS) calculated that these investments represented 57 percent (4.5 billion euros) of total Chinese investments in Europe in 2022. This mainly involves start-ups rather than takeovers. “A handful of large projects – almost exclusively in the automotive industry – are behind the rise in greenfield investments. Chinese battery giants such as CATL, Envision AESC and SVOLT invested in plants in Germany, the UK, France and Hungary,” MERICS summarizes.

Suspicion of forced labor in the fishing industry

By

Marcel Grzanna

The list of problematic products from China is getting longer and longer. After tomatoes, textiles, cotton, solar panels, consumer electronics and car parts, fish and seafood are now coming under scrutiny. The investigative portal The Outlaw Ocean Project has compiled a wealth of evidence that Uyghur people are being forced to work in food factories in China’s coastal provinces.

At least 1,000 Uyghurs were reportedly employed by companies as part of a government labor program, working against their will in the processing of fish and seafood for the European and North American markets. Several hundred North Korean citizens are also said to be involuntarily employed in various factories in the region.

The companies mentioned include the Chishan Group, one of Shandong’s leading producers of fishery products. According to the report, a manager confirmed in a memo to employees that Uyghurs from Xinjiang had been sent there to work. Yantai Sanko Fisheries from Shandong is also mentioned. Pictures of Uyghur workers rehearsing a speech by China’s party leader, Xi Jinping, have been officially published by a municipal agency.

Chinese fishing fleet also under suspicion

Forced labor does not necessarily mean that workers are not paid. In fact, they are sometimes even paid decent wages. However, one of the affected workers complained, for instance, that he had had no choice but to accept the job offer. The investigation found cases where people who refused to work were sent to internment camps.

Table.Media has also spoken to people in the past who did not work in factories in Xinjiang of their own free will. Wages were paid in these cases, too, but most of the money was withheld to cover costs for accommodation, food or transport.

The severe violations of the International Labour Organisation (ILO) conventions, which China has signed, are not limited to factory work. Serious human rights violations reportedly also occur in the Chinese fishing fleet. Foreign workers are said to work on the boats, sometimes unpaid and poorly fed.

MEPs call for tightened regulations

The conditions in Chinese fisheries have also preoccupied the European Parliament for a while. On Monday evening, MEPs from the Internal Market and International Trade committees voted in favor of a draft import ban to remove such forced labor products at EU borders.

The MEPs want to nip in the bud economic incentives for companies to participate in forced labor or look the other way. According to the parliamentary proposal, the EU Commission is to draw up a list of regions and economic sectors where the risk of forced labor is particularly pronounced. If a product comes from such a region, the burden of proof is to be reversed. Companies would then have to prove that no forced labor exists in their supply chain.

The proposal is inspired by the US Uyghur Forced Labor Prevention Act. Under it, importers of products from Xinjiang must proactively prove that their supply chains are clean. In Europe, the burden of proof still lies with the authorities. MEPs aim to show potential critics from the business community the advantages of a consistent ban on goods in the EU whose clean value creation cannot be fully verified. They further argue that a ban on forced labor also protects compliant companies from unfair competition.

The European Parliament further called for more transparency regarding Chinese distant water fisheries. In a resolution adopted on Tuesday, MEPs criticized the Chinese authorities for not being open about the country’s distant water fishing fleet.

Transfer complicates identification

The Outlaw Ocean Project’s report on forced labor in the seafood value chain reignites the debate in the US. The US Congressional Executive Commission on China will examine the issue next week. Imports of the products would be prohibited under the circumstances. “Nevertheless, the US Government, major grocery chains, and restaurants continue to purchase seafood caught and processed using forced labor in China,” the hearing announcement says.

The transfer of Uyghur workers to other parts of China significantly complicates the identification of forced labor. The involuntary transfer is part of a program that Xinjiang researcher Adrian Zenz calls the “camp-to-labor pipeline-system.” In his latest study, “Innovating Panel Labor,” published in early October in the scientific journal The China Journal, Zenz has cross-referenced government documents, eyewitness accounts, satellite imagery and public records.

Constant surveillance in factories

He analyzed the link between the detention of Uyghurs in Xinjiang’s re-education camps and their forced integration into the labor market. “detainees go through a gradual process of training, partial release, and finally full release into a forced labor assignment,” says Zenz.

Xinjiang researchers see the transfer to industrial work as a means to continue close monitoring of the Uyghurs after the number of camp inmates has been drastically reduced in recent years. In factories, workers are under constant surveillance, eliminating the need for detention camps.

Brussels hosts Global Gateway forum

Following the Belt and Road Forum (BRI) in Beijing, the European Union will host an infrastructure summit next week: Heads of state and government from around 20 countries are expected to attend the Global Gateway Forum in Brussels on Wednesday and Thursday, Bloomberg News reported on Thursday, citing people familiar with the matter. There is no official list of attendees yet. According to the report, leaders from Bangladesh, Senegal, Namibia and Moldova are expected to attend. It is also not yet known who will attend the summit from the EU side. An EU Commission spokesperson told Table.Media that details will be announced soon.

Global Gateway sees itself as an alternative to China’s BRI – in practice, however, the actual implementation of new projects continues to be problematic. In July, EU Commission President Ursula von der Leyen presented an investment agenda with Latin America and the Caribbean. More than 45 billion euros will be invested in the region by 2027, financed by EU budgets, funds from EU member states and investments by European private companies.

With the BRI Forum, China’s head of state, above all, had prepared a stage of common ground for Russian President Vladimir Putin. In the meantime, the attention for Putin was diverted by the fact that fewer heads of state and government were present at the meeting than at the first forum in 2017, as is evident from the group photos. Nevertheless, Xi accomplished two things that upset Brussels: Viktor Orbán, prime minister of EU member Hungary, shook Putin’s hand. And EU accession candidate Serbia agreed on a free trade agreement with China. ari

IW innovations study

According to a study, China increasingly competes with Germany in technical innovations. In the field of biotechnology, patent applications from the People’s Republic have increased more than sevenfold in the past ten years, as the employer-affiliated German Economic Institute (IW Cologne) stated on Thursday regarding its study.

Numerous new companies have emerged that are on the threshold of becoming global leaders. At the same time, corresponding patent applications from Germany dropped by 16 percent. “It is almost certain that China will have significantly overtaken Germany in biotechnology before the end of the current five-year plan in 2025,” said the study, which examined Chinese patent applications impacting Germany from 2010 to 2019.

Automotive patents increased tenfold

Patent performance in the automotive industry has reportedly increased tenfold. In particular, China has made significant strides in EVs. “Specifically, this applies not least thanks to companies such as CATL and BYD for battery and accumulator technology,” the IW said. Unlike Germany, China no longer has any significant patent activity in conventional internal combustion engines and thus does not have to bear any structural change burdens. In addition, Beijing has been pumping substantial amounts of money into research institutions and technology companies for years.

Unlike in Germany, where the automotive industry generates the majority of digitization patents, 84 percent of Chinese digitization patents originate from the electrical industry. “In almost all facets of digitization technology, China now has a strong foundation for successfully competing in the international technology arena thanks to its immense patent momentum,” says the IW. The only area where China still has weaknesses is semiconductors. For instance, it would account for only 6.1 percent of all Chinese digitization patents, while Taiwan has an international top value of 32.8 percent. “This patent data also illustrates China’s dependence on Taiwan for semiconductors, which can be read in the corresponding import statistics,” the researchers conclude. rtr

Wind energy: No EU proceedings for the time being

The EU Commission will likely not initiate a formal anti-subsidy investigation against Chinese wind turbine manufacturers. First, European companies are to be encouraged to provide further evidence of unfair practices, the Brussels-based authority writes in the draft of the European Wind Energy Action Plan, which the Commission plans to present next week in Brussels and which is available in draft form to Table.Media.

“If justified, the Commission will use its trade defense instruments,” the draft adds. In mid-September, Commission President Ursula von der Leyen announced a comprehensive investigation into Chinese EVs, which could end up with punitive tariffs. Subsequently, Industry Commissioner Thierry Breton, among others, threatened a similar procedure for the wind industry. ber

New carbon reporting requirement for heavy industry

China’s Ministry of Ecology and Environment has ordered large companies in seven heavy industries to tighten their emissions reports in preparation for the European Union’s upcoming Carbon Border Mechanism (CBAM). The ministry thus centralizes the annual reporting process, previously handled locally, Bloomberg reported Thursday. According to Bloomberg, the goal is to help exporters meet the requirements of CBAM, which began gathering data in October and officially takes effect in 2026.

In China, CBAM affects the aluminum, cement, steel, petrochemical, chemical, paper and aviation industries, dominated by state-owned enterprises. Factories emitting more than 26,000 metric tons of CO2 equivalent annually in these seven sectors will have to review and, if necessary, adjust their 2022 data in a kind of test run by December, according to the notice posted on the ministry’s website. It also announces a stricter definition for zero-emission electricity, limiting the scope for carbon credits for companies.

Affected sectors will be included in China’s emissions trading system (ETS) no later than 2030, which currently only includes energy companies. Europe’s ETS is far more comprehensive. Therefore, CBAM is to compensate for cost disadvantages for European companies compared to imports from non-European countries without emissions trading or with weaker ETS systems – such as China – with the help of CO2 tariffs.

Building a robust reporting system will help China “tackle the challenges of CBAM,” commented Qin Yan, lead carbon and power analyst at the London Stock Exchange Group. For example, China’s steel companies have “a variety of production lines with products of different level of emissions-intensity.” Emissions reporting allows China’s exporters to supply greener products to the EU and the dirtier ones to other markets without carbon tariffs,” said Qin. ck

Taliban want to join BRI

Afghanistan’s ruling Taliban Islamists want to join China’s multi-billion dollar New Silk Road trade project. A delegation will be sent to the People’s Republic for corresponding talks, acting Commerce Minister Haji Nooruddin Azizi told Reuters. “We requested China to allow us to be a part of the China-Pakistan Economic Corridor and Belt and Road Initiative,” Azizi said. The Pakistan “economic corridor” refers to the huge flagship section of the Belt and Road Initiative (BRI) in Afghanistan’s neighbor. China’s President Xi Jinping welcomed representatives from more than 130 countries to Beijing this week to mark the tenth anniversary of the New Silk Road.

Afghanistan can offer China a wealth of coveted mineral resources. Several Chinese companies are already operating in the country, including the Metallurgical Corp. of China, which has been in talks with the Taliban government and the previous Western-backed government on developing a large copper mine.

Beijing has sought to develop its ties with the Taliban-run government since it took over in 2021, even though no other foreign government has recognized the administration. Last month, China became the first country to appoint an ambassador to Kabul, with other nations retaining previous ambassadors or appointed heads of mission in a charge d’affaires capacity that does not involve formally presenting credentials to the government. rtr

TSMC expects increased demand from car companies

Taiwanese chip world market leader TSMC expects semiconductor demand for the automotive industry to recover in the coming year after a weak period. Overall, the automotive industry is becoming a bigger and bigger customer for chipmakers, the company said. “More and more electric cars are being made, and more and more functions are being added to cars,” CEO C.C. Wei said Thursday at the company’s quarterly results presentation.

Wei said economic problems in China were the biggest uncertainty factor for the industry. Low demand for electronics from the People’s Republic had contributed to a drop in profits for TSMC. Despite the decline of one-fourth, the company was still left with a profit of 211 billion Taiwan dollars, a good six billion euros. For the coming year, Wei expects an overall recovery in demand for smartphones and PCs in China and worldwide. fin

The problematic stance on Israel

Four Chinese citizens were confirmed dead, two missing, and six injured during the current Hamas-Israel conflicts. No further information about them was revealed, and few bothered to ask.

However, a half-Chinese woman, whose image of being kidnapped by Hamas militants went viral, triggered significant interest among the Chinese public. One day after the October 7 massacre, the Israeli embassy in Beijing, said through Weibo (the Chinese equivalent of Twitter) that the woman, Noa Argamini, is of mixed Chinese-Israeli descent and was born in Beijing.

Then her mother, Liora Argamini, shared the family’s story with the press. Liora, whose Chinese name is Li Chong Hong, is a native of Wuhan. She went to Israel in the mid-1990s for professional training, met her future husband there, decided to stay, and eventually settled down in the city of Be’er Sheva. Noa was not born in Beijing but in Israel. They are now both Israeli citizens.

In interviews, the mother called on China for help to rescue Noa. Her comments and appeal further intensified Chinese audiences’ interest, sending “the mixed Chinese-Israeli girl” to the top of the trending topics on Weibo.

However, the prevailing opinion is that she has nothing to do with China. The underlying reason for the indifferent, even hostile, attitude is the Chinese Government’s more pronounced pro-Palestine stance in the Israel-Palestine conflicts.

Hostilities against the young woman

Only last year, another half-Chinese woman, Eileen Gu, became a superstar in China by winning two gold medals at the Beijing Winter Olympics.

Gu was born to a Chinese mother and an American father in the United States and grew up there. She represented the US in international competitions until 2019 but switched to China for the 2022 Olympics. She never gave a straightforward answer to questions about her citizenship, which remained shrouded in secrecy until now.

Having Gu on the Chinese team turned out to be a strategic move for China, which had always been desperate to rank high in gold medals. With Gu’s contribution, China finished in third place with nine gold medals, surpassing the US, which got eight.

Despite the already strained China-US relations, the Chinese public, under heavy government influence, overlooked the ambiguity surrounding Gu’s citizenship and her US background, and embraced the “pride” she brought to China.

But what can Noa Argamini bring to China? In the Chinese Government’s perception, probably nothing good.

When asked about her on October 9, a China’s foreign ministry spokeswoman said, “We have no knowledge about her. We are checking.” Since then, China has made no further official comment on Noa Argamini.

Her mother Argamini, with her problematic communication skills, was also very unhelpful in influencing public opinion in China.

Unlike the public relations-savvy Eileen Gu, Liora Argamini didn’t try to evade questions about the citizenship of Noa and herself. But in a video interview with a Phoenix TV journalist, she said emotionlessly: “Even if I am an Israeli citizen, can’t you Chinese help us? Do you understand what I am saying? Helping others is an obligation for everybody.”

Unkind comments about Noa were already circulating on the Chinese internet before the mother gave interviews. After she made this catastrophic comment, more people joined the chorus, stating that the family doesn’t deserve help.

Even harsher comments and rumors surfaced: The Israeli embassy purposefully misstated Noa’s birthplace to arouse sympathy; The mother was a traitor because she was on Chinese funds when she went to Israel; She was among those granted residence permits in Israel in the aftermath of the Tiananmen massacre; Noa is not a university student, as claimed by the mother; she is a soldier fighting in the war.

Public opinion is easily manipulated

Until last week, most Chinese considered the Israel-Palestine conflicts irrelevant to them. Although names such as Gaza and the West Bank often appeared in the news, few understood why all these had happened.

Despite its close alliance with the United States, Israel had been perceived in China as an admirable, friendly country that survived and thrived in an extremely hostile environment. Jewish people were seen as clever and hardworking. Even a hugely popular Chinese book called “Currency Wars,” which claimed that the United States was controlled by Jewish financiers, didn’t significantly tarnish the generally positive image of Jewish people. Every now and then, stories about how the Chinese helped Jewish people in the 1930s and 1940s would be recounted.

Things seemed to have changed overnight. All of a sudden, Israel is portrayed as being responsible for the entire Israel-Palestine tragedy. This is an indication that the Chinese Government’s stance on the issue has changed, moving closer to the Palestine side. It also explains why the Chinese government has been relatively silent about the Chinese victims in the Hamas attack.

Futuristic, traditional, artistic: The 81st World Science Fiction Convention WorldCon is being held at the Science Fiction Museum in Chengdu, Sichuan. The theme: Meet the future. More than 200 activities, including roundtable discussions, salons and exhibitions, focus on the relationship between the city and the future. Visitors can also meet fantasy figures like this cosmic dancer, as well as famous science fiction authors, including Robert J. Sawyer and Liu Cixin.

CHINA.TABLE EDITORIAL OFFICE

Amelie
Richter

Marcel
Grzanna

Fabian
Peltsch

Julia
Fiedler

Angela
Köckritz

Jörn
Petring

Dear reader,

The EU aims to secure a long-term slice of the battery business with the Batteries Regulation. Brussels wants to shape the value chains of this key technology in a way that prevents reckless dependence on third countries, above all, on the world market leader China.

The EU’s ambitious plans put Chinese manufacturers under pressure – after all, Europe is their biggest export market. But Christian Domke-Seidel writes that China’s industry has not received the regulation quite as negatively as many would think. On the contrary: For many companies, the new requirements are even an incentive to increase their investments in Europe. Because those who comply with the requirements have a better chance of establishing a fast and broad foothold in this attractive market.

A controversial issue between Europe and China, on the other hand, remains forced labor in supply chains. As has now become known, Uyghurs are reportedly processing fish and seafood for the European market in China’s coastal provinces against their will.

This raises the question of how the import conditions of goods from Xinjiang can be further tightened. The problem: Beijing distributes Uyghur labor to other parts of China, and this makes identifying forced labor much more difficult. Marcel Grzanna’s analysis shows how the forced integration of people into the nationwide job market happens and what consequences the EU can still draw.

Your
Fabian Peltsch

EU Battery Regulation as an incentive

By

Christian Domke Seidel

The Battery Regulation is a highly ambitious project of the European Union. It is about structuring a product’s entire life cycle and value chain more sustainably. The aim is to create a circular economy that makes Europe less dependent on third countries. Due to the transport and energy transition, batteries are considered one of the key industries of the future. So far, Europe has been highly dependent on China, which, according to the European Court of Auditors, accounted for a full 76 percent of global production capacity in 2021.

Battery Regulation aims to re-regulate the market

And it is a lucrative business field. The consulting firm McKinsey calculates that the demand for lithium-ion batteries will increase by 27 percent annually through 2030 – from 700 gigawatt to 4.7 terawatt hours. This will create a market with a turnover of 400 billion dollars along the value chain. The Battery Regulation is intended to secure Europe’s market share in the long term.

To achieve this, the Battery Regulation focuses, among other things, on the following core instruments:

Distributors of batteries must disclose the carbon footprint of a battery. Independent third parties must verify the information beforehand. In addition, upper caps will be gradually introduced.
Every battery (over 2 kWh and traction batteries) must have a digital battery passport from 2027. This will contain 90 pieces of information on, among other things, the materials used, the repair and the recycling process.
From 2025 onwards, targets for recycling efficiency, material recovery and recycled content will be gradually introduced.
The distributors are responsible for social and environmental risks along the entire value chain.