The President of the EU Chamber of Commerce in Beijing has likened China’s industrial policy to a slow-motion train wreck. Slowly but surely, significant damage is being inflicted and the question arises: Who will play the role of the bystander – those individuals who merely gawk and get in the way while others clean up the mess?
Enough with the metaphors, let’s delve into reality: State subsidies from China are forcing European industries to their knees, as Amelie Richter reports. Solar energy serves as a prominent example from the past, while electromobility represents a current real-time challenge. Therefore, Chamber President Eskelund urgently warns against a trade war. After all, what else can EU countries do besides imposing tariffs on dumped products from China? Stand by idly?
Recently, Mercedes CEO Ola Kaellenius called for the abolition of all tariffs and advocated for free competition. Perhaps the corporate boss should also simultaneously demand an end to the overcapacity of Chinese industries. This would eliminate one reason for tariffs.
Then German automotive suppliers would have fewer headaches. They are already struggling in the Chinese market to avoid being sidelined by Chinese competitors in the long run. Dumping prices are not the main issue there; rather, it’s excessively long development times, as reported by Julia Fiedler.
We Germans know all too well how difficult it is for us to abandon tried-and-true processes because new players are changing the rules. If we – or rather, German companies – don’t adapt, then perhaps a slow-motion pile-up is inevitable.
European companies in China are facing mounting pressure. EU Chamber of Commerce chief Jens Eskelund summed up the situation on Wednesday by likening the current state of trade relations between Brussels and Beijing to a “slow-motion train wreck” during the presentation of the Chamber’s report on economic security in an increasingly geopolitically charged environment (“Riskful thinking: navigating the politics of economic security”) in collaboration with consulting firm China Macro Group.
China’s export-oriented growth with current overcapacity threatens to hollow out European industries such as the solar and electric vehicle sectors in the long run and could provoke a new trade war, warned the EU Chamber in its report. Eskelund stated that he doesn’t believe Europe will accept deindustrialization because China is exporting its excess capacity. “Something needs to happen soon,” he said.
Due to the more politicized business climate compared to the previous year, companies need to allocate more resources to risk prevention, writes the EU Chamber of Commerce. Resources could be better invested in product and service development rather than increasing budgets for risk assessments and compliance measures. The situation in the People’s Republic is leading to significant efficiency losses for companies, raising operating costs, hampering innovation, and ultimately resulting in higher costs passed on to consumers. The Chinese market has become less predictable.
Concerns also arise from the legal environment in the People’s Republic: “China’s comprehensive legal toolkit for retaliation against what it sees as foreign interference and long-arm jurisdiction allows the Chinese government to sanction certain foreign companies or individuals, thereby disrupting their business in China by, for example, restricting their investments or market access in China,” write the analysts in their report.
The requirements for more “local content” are also showing their effect: In the efforts for self-sufficiency, China has replaced some imports with incentives or “pressure” at the provincial or municipal level by Chinese or China-based suppliers, resulting in “significant disadvantages” for European companies. The report cites public procurement for IT hardware or medical devices as an example.
It is natural for all global actors to strive to ensure the security of their respective economies, said Eskelund. However, this should be done in a way that minimally affects business activities. “Measures taken in the name of risk management and strengthening economic security should be proportionate, targeted and precise and should never serve as a cover for protectionism.” Beijing also urgently needs to address the issue of overcapacity.
The occurrence of overcapacity in China is currently due to the lack of market mechanisms in the People’s Republic, according to a former president of the EU Chamber in China quoted by dpa at a panel discussion on Wednesday. According to him, many of the approximately 150,000 state-owned enterprises and the roughly 140 automotive companies would have to go bankrupt, which does not happen due to local subsidies. Therefore, the problem of oversupply can only be seriously addressed if companies go bankrupt, as in a market economy.
China’s industrial policy also overly supports manufacturers on the supply side rather than the consumer side, according to another former Chamber president. “If you want to use subsidies, give them to the consumer. That helps prevent the problems China has gotten into,” he said.
Increased industrial investments coupled with low domestic demand and consumption had led to the overcapacity of Chinese industrial goods. Economic activities in China, including consumption and industrial production, had recovered better than expected in the first two months of the year. However, there are concerns that the recovery may only be temporary.
Brussels is currently trying to address the significant trade deficit the EU has with China. This reached a record high of around 400 billion euros in 2022. Last year, it then dropped to around 290 billion euros, according to data from the EU Commission. Overall, trade between the People’s Republic and the EU has declined recently, also in the current year: In the first two months of the year, according to Chinese customs data, total trade between the EU and China decreased by 4.1 percent compared to the previous year.
Tensions between China and the European Union escalated when Brussels launched an anti-subsidy investigation into China’s exports of electric vehicles last October. Imports of electric vehicles into the EU had fallen by more than a third at the beginning of the year. The EU Commission has begun registering imports to prevent panic buying ahead of possible temporary tariffs starting in July.
Accelerating a German supplier to the speed now demanded by Chinese automakers is no easy task. Their structures, which have undoubtedly proven themselves over many years, are increasingly cumbersome. Young Chinese EV start-ups, some of which are barely ten years old or younger, are agile and willing to take risks.
It sounds like a cultural shift: German companies must abandon their cherished precision and ramp up their processes if they want to compete against Chinese rivals. Not only in the automotive industry, but especially there. “Contracts are often awarded to suppliers based on speed,” says Johann Wieland, former CEO of BMW Brilliance Automotive in Beijing.
Chinese automakers bring new products to market on average a year earlier than German manufacturers. This means their investments in research and development yield profits more quickly. However, they need suppliers who can keep up with the pace. In return, manufacturers are also willing to pay more.
Suppliers do not follow the sales market, but production. And there have been tectonic shifts in production over the past 20 years. In 2000, the United States was the world’s largest automobile production site, but today it is China. From 2000 to 2022, China’s share of the global market increased ninefold. During the same period, production in the United States, Japan, Germany and Spain halved.
“The self-propelled ‘Made in Germany’ no longer exists,” agreed the guests of the first China.Table Toolbox. Frederik Gollob led sales for Daimler in China and was CEO of Mercedes-Benz Hong Kong. Together with Johann Wieland, he founded the consulting firm Qi Advisory. They discussed the question: “German suppliers and Chinese automakers – opportunities and pitfalls.”
Take Bosch, for example: The Swabians may call themselves the world’s largest automotive supplier, but for how long? In 2022, ZF Friedrichshafen was already kicked out of the top 3 – by battery manufacturer CATL. Germany’s suppliers have lost nearly three percent of the global market share in three years, while Asian competitors have gained four percent.
German manufacturers like Volkswagen, BMW and Mercedes-Benz have also contributed to this, with their huge investments in Chinese factories, says Wieland. This has also contributed to the growth of the Chinese supplier industry. In China, a large proportion of the components for a car must be produced domestically. The share of local content now stands at around 60 percent. The remaining 40 percent may be imported. Authorities mandate local content – but companies now also tap into the local supply industry out of self-interest.
Locally sourced components are not only cheaper, but the quality of what is produced in China today has improved significantly, says Wieland. Especially in the last five to six years, Chinese suppliers have caught up, especially in infotainment, software and electric drives. They are already ahead in some technologies.
The question is: How can German suppliers participate in the future? According to Frederik Gollob, the first step is to understand the market because Chinese customers think differently. This starts with connectivity, autonomous driving, and software in general. Chinese customers also want to watch a movie with their family in the car or sleep in it. Scenarios that are less common in Germany.
Also important: knowing the product development process of Chinese manufacturers. Instead of going through multi-stage validation processes with multiple models like German companies, much work in China is done with simulations.
Nevertheless, Gollob and Wieland advise companies to face the competition. It can be useful to relocate part of the production to China and develop products in China, say the consultants. The key: Local teams must be able to drive development processes and product innovations independently. The more decision-making freedom the Chinese organization has, the faster and more competitive it will be, says Gollob.
Companies willing to take the step to China can find support at a division of the Association of the Automotive Industry, QMC in Shanghai. A suitable Chinese joint venture partner can also contribute to success by opening doors, helping to solve problems and also having relationships with authorities and associations.
Among Katja Schmidt-Wistoff‘s favorite authors are Georg Büchner, Franz Kafka, Siegfried Lenz, Thomas Bernhard and Juli Zeh. “I highly recommend them to the students,” she says. The students, in her case, are the adolescents of the German Embassy School in Beijing. Schmidt-Wistoff has been working at the German school in the Chinese capital as head of the library for 13 years now. For the 58-year-old, this position at the German school in the Chinese capital is an ideal opportunity to pass on her passion for literature to the students.
Born in 1965 in Freiburg im Breisgau, Katja Schmidt-Wistoff didn’t stay there long. She moved with her parents to Erlangen, in Franconia, later to North Rhine-Westphalia, in the town of Godesberg, where she completed her high school education. She then studied and earned her doctorate at the University of Bonn. Her time in China began in 2005. “It was always my goal to live and teach abroad,” says Schmidt-Wistoff, who applied for the position of lecturer at the German Academic Exchange Service (DAAD) – and succeeded.
At Peking University, she taught Chinese master’s students in literature theory and literary history. In 2010, Schmidt-Wistoff took over as head of the library at the German Embassy School in Beijing. “Back then, the library was largely managed by volunteers.”
Since she started, much has changed in the school, largely due to Schmidt-Wistoff’s influence. First and foremost, she expanded the literary collection. Currently, students, as well as adults, have access to 20,000 media items. Schmidt-Wistoff also fostered enthusiasm for reading among the students beyond the library’s basic functions. She pondered: “What else can a school library achieve besides lending books? What could I offer?“
She began organizing events. Katja Schmidt-Wistoff ensured that starting in 2014, prominent figures from culture, politics and society were invited to the school under the motto “Beijing luminaries read at DSP“. Participants have included the writer Martin Walser, the comedian Dieter Nuhr, and even the German ambassador to China.
Another one of her projects is the so-called Beijing Talk. Under her guidance, students from the 11th grade invite guests and organize a kind of talk show in front of an audience. Last year, the German musician SCOR, who raps in Chinese, was a guest. “That was an absolute highlight,” says Schmidt-Wistoff, “because the event appealed to all generations, whether students, parents or teachers.”
Managing a library at a Chinese school also comes with challenges. For instance, it’s difficult to obtain certain works. “Authorities now closely monitor whether literature critical of China is being ordered,” says Schmidt-Wistoff. She recalls a calendar that was stamped because it depicted Taiwan as not explicitly belonging to China. Another time, a children’s vampire book couldn’t be ordered because it allegedly “corrupted” the youth, says Schmidt-Wistoff. “We’ve slowly developed a sense of what’s possible and what’s not.“
In her free time, she pursues her second great passion: music. Schmidt-Wistoff doesn’t just sing in one choir, but in five. “There are so many opportunities in Beijing,” says Schmidt-Wistoff. One keeps discovering something new. “Challenges and opportunities to try things out.” Just recently, she took over the leadership of one of the choirs. Dayan Djajadisastra
In Shenzhen, the Milan-Shenzhen Lifestyle Week kicked off. Over the coming days, the focus in the southern Chinese metropolis will primarily be on fashion, manufacturing and music at numerous events. For the People’s Republic, this event is another step towards building cultural soft power. China aims not only to export its industrial products worldwide but also to disseminate parts of its culture to exert greater influence on the world – akin to how Americans have succeeded with Mickey Mouse, Coca-Cola, fast food and Hollywood.
The President of the EU Chamber of Commerce in Beijing has likened China’s industrial policy to a slow-motion train wreck. Slowly but surely, significant damage is being inflicted and the question arises: Who will play the role of the bystander – those individuals who merely gawk and get in the way while others clean up the mess?
Enough with the metaphors, let’s delve into reality: State subsidies from China are forcing European industries to their knees, as Amelie Richter reports. Solar energy serves as a prominent example from the past, while electromobility represents a current real-time challenge. Therefore, Chamber President Eskelund urgently warns against a trade war. After all, what else can EU countries do besides imposing tariffs on dumped products from China? Stand by idly?
Recently, Mercedes CEO Ola Kaellenius called for the abolition of all tariffs and advocated for free competition. Perhaps the corporate boss should also simultaneously demand an end to the overcapacity of Chinese industries. This would eliminate one reason for tariffs.
Then German automotive suppliers would have fewer headaches. They are already struggling in the Chinese market to avoid being sidelined by Chinese competitors in the long run. Dumping prices are not the main issue there; rather, it’s excessively long development times, as reported by Julia Fiedler.
We Germans know all too well how difficult it is for us to abandon tried-and-true processes because new players are changing the rules. If we – or rather, German companies – don’t adapt, then perhaps a slow-motion pile-up is inevitable.
European companies in China are facing mounting pressure. EU Chamber of Commerce chief Jens Eskelund summed up the situation on Wednesday by likening the current state of trade relations between Brussels and Beijing to a “slow-motion train wreck” during the presentation of the Chamber’s report on economic security in an increasingly geopolitically charged environment (“Riskful thinking: navigating the politics of economic security”) in collaboration with consulting firm China Macro Group.
China’s export-oriented growth with current overcapacity threatens to hollow out European industries such as the solar and electric vehicle sectors in the long run and could provoke a new trade war, warned the EU Chamber in its report. Eskelund stated that he doesn’t believe Europe will accept deindustrialization because China is exporting its excess capacity. “Something needs to happen soon,” he said.
Due to the more politicized business climate compared to the previous year, companies need to allocate more resources to risk prevention, writes the EU Chamber of Commerce. Resources could be better invested in product and service development rather than increasing budgets for risk assessments and compliance measures. The situation in the People’s Republic is leading to significant efficiency losses for companies, raising operating costs, hampering innovation, and ultimately resulting in higher costs passed on to consumers. The Chinese market has become less predictable.
Concerns also arise from the legal environment in the People’s Republic: “China’s comprehensive legal toolkit for retaliation against what it sees as foreign interference and long-arm jurisdiction allows the Chinese government to sanction certain foreign companies or individuals, thereby disrupting their business in China by, for example, restricting their investments or market access in China,” write the analysts in their report.
The requirements for more “local content” are also showing their effect: In the efforts for self-sufficiency, China has replaced some imports with incentives or “pressure” at the provincial or municipal level by Chinese or China-based suppliers, resulting in “significant disadvantages” for European companies. The report cites public procurement for IT hardware or medical devices as an example.
It is natural for all global actors to strive to ensure the security of their respective economies, said Eskelund. However, this should be done in a way that minimally affects business activities. “Measures taken in the name of risk management and strengthening economic security should be proportionate, targeted and precise and should never serve as a cover for protectionism.” Beijing also urgently needs to address the issue of overcapacity.
The occurrence of overcapacity in China is currently due to the lack of market mechanisms in the People’s Republic, according to a former president of the EU Chamber in China quoted by dpa at a panel discussion on Wednesday. According to him, many of the approximately 150,000 state-owned enterprises and the roughly 140 automotive companies would have to go bankrupt, which does not happen due to local subsidies. Therefore, the problem of oversupply can only be seriously addressed if companies go bankrupt, as in a market economy.
China’s industrial policy also overly supports manufacturers on the supply side rather than the consumer side, according to another former Chamber president. “If you want to use subsidies, give them to the consumer. That helps prevent the problems China has gotten into,” he said.
Increased industrial investments coupled with low domestic demand and consumption had led to the overcapacity of Chinese industrial goods. Economic activities in China, including consumption and industrial production, had recovered better than expected in the first two months of the year. However, there are concerns that the recovery may only be temporary.
Brussels is currently trying to address the significant trade deficit the EU has with China. This reached a record high of around 400 billion euros in 2022. Last year, it then dropped to around 290 billion euros, according to data from the EU Commission. Overall, trade between the People’s Republic and the EU has declined recently, also in the current year: In the first two months of the year, according to Chinese customs data, total trade between the EU and China decreased by 4.1 percent compared to the previous year.
Tensions between China and the European Union escalated when Brussels launched an anti-subsidy investigation into China’s exports of electric vehicles last October. Imports of electric vehicles into the EU had fallen by more than a third at the beginning of the year. The EU Commission has begun registering imports to prevent panic buying ahead of possible temporary tariffs starting in July.
Accelerating a German supplier to the speed now demanded by Chinese automakers is no easy task. Their structures, which have undoubtedly proven themselves over many years, are increasingly cumbersome. Young Chinese EV start-ups, some of which are barely ten years old or younger, are agile and willing to take risks.
It sounds like a cultural shift: German companies must abandon their cherished precision and ramp up their processes if they want to compete against Chinese rivals. Not only in the automotive industry, but especially there. “Contracts are often awarded to suppliers based on speed,” says Johann Wieland, former CEO of BMW Brilliance Automotive in Beijing.
Chinese automakers bring new products to market on average a year earlier than German manufacturers. This means their investments in research and development yield profits more quickly. However, they need suppliers who can keep up with the pace. In return, manufacturers are also willing to pay more.
Suppliers do not follow the sales market, but production. And there have been tectonic shifts in production over the past 20 years. In 2000, the United States was the world’s largest automobile production site, but today it is China. From 2000 to 2022, China’s share of the global market increased ninefold. During the same period, production in the United States, Japan, Germany and Spain halved.
“The self-propelled ‘Made in Germany’ no longer exists,” agreed the guests of the first China.Table Toolbox. Frederik Gollob led sales for Daimler in China and was CEO of Mercedes-Benz Hong Kong. Together with Johann Wieland, he founded the consulting firm Qi Advisory. They discussed the question: “German suppliers and Chinese automakers – opportunities and pitfalls.”
Take Bosch, for example: The Swabians may call themselves the world’s largest automotive supplier, but for how long? In 2022, ZF Friedrichshafen was already kicked out of the top 3 – by battery manufacturer CATL. Germany’s suppliers have lost nearly three percent of the global market share in three years, while Asian competitors have gained four percent.
German manufacturers like Volkswagen, BMW and Mercedes-Benz have also contributed to this, with their huge investments in Chinese factories, says Wieland. This has also contributed to the growth of the Chinese supplier industry. In China, a large proportion of the components for a car must be produced domestically. The share of local content now stands at around 60 percent. The remaining 40 percent may be imported. Authorities mandate local content – but companies now also tap into the local supply industry out of self-interest.
Locally sourced components are not only cheaper, but the quality of what is produced in China today has improved significantly, says Wieland. Especially in the last five to six years, Chinese suppliers have caught up, especially in infotainment, software and electric drives. They are already ahead in some technologies.
The question is: How can German suppliers participate in the future? According to Frederik Gollob, the first step is to understand the market because Chinese customers think differently. This starts with connectivity, autonomous driving, and software in general. Chinese customers also want to watch a movie with their family in the car or sleep in it. Scenarios that are less common in Germany.
Also important: knowing the product development process of Chinese manufacturers. Instead of going through multi-stage validation processes with multiple models like German companies, much work in China is done with simulations.
Nevertheless, Gollob and Wieland advise companies to face the competition. It can be useful to relocate part of the production to China and develop products in China, say the consultants. The key: Local teams must be able to drive development processes and product innovations independently. The more decision-making freedom the Chinese organization has, the faster and more competitive it will be, says Gollob.
Companies willing to take the step to China can find support at a division of the Association of the Automotive Industry, QMC in Shanghai. A suitable Chinese joint venture partner can also contribute to success by opening doors, helping to solve problems and also having relationships with authorities and associations.
Among Katja Schmidt-Wistoff‘s favorite authors are Georg Büchner, Franz Kafka, Siegfried Lenz, Thomas Bernhard and Juli Zeh. “I highly recommend them to the students,” she says. The students, in her case, are the adolescents of the German Embassy School in Beijing. Schmidt-Wistoff has been working at the German school in the Chinese capital as head of the library for 13 years now. For the 58-year-old, this position at the German school in the Chinese capital is an ideal opportunity to pass on her passion for literature to the students.
Born in 1965 in Freiburg im Breisgau, Katja Schmidt-Wistoff didn’t stay there long. She moved with her parents to Erlangen, in Franconia, later to North Rhine-Westphalia, in the town of Godesberg, where she completed her high school education. She then studied and earned her doctorate at the University of Bonn. Her time in China began in 2005. “It was always my goal to live and teach abroad,” says Schmidt-Wistoff, who applied for the position of lecturer at the German Academic Exchange Service (DAAD) – and succeeded.
At Peking University, she taught Chinese master’s students in literature theory and literary history. In 2010, Schmidt-Wistoff took over as head of the library at the German Embassy School in Beijing. “Back then, the library was largely managed by volunteers.”
Since she started, much has changed in the school, largely due to Schmidt-Wistoff’s influence. First and foremost, she expanded the literary collection. Currently, students, as well as adults, have access to 20,000 media items. Schmidt-Wistoff also fostered enthusiasm for reading among the students beyond the library’s basic functions. She pondered: “What else can a school library achieve besides lending books? What could I offer?“
She began organizing events. Katja Schmidt-Wistoff ensured that starting in 2014, prominent figures from culture, politics and society were invited to the school under the motto “Beijing luminaries read at DSP“. Participants have included the writer Martin Walser, the comedian Dieter Nuhr, and even the German ambassador to China.
Another one of her projects is the so-called Beijing Talk. Under her guidance, students from the 11th grade invite guests and organize a kind of talk show in front of an audience. Last year, the German musician SCOR, who raps in Chinese, was a guest. “That was an absolute highlight,” says Schmidt-Wistoff, “because the event appealed to all generations, whether students, parents or teachers.”
Managing a library at a Chinese school also comes with challenges. For instance, it’s difficult to obtain certain works. “Authorities now closely monitor whether literature critical of China is being ordered,” says Schmidt-Wistoff. She recalls a calendar that was stamped because it depicted Taiwan as not explicitly belonging to China. Another time, a children’s vampire book couldn’t be ordered because it allegedly “corrupted” the youth, says Schmidt-Wistoff. “We’ve slowly developed a sense of what’s possible and what’s not.“
In her free time, she pursues her second great passion: music. Schmidt-Wistoff doesn’t just sing in one choir, but in five. “There are so many opportunities in Beijing,” says Schmidt-Wistoff. One keeps discovering something new. “Challenges and opportunities to try things out.” Just recently, she took over the leadership of one of the choirs. Dayan Djajadisastra
In Shenzhen, the Milan-Shenzhen Lifestyle Week kicked off. Over the coming days, the focus in the southern Chinese metropolis will primarily be on fashion, manufacturing and music at numerous events. For the People’s Republic, this event is another step towards building cultural soft power. China aims not only to export its industrial products worldwide but also to disseminate parts of its culture to exert greater influence on the world – akin to how Americans have succeeded with Mickey Mouse, Coca-Cola, fast food and Hollywood.
