Investments by Chinese companies in Europe are increasingly shifting to greenfield sites. Or to put it another way: Chinese companies now prefer to build their factories directly in Europe instead of acquiring companies. The target industry is primarily mobility.
This development bears dramatic news for the German car industry, writes Michael Radunski: BMW, VW and others are not just about to lose the huge sales market in China. Rather, it seems that China’s companies feel ready to take competition in the automotive sector to Europe now.
But this did not come as a surprise. For decades, foreign companies have had to hand over their know-how to China in return for successful business. Everyone knew that this was a bad deal. But few cared. Mobility would merely join a list of industries that were once dominated by European – and especially German – companies before the Chinese competition took over the reins.
Our second analysis also focuses on Chinese companies. But on those now being sanctioned by the European Union for presumably supplying the Russian war apparatus with important components. These sanctions will certainly spoil the mood when Foreign Minister Qin Gang visits German Foreign Minister Annalena Baerbock in Berlin today. But the two are already used to a sour atmosphere when dealing with each other. Maybe a few sanctions will not make a big difference.
The EU apparently plans to target Chinese companies for military deliveries to Russia. In a new round of sanctions, the focus will be on the implementation of and compliance with EU sanctions against Russia, a spokesperson for the EU Commission stated in Brussels on Monday.
The spokesperson emphasized that the planned eleventh sanctions package relating to the Ukraine war focuses on the effectiveness of the punitive measures and how they can be prevented from being circumvented. For the first time, Chinese companies could also be sanctioned. However, the Commission spokesperson did not give further details, for instance, who is on the sanctions list.
According to a report by the news agency Reuters, among other things, the assets of seven Chinese companies in the EU could be frozen. Reuters cites several Brussels diplomats.
The EU ambassadors will first discuss the package on Wednesday. The aim is to adopt the eleventh sanctions package before the end of the month. According to a report in the British Financial Times, respective companies are accused of selling equipment with potential military use to Russia.
Presumably, two companies from Mainland China are on the list:
In addition, there are five other companies from Hong Kong:
3HC Semiconductors, King-Pai Technology as well as Sinno Electronics and Sigma Technology, are already on the US Treasury Department’s sanctions list.
Considering the “key role of electronic components” in Russia’s war against Ukraine, it is “appropriate” to include foreign countries that circumvent trade restrictions and supply Russia’s military and industrial complex with electronic components, the EU Commission’s proposal reportedly says.
3HC Semiconductors allegedly attempted to circumvent export controls by purchasing parts from the US and shipping them to Russia, and King-Pai Technology allegedly delivered microelectronics with defense applications.
Brussels has so far avoided targeting Chinese companies. There has been no conclusive evidence that China is supplying weapons to Russia. However, reports and the analysis of customs data have shown that China exports dual-use goods to Russia. These include, for example, drones like the Mugin-5 drone. Dual-use products can be used for civilian and military purposes. CQ-A rifles also recently turned up in customs data. These were marked as civilian hunting rifles.
The goods are mostly shipped to Russia via Turkey and the United Arab Emirates. Many products from the European Union have not been allowed to be exported to Russia for months. In addition to dual-use goods, these include certain types of machinery, vehicles, or semiconductors.
With Chinese companies, the EU sanctions would now, for the first time, include an extraterritorial component. According to EU circles, it is planned first to create the legal basis for restricting exports to non-EU countries on the grounds of suspected circumvention of sanctions. Should this prove insufficient, certain exports could actually be banned as a second step. However, all 27 member states must unanimously decide on such a step.
The government in Beijing has already preemptively warned the EU against imposing sanctions related to the Ukraine war: If such a step were to be taken, bilateral relations would deteriorate, the Chinese Foreign Ministry said on Monday. China would then take firm measures to protect its interests.
The principle of extraterritoriality has been applied in the past, for example, in the case of US sanctions against Iran. In 2018, the Trump administration decided to withdraw from the Iranian nuclear agreement and enforce a “maximum pressure” strategy to reimpose sanctions on the regime in Tehran that had previously been lifted under the international agreement.
The US authorities used extraterritoriality, also called secondary sanctions, to punish non-US companies that still conducted business with Iran. Fearing reprisals, many European companies withdrew from the Iranian market. Brussels sharply criticized Washington at the time for the move.
China’s investments in Europe are decreasing. In 2022, the volume was down 22 percent year-on-year, according to a recent study by the Mercator Institute for China Studies (Merics) and the Rhodium Group. Compared to 2016, it even declined by 83 percent.
But China’s investments in the EU and the UK have not only slowed down; they have also fundamentally changed. It is now mainly greenfield investment, targeting one industry sector in particular: The production of EV batteries. Europe has thus become an important part of the global expansion of Chinese EVs, the study’s editors write.
There are many striking examples: The Chinese battery manufacturer CATL is building a factory in Hungary for 7.6 billion euros, Svolt in Germany for around 2 billion euros or Envision AESC in France for another 2 billion euros. Battery investments are thus the new mainstay of Chinese investments in Europe, says the Merics/Rhodium study.
The important findings of the study are:
The study shows two fundamental novelties in particular: The nature of Chinese investment has changed, as has the targeted sector.
For years, Beijing concentrated mainly on classic M&A operations, i.e., Chinese corporations’ mergers and acquisitions of German and European companies. For example, the purchase of the German robotics company Kuka, founded in Augsburg in 1898, by the Chinese electronics group Midea made headlines and sparked heated discussions.
But by now, Chinese greenfield investments in Europe have overtaken such M&A activities – for the first time in 20 years. Chinese greenfield investments, for example, amounted to around 4.5 billion euros last year – accounting for 57 percent of total Chinese investments. One reason: China’s companies are becoming increasingly competitive, as most recently CATL with a new battery technology.
This is followed by the second change: China’s greenfield investments in 2022 focused mainly on battery factories for electric cars. “Chinese firms are ploughing billions into the electric vehicle supply chain in Europe,” says Agatha Kratz, President of the US think tank Rhodium Group.
Max Zenglein sees this as an indicator of a global shift. “The changing investment patterns underline the competitiveness of Chinese companies, particularly in electric vehicles,” says the Merics chief economic expert.
This development holds dramatic news for the German car industry: BMW, VW and Co. are not only about to lose the huge sales market in China. Instead, China’s corporations seem ready to bring competition to Europe’s automotive sector.
Furthermore, China’s shifting direct investments also have effects that reach far beyond the direct regions and industries: They are not only important sources of income for the respective regions, creating numerous new jobs. More importantly, China’s corporations are also increasingly given a strategically important role on the continent. “They have become major players in Europe’s green transition,” explains Rhodium President Kratz.
This conclusion should give strategists in Europe who strive for more autonomy food for thought. Europe is also at risk of becoming dependent on China in the energy transition. This can work out well if both sides pursue a common goal. However, there are also cautionary examples, as a look at the fate of the German solar industry or the current developments among Germany’s heat pump manufacturers show.
Just a few weeks after Foreign Minister Annalena Baerbock’s visit to China, she will meet her Chinese counterpart Qin Gang again today, Tuesday. Qin left for a three-country trip to Europe on Monday and will visit France, Norway, and Germany.
Baerbock had traveled to the People’s Republic in mid-April and urged her hosts to use their influence on Moscow more firmly and to condemn the Russian attack on Ukraine. Qin had reacted strongly to criticism of China’s human rights record and its increasingly aggressive stance towards Taiwan, saying that his country did not need to be lectured.
Consequently, the atmosphere in France will probably be a little more relaxed than in Berlin. President Emmanuel Macron earned applause from Chinese state media with his recommendations regarding Europe’s position on the Taiwan question. China has been using contradictory positions in the EU for decades to expand its influence over Europe. grz
The Sino-German Dialogue Forum officially presented the book volume “50 Stimmen” (50 Voices) on Monday, which was compiled to commemorate the 50th anniversary of establishing diplomatic relations. The volume’s editors are Annette Schavan, the German Co-Chair of the Dialogue Forum, and Mikko Huotari, Director of the Mercis Research Institute. The book features 50 individuals with close relations to China. They reflect the state of relations between the two countries. China.Table is a media partner of the project.
Huotari highlighted the importance of engaging with China – especially now. “With the anti-espionage law, conditions for any exchange have become precarious,” the Merics chief said in Berlin. “This contradicts the diplomatic charm offensive after the reopening.” For all the concern about the state of relations, he said, the attempt to understand and the desire for understanding is all the more important. “This volume was born from this impetus.”
The director of the Confucius Institute in Nuremberg, Yan Xu-Lackner, currently sees blockades on both sides. A bloc formation can be observed, she says. “On the Chinese side, the free spaces have become narrower – but on the German side, too, the discourse is narrowing,” she told Table.Media editor Felix Lee, who interviewed some of the 50 contributors to the volume at the event about their China experiences.
The head of the Heinrich Böll Foundation’s office in Beijing, Oliver Radtke, lamented a loss of the capacity for international exchange in China. Radtke moved to the People’s Republic during the pandemic. “I came to a country that had forgotten how to be in exchange with the world.”
Nora Frisch, the founder of the Drachenhaus publishing house, also observes a change in how the West perceives China, which contributes to communication problems. “The power China has obtained is associated with fears of decline.” Frisch said that China has become so powerful that the West would have to convince instead of patronize when dealing with the country. “This is where cultural mediation can make a big difference.”
The event on Monday marked the end of former minister Schavan’s term as German co-chair of the dialogue forum. Schavan sees China’s behavior as the cause of the current dialogue problems. She expressed the wish for more positive signals indicating a willingness to talk. “If China wants the exchange, if China wants active diplomatic relations, then some signs are needed.” The German Foreign Office said that the Dialogue Forum will continue. fin
What began as an adventure in the Australian outback led to an academic career: At the age of 30, Steffi Weil, then manager of an IT consulting firm, decided to take a one-year sabbatical: “I thought it was now or never,” she says. “That was the unexpected beginning of a new life.” Simply taking her mind off things in the vastness of Australia wasn’t her thing, she needed a way to pass the time. So Weil spontaneously enrolled in a short summer school. The focus: Chinese politics – which was followed by a second master’s degree, a joint PhD, and ultimately professorships at the Antwerp Management School and the University of Antwerp.
Weil dedicated her thesis to the potential of effective lobbying in China – and found loopholes in China’s steel-hard shell: “I’ve always wondered how you can influence a system that seems unchangeable from the outside.” This pragmatic streak is not only part of Weil’s nature; it also guides her scientific research. Today, she continues to explore the problems of influence in policymaking, most recently security issues and the impact of Chinese policy ideas on the global governance system.
Weil believes the current task is to look for intellectual approaches not based on Cold War logic: “I think China is looking for diplomatic tools that the West can understand.” And that can be very difficult, she says. While Weil firmly favors making critical industries in the European Union more independent of China, she doubts whether measures such as the EU Chip Act are likely to achieve that. After all, in technological terms, the past twenty years cannot be made up with the snap of a finger.
It will need partnership-based cooperation to become independent of China in the medium term. Measures that lead to the entrenchment of hostilities are counterproductive, she says.
In addition to her own research, Weil devotes much energy to a PhD program for executives, which she is in charge of. It involves a four-year structured curriculum that accompanies top-level executives on their way to a full PhD. Weil wants this program to offer a shortcut between the business and academic worlds. Not least because of the difficulties she personally experienced in making the switch, which she describes as “culture shock.” “We are fully tailored to the needs of executives,” she says about the PhD program.
She supports PhD students in translating their business-related questions into an academic context. In the process, she tries to foster an interplay between practical experience and theoretical methodology. This often leads to remarkable results: “These are people who then shake up academia a bit,” Weil says. It certainly could use a few more of them. Julius Schwarzwaelder
Zibo, an industrial city in the eastern province of Shandong, is China’s most popular tourist destination these days. The reason? Supposedly, it has the best barbecue in the country. The hype was kicked off by a group of students who documented a culinary trip to the previously unknown city on Douyin, the Chinese TikTok. In the meantime, tour buses are lining up outside the food mile of Zibo. Even express trains have been set up to get barbecue-hungry people quicker to their destinations. China’s state media see Zibo as an “exemplary case for old industrial cities seeking transformation.” Critics of the hype speak ironically of “Shandong’s Disneyland,” saying it represents the worst side of consumerism devoid of meaning.
Investments by Chinese companies in Europe are increasingly shifting to greenfield sites. Or to put it another way: Chinese companies now prefer to build their factories directly in Europe instead of acquiring companies. The target industry is primarily mobility.
This development bears dramatic news for the German car industry, writes Michael Radunski: BMW, VW and others are not just about to lose the huge sales market in China. Rather, it seems that China’s companies feel ready to take competition in the automotive sector to Europe now.
But this did not come as a surprise. For decades, foreign companies have had to hand over their know-how to China in return for successful business. Everyone knew that this was a bad deal. But few cared. Mobility would merely join a list of industries that were once dominated by European – and especially German – companies before the Chinese competition took over the reins.
Our second analysis also focuses on Chinese companies. But on those now being sanctioned by the European Union for presumably supplying the Russian war apparatus with important components. These sanctions will certainly spoil the mood when Foreign Minister Qin Gang visits German Foreign Minister Annalena Baerbock in Berlin today. But the two are already used to a sour atmosphere when dealing with each other. Maybe a few sanctions will not make a big difference.
The EU apparently plans to target Chinese companies for military deliveries to Russia. In a new round of sanctions, the focus will be on the implementation of and compliance with EU sanctions against Russia, a spokesperson for the EU Commission stated in Brussels on Monday.
The spokesperson emphasized that the planned eleventh sanctions package relating to the Ukraine war focuses on the effectiveness of the punitive measures and how they can be prevented from being circumvented. For the first time, Chinese companies could also be sanctioned. However, the Commission spokesperson did not give further details, for instance, who is on the sanctions list.
According to a report by the news agency Reuters, among other things, the assets of seven Chinese companies in the EU could be frozen. Reuters cites several Brussels diplomats.
The EU ambassadors will first discuss the package on Wednesday. The aim is to adopt the eleventh sanctions package before the end of the month. According to a report in the British Financial Times, respective companies are accused of selling equipment with potential military use to Russia.
Presumably, two companies from Mainland China are on the list:
In addition, there are five other companies from Hong Kong:
3HC Semiconductors, King-Pai Technology as well as Sinno Electronics and Sigma Technology, are already on the US Treasury Department’s sanctions list.
Considering the “key role of electronic components” in Russia’s war against Ukraine, it is “appropriate” to include foreign countries that circumvent trade restrictions and supply Russia’s military and industrial complex with electronic components, the EU Commission’s proposal reportedly says.
3HC Semiconductors allegedly attempted to circumvent export controls by purchasing parts from the US and shipping them to Russia, and King-Pai Technology allegedly delivered microelectronics with defense applications.
Brussels has so far avoided targeting Chinese companies. There has been no conclusive evidence that China is supplying weapons to Russia. However, reports and the analysis of customs data have shown that China exports dual-use goods to Russia. These include, for example, drones like the Mugin-5 drone. Dual-use products can be used for civilian and military purposes. CQ-A rifles also recently turned up in customs data. These were marked as civilian hunting rifles.
The goods are mostly shipped to Russia via Turkey and the United Arab Emirates. Many products from the European Union have not been allowed to be exported to Russia for months. In addition to dual-use goods, these include certain types of machinery, vehicles, or semiconductors.
With Chinese companies, the EU sanctions would now, for the first time, include an extraterritorial component. According to EU circles, it is planned first to create the legal basis for restricting exports to non-EU countries on the grounds of suspected circumvention of sanctions. Should this prove insufficient, certain exports could actually be banned as a second step. However, all 27 member states must unanimously decide on such a step.
The government in Beijing has already preemptively warned the EU against imposing sanctions related to the Ukraine war: If such a step were to be taken, bilateral relations would deteriorate, the Chinese Foreign Ministry said on Monday. China would then take firm measures to protect its interests.
The principle of extraterritoriality has been applied in the past, for example, in the case of US sanctions against Iran. In 2018, the Trump administration decided to withdraw from the Iranian nuclear agreement and enforce a “maximum pressure” strategy to reimpose sanctions on the regime in Tehran that had previously been lifted under the international agreement.
The US authorities used extraterritoriality, also called secondary sanctions, to punish non-US companies that still conducted business with Iran. Fearing reprisals, many European companies withdrew from the Iranian market. Brussels sharply criticized Washington at the time for the move.
China’s investments in Europe are decreasing. In 2022, the volume was down 22 percent year-on-year, according to a recent study by the Mercator Institute for China Studies (Merics) and the Rhodium Group. Compared to 2016, it even declined by 83 percent.
But China’s investments in the EU and the UK have not only slowed down; they have also fundamentally changed. It is now mainly greenfield investment, targeting one industry sector in particular: The production of EV batteries. Europe has thus become an important part of the global expansion of Chinese EVs, the study’s editors write.
There are many striking examples: The Chinese battery manufacturer CATL is building a factory in Hungary for 7.6 billion euros, Svolt in Germany for around 2 billion euros or Envision AESC in France for another 2 billion euros. Battery investments are thus the new mainstay of Chinese investments in Europe, says the Merics/Rhodium study.
The important findings of the study are:
The study shows two fundamental novelties in particular: The nature of Chinese investment has changed, as has the targeted sector.
For years, Beijing concentrated mainly on classic M&A operations, i.e., Chinese corporations’ mergers and acquisitions of German and European companies. For example, the purchase of the German robotics company Kuka, founded in Augsburg in 1898, by the Chinese electronics group Midea made headlines and sparked heated discussions.
But by now, Chinese greenfield investments in Europe have overtaken such M&A activities – for the first time in 20 years. Chinese greenfield investments, for example, amounted to around 4.5 billion euros last year – accounting for 57 percent of total Chinese investments. One reason: China’s companies are becoming increasingly competitive, as most recently CATL with a new battery technology.
This is followed by the second change: China’s greenfield investments in 2022 focused mainly on battery factories for electric cars. “Chinese firms are ploughing billions into the electric vehicle supply chain in Europe,” says Agatha Kratz, President of the US think tank Rhodium Group.
Max Zenglein sees this as an indicator of a global shift. “The changing investment patterns underline the competitiveness of Chinese companies, particularly in electric vehicles,” says the Merics chief economic expert.
This development holds dramatic news for the German car industry: BMW, VW and Co. are not only about to lose the huge sales market in China. Instead, China’s corporations seem ready to bring competition to Europe’s automotive sector.
Furthermore, China’s shifting direct investments also have effects that reach far beyond the direct regions and industries: They are not only important sources of income for the respective regions, creating numerous new jobs. More importantly, China’s corporations are also increasingly given a strategically important role on the continent. “They have become major players in Europe’s green transition,” explains Rhodium President Kratz.
This conclusion should give strategists in Europe who strive for more autonomy food for thought. Europe is also at risk of becoming dependent on China in the energy transition. This can work out well if both sides pursue a common goal. However, there are also cautionary examples, as a look at the fate of the German solar industry or the current developments among Germany’s heat pump manufacturers show.
Just a few weeks after Foreign Minister Annalena Baerbock’s visit to China, she will meet her Chinese counterpart Qin Gang again today, Tuesday. Qin left for a three-country trip to Europe on Monday and will visit France, Norway, and Germany.
Baerbock had traveled to the People’s Republic in mid-April and urged her hosts to use their influence on Moscow more firmly and to condemn the Russian attack on Ukraine. Qin had reacted strongly to criticism of China’s human rights record and its increasingly aggressive stance towards Taiwan, saying that his country did not need to be lectured.
Consequently, the atmosphere in France will probably be a little more relaxed than in Berlin. President Emmanuel Macron earned applause from Chinese state media with his recommendations regarding Europe’s position on the Taiwan question. China has been using contradictory positions in the EU for decades to expand its influence over Europe. grz
The Sino-German Dialogue Forum officially presented the book volume “50 Stimmen” (50 Voices) on Monday, which was compiled to commemorate the 50th anniversary of establishing diplomatic relations. The volume’s editors are Annette Schavan, the German Co-Chair of the Dialogue Forum, and Mikko Huotari, Director of the Mercis Research Institute. The book features 50 individuals with close relations to China. They reflect the state of relations between the two countries. China.Table is a media partner of the project.
Huotari highlighted the importance of engaging with China – especially now. “With the anti-espionage law, conditions for any exchange have become precarious,” the Merics chief said in Berlin. “This contradicts the diplomatic charm offensive after the reopening.” For all the concern about the state of relations, he said, the attempt to understand and the desire for understanding is all the more important. “This volume was born from this impetus.”
The director of the Confucius Institute in Nuremberg, Yan Xu-Lackner, currently sees blockades on both sides. A bloc formation can be observed, she says. “On the Chinese side, the free spaces have become narrower – but on the German side, too, the discourse is narrowing,” she told Table.Media editor Felix Lee, who interviewed some of the 50 contributors to the volume at the event about their China experiences.
The head of the Heinrich Böll Foundation’s office in Beijing, Oliver Radtke, lamented a loss of the capacity for international exchange in China. Radtke moved to the People’s Republic during the pandemic. “I came to a country that had forgotten how to be in exchange with the world.”
Nora Frisch, the founder of the Drachenhaus publishing house, also observes a change in how the West perceives China, which contributes to communication problems. “The power China has obtained is associated with fears of decline.” Frisch said that China has become so powerful that the West would have to convince instead of patronize when dealing with the country. “This is where cultural mediation can make a big difference.”
The event on Monday marked the end of former minister Schavan’s term as German co-chair of the dialogue forum. Schavan sees China’s behavior as the cause of the current dialogue problems. She expressed the wish for more positive signals indicating a willingness to talk. “If China wants the exchange, if China wants active diplomatic relations, then some signs are needed.” The German Foreign Office said that the Dialogue Forum will continue. fin
What began as an adventure in the Australian outback led to an academic career: At the age of 30, Steffi Weil, then manager of an IT consulting firm, decided to take a one-year sabbatical: “I thought it was now or never,” she says. “That was the unexpected beginning of a new life.” Simply taking her mind off things in the vastness of Australia wasn’t her thing, she needed a way to pass the time. So Weil spontaneously enrolled in a short summer school. The focus: Chinese politics – which was followed by a second master’s degree, a joint PhD, and ultimately professorships at the Antwerp Management School and the University of Antwerp.
Weil dedicated her thesis to the potential of effective lobbying in China – and found loopholes in China’s steel-hard shell: “I’ve always wondered how you can influence a system that seems unchangeable from the outside.” This pragmatic streak is not only part of Weil’s nature; it also guides her scientific research. Today, she continues to explore the problems of influence in policymaking, most recently security issues and the impact of Chinese policy ideas on the global governance system.
Weil believes the current task is to look for intellectual approaches not based on Cold War logic: “I think China is looking for diplomatic tools that the West can understand.” And that can be very difficult, she says. While Weil firmly favors making critical industries in the European Union more independent of China, she doubts whether measures such as the EU Chip Act are likely to achieve that. After all, in technological terms, the past twenty years cannot be made up with the snap of a finger.
It will need partnership-based cooperation to become independent of China in the medium term. Measures that lead to the entrenchment of hostilities are counterproductive, she says.
In addition to her own research, Weil devotes much energy to a PhD program for executives, which she is in charge of. It involves a four-year structured curriculum that accompanies top-level executives on their way to a full PhD. Weil wants this program to offer a shortcut between the business and academic worlds. Not least because of the difficulties she personally experienced in making the switch, which she describes as “culture shock.” “We are fully tailored to the needs of executives,” she says about the PhD program.
She supports PhD students in translating their business-related questions into an academic context. In the process, she tries to foster an interplay between practical experience and theoretical methodology. This often leads to remarkable results: “These are people who then shake up academia a bit,” Weil says. It certainly could use a few more of them. Julius Schwarzwaelder
Zibo, an industrial city in the eastern province of Shandong, is China’s most popular tourist destination these days. The reason? Supposedly, it has the best barbecue in the country. The hype was kicked off by a group of students who documented a culinary trip to the previously unknown city on Douyin, the Chinese TikTok. In the meantime, tour buses are lining up outside the food mile of Zibo. Even express trains have been set up to get barbecue-hungry people quicker to their destinations. China’s state media see Zibo as an “exemplary case for old industrial cities seeking transformation.” Critics of the hype speak ironically of “Shandong’s Disneyland,” saying it represents the worst side of consumerism devoid of meaning.
