Taxes in China are to be equalized between expats and locals in the coming year, as Finn Mayer-Kuckuk reports. What seems like a fair solution turns out to be a major annoyance for expats in Beijing or Shanghai: If rents or language courses are no longer tax-deductible, this would definitely have an impact on the state of their wallets. And that’s not all: The changes will also have serious consequences for the respective employers in America and Europe.
E-learning in China is currently experiencing a real boom. In 2020 alone, around €6.5 billion were invested in this industry – more than in the past ten years combined. Frank Sieren shows that this is primarily about more equity between the glittering metropolises and the dusty hinterland. However, the prevailing gold-rush mood should not make people overconfident: Even in this industry, companies are not immune to setbacks.
China is one of the largest beverage markets in the world. According to the China Commercial Industrial Research Institute, this market could be worth a whopping ¥1.3 trillion ($198 billion) by 2024. Ning Wang shows how Genki from Beijing and Nongfu Spring are responding to the desire for modern beverages, especially among young Chinese.
I wish you many new insights while reading!
Anger is rising among employees of foreign companies in China over the planned removal of tax privileges for expatriates. At the end of this year, companies will no longer be able to pay benefits such as rent and school fees tax-free. In a recent survey, the US Chamber of Commerce (AmCham) in Shanghai is already warning that companies are leaving – in a big way. Overall, Shanghai as a business location is suffering from the change: Almost 70 percent of the companies surveyed said it would now be more difficult to find highly qualified personnel to work locally.
European chamber colleagues see it similarly. “China seems to be at peace with the fact of losing more and more foreign forces,” says Jörg Wuttke, president of the EU Chamber of Commerce in Beijing. European business stakeholders wrote in a recent assessment that the previous tax regime had done much to make China an attractive place to do business. “It compensates for some of the higher costs that families face in China.”
Previously, foreign workers could deduct a whole range of expenses. These include:
The opportunities to receive these benefits tax-free from the employer have been readily used by companies and their employees to structure contracts in a tax-efficient manner. For example, if the company pays for the rent and transfers it directly to the operator of the housing complex, this benefit has not counted as a non-cash benefit until now, as would be the case in Germany. The Chinese view was instead: The company provides an apartment – which is then traditionally tax-free. With the modification in the taxation of foreigners, which has been in the works since 2018, this is now changing. Housing and school fees are taxable as part of income.
Since a decent international-level place to stay in Beijing or Shanghai costs several thousand euros in rent, this is a sizeable transfer opportunity. It is similar with the fees for the German or international school. According to the Chamber, typical figures for company employees here are ¥300,000 a year for rent and ¥350,000 for two children at school. This allowed for tax-free benefits of €85,000. Since income tax is perceived as high by international standards at over 40 percent for a manager’s salary, these dodges were highly welcome.
The majority of these benefits will cease at the end of 2021. Instead, the authorities will treat foreigners more like nationals. For example, starting in 2022, ¥1000 (€130) per month can be deducted for children’s education. The same amount applies to rent. However, given the high costs, this is little more than a drop in the ocean compared to the old situation. The EU Chamber points out that although the equalization sounds fair, it is not appropriate in substance because life is more expensive for foreigners. They can’t just send their children to a school around the corner, they have to rely on international schools.
Anger over these changes is high. “Housing is already sinfully expensive, and school fees are also rising due to the elimination of students,” says Wuttke. It has become more difficult to recruit German employees for assignments in China in recent years anyway.
When talking to industry representatives, they are quick to point out the tax competition with other markets in the region. Singapore has a tax flat rate of 15 or 20 percent, with numerous deductions still available. Japan, too, has offered a number of incentives for a return since companies moved their Asian headquarters from Tokyo to Beijing.
The US Chamber of Commerce is calling for tax reform to be postponed. An alternative would be “special tax zones” like those around the Pearl River Delta – because the details of taxation are a matter for the municipalities. The problem for expats is that most of them live in Beijing and Shanghai, where the tax advantages are to be abolished without replacement.
Zero fat, zero sugar, and zero calories – that is Genki Forest’s recipe for success. Within a very short time, the Beijing-based beverage company has managed to make a name for itself in the industry for its “healthy mineral water”. In its latest round of financing, Genki raised so much money that it was able to triple its valuation from last year to $6 billion.
At first, Genki’s initial offering – flavored mineral water in peach, cucumber, or citrus flavors – did not necessarily give the impression of being a product suitable for the masses. After all, fruit-flavored water was already available from beverage manufacturers in other Asian countries. Moreover, Genki’s waters closely resembled the carbonated soft drinks from Coca-Cola or the Perrier mineral waters.
But first impressions should be deceiving: In the year of the COVID-19 pandemic, Genki Forest, which doesn’t disclose its financials, managed to post sales of ¥660 million ($96.6 million) in the first five months of 2020, according to China Daily.
After all, China is one of the largest mineral water markets in the world. According to Statista, mineral water consumption is around 49 million tons a year. And there is obviously still room – for new suppliers like Genki Forest and big winners like Zhong Shanshan.
He rose to become one of China’s richest men last fall with the initial public offering of his mineral water brand, Nongfu Spring. Nongfu Spring posted sales of ¥8.7 billion ($1.3 billion) in the first five months of 2020. In 2019, it was ¥24 billion ($3.6 billion) in the same period.
“So far, beverage producers in the Middle Kingdom have been able to enjoy reliable sales figures that have risen every year,” says Stefanie Schmitt from Germany Trade and Invest (GTAI). However, Schmitt also points to the effects of the COVID-19 year, which have put pressure on the industry’s sales.
According to data from the China Economic Information Network (CEInet), sales in the first half of 2020 fell by 6.4 percent year-on-year. In 2019, they had still recorded a plus of five percent compared to the previous year with the equivalent of around $226 billion, the GTAI report continues.
“The trend that started in major developed countries of carbonated waters replacing other carbonated drinks has reached China,” George Ren, senior partner at Roland Berger in Shanghai told the South China Morning Post. That was last fall when Genki raised so much money through a funding round that the fledgling beverage company’s value reached $2 billion. “There will be increased competition in this market,” Ren predicted at the time.
Genki Forest targets a trend among young and affluent city dwellers: Drinks that promise to make you healthier, fitter, and more beautiful. These are all goals that the cosmetics and fitness industries also claim for themselves and have become even more important to consumers since the pandemic year, especially with products consumed daily, such as water. Among consumers under 30, Genki is already one of China’s top 100 brands.
From the beginning, Genki Forest has also relied on a broad distribution network and distribution via so-called influencers on social media such as Instagram or TikTok, instead of just traditional marketing. Genki’s drinks can be bought and seen in more than 53,000 supermarkets across the country and convenience stores in major cities, some of which are open 24 hours. In addition, more than 130,000 retailers have Genki’s drinks in their assortment, and the export of the drinks abroad via e-commerce retailers such as Alibaba to the USA, Canada, or even to Germany runs smoothly.
Genki Forest, which describes itself as a health-tech beverage start-up, has only been available to buy since 2016, after two years of balancing the brand’s beverage offering in a research and development centre.
The fact that Genki’s beverage mix looked promising was also recognized by venture capitalists such as Sequoia or financial investor Warburg Pincus from the USA – and they invested in Genki at an early stage. A milestone was the online shopping sales day 618 in June last year: At that time, Genki made more sales than Pepsi or Coca-Cola.
Industry consultancy Zhiyan estimates the current size of the Chinese beverage market at around 230 billion yuan ($35 billion). By 2024, it could be as much as 1.3 trillion yuan ($198 billion), according to the China Commercial Industrial Research Institute.
Tang Binsen, founder and CEO of Genki Forest, comes not from the consumer goods sector but from the tech industry. He was previously the head of Elex-Technologies, a gaming company that developed the game “Clash of Kings” in 2014, which has been downloaded 100 million times and is one of the world’s top-selling apps.
But Tang, who won a prize for programming in France at the age of 22 and is one of the backers of a bike-sharing start-up in Australia, has increasingly specialized in consumer goods in recent years. Now that the mineral water business seems to be taking off, he is eyeing a move into the coffee market.
Genki Forest has also expanded its product line beyond beverages: Last year, the company began developing low-fat foods and launched chicken and sausage products.
And through his own investment firm, Challenjers Capital, Genki CEO Tang has long since moved into other consumer sectors: He has invested in instant noodle brand Ramen Talk, sparkling wine brand Hope Water, and craft beer maker Panda Brew. One of Tang’s core beliefs is that at least three of the top ten companies in each industry should be Chinese in the future.
Reading Eberhard Sandschneider’s Opinion on China.Table, I had a sense of déjà vu. In an article for “Aus Politik und Zeitgeschichte” in 2012 – at that time still director of the German Council on Foreign Relations – he had expressed very similar criticism of a values-driven German foreign policy. For transparency, I should mention that I did my doctorate under Sandschneider at the FU Berlin.
The topic of my doctoral thesis, published by Springer VS in 2009, was “Promoting participatory development in the PR China”. Based on my experiences as a practitioner working for German development cooperation (2003-07) I made the case for democracy promotion in the People’s Republic of China. I give Sandschneider great credit for his not only fair but also positive assessment of my dissertation, despite his differing views on German foreign policy. It, therefore, gives me no pleasure to express a fundamental criticism of his opinion piece twelve years later. I formulate my counter-position in the spirit of Ruth Bader Ginsburg: “[one] can disagree without being disagreeable”.
Sandschneider’s perspective on Western relations with China shows a curious continuity. While his attitudes towards the premises of German foreign policy have apparently not changed, a totalitarian change of policy has taken place in the People’s Republic of China under General Secretary Xi Jinping since 2012. He is apparently unaware of the resulting tension.
Instead, Sandschneider criticizes “moralizing China policy” as he always has. He also condemns double standards in American and European policy with regards to China, which in his view primarily pursues geopolitical or economic goals. According to Sandschneider, military tensions in the Taiwan Strait can only be blamed on the “foreign policy posturing of a US administration that has almost been dismissed from office”. He also criticizes Western Magnitsky sanctions against Chinese officials. The latter only lead to “clogging” channels of dialogue. At the same time, he advocates “quiet diplomacy”. Sandschneider castigates the supposed “megalomania” of all those who believed they could “manage” the “rise of China”. Surprisingly, he himself later calls “China policy in the West a permanent and lasting management task”. Sandschneider almost always calls any criticism of the political situation in the PRC “China-bashing“. Instead, he calls for “talking, negotiating, perhaps arguing with this country and its government to find solutions that are acceptable to all sides”.
His calls for dialogue and cooperation sound plausible at first but completely ignore the political-practical obstacles. During my time as a development aid worker in China, I supported diplomats at the German Embassy in Beijing in organizing and conducting meetings between German decision-makers (including Ambassador Stanzel, 2004; Bundestag President Thierse, 2005; and Foreign Minister Steinmeier, 2006) and Chinese NGO representatives. From 2011 to 2014, I coordinated the implementation of an EU-China dialogue program on behalf of the European Commission. The implementation of such genuinely open-ended intercultural encounters was still possible during the period before and shortly after Xi Jinping took office.
However, in 2013, with Document No. 9, the Communist Party of China (CCP) declared constitutional democracy, universal values, civil society, independent journalism, and criticism of the party to be absolutely taboo topics, which apply to both domestic and international discussions with China. This document marked the end of the semi-liberal era under General Secretary Hu Jintao (2002-2012). What possibilities are there for fruitful cooperation or dialogue based on mutual recognition and reciprocity when dialogue systematically excludes democratic values, and the language rules of the Xi discourse are binding on the Chinese side?
The Xi regime’s political censorship now permeates all essential areas of Sino-German cooperation: for example, when civil society cooperation is restricted to a few topics that conform to the regime and existing NGO trust networks are systematically undermined or destroyed; when the framework conditions for cooperation endanger the freedom of science and autonomous scientific cooperation; or when the party-state distorts the necessary “level playing field” of economic cooperation based on equal opportunities, reciprocity and mutual benefit to China’s unilateral long-term advantage.
The short-term win-win situation for individual German companies has so far been combined with a long-term one-sided win-lose cooperation in terms of development policy, which has shaken confidence in the promises made by the Chinese party-state. Why should this time be any different? I therefore find it alarming that Sandschneider does not utter a single critical word about the increasing economic dependence of German companies on the Chinese market. German SMEs should be aware that “made in China 2025“ poses a direct threat to the goal of “Industry 4.0”. The CCP is concerned with first instrumentalizing and co-opting German industry and then replacing it in the long term.
Instead of talking about such challenges in German-Chinese relations, Sandschneider confines himself to comment on the geopolitical rivalry between the US and the PRC. By contrast, I would have expected more (self-)critical reflections on Germany’s China policy from a long-standing advisor to the German government. However, when it comes to the failures on the German side, Sandschneider remains conspicuously silent.
How contemporary, for example, is Germany’s China policy, which is strongly focused on foreign trade promotion? Even as the barricades in Hong Kong were already burning in the summer of 2020, German Economics Minister Altmaier kept repeating the long obsolete slogan “change through trade”. Yet, it should be clear to everyone by now that selling German cars in China has not led to liberal-democratic change.
In addition, the primacy of politics has never really applied in Germany’s China policy since 1989. In my active time in the German development bureaucracy, I experienced executives who made extremely disparaging remarks about members of the Bundestag who were traveling to China. It was clear to the practitioners on the ground that China policy was not shaped by German politicians but by representatives of the Asia-Pacific Committee of German Business.
I find it problematic that since Schröder’s chancellorship, Germany’s China policy has been largely determined by the interests of the German private sector. While such a corporatist approach has ensured enormous corporate profits in the short term, it is questionable when business lobbyists dictate the guidelines of German China policy. Even for companies, the benefits in many industries were often temporary before being marginalized in unfair competition. The decline of the German solar industry exemplifies this misguided development.
This is certainly not a sustainable and industrial and China policy. I agree with Nils Schmid, the foreign policy spokesman of the SPD parliamentary group, on this issue. In an interview with the Financial Times, he pointed out that Germany needs “a real foreign policy for China – not just a business-oriented policy (author’s translation)”. A new German China policy must critically address the systemic totalitarian tendencies of the Xi regime. To this end, the German government should establish an interdepartmental staff unit for dealing with authoritarian states, which would develop recommendations for action for both the federal and state governments.
Sandschneider’s Opinion on China.Table seems out of date. In his article for APuZ in 2012, Sandschneider still called for “the emergence of a rising foreign policy elite with the necessary competence to deal with new global challenges.” On this point, he is undoubtedly right. For a paradigm shift in Germany’s China policy, we now need not only a new program but also new employees.
Andreas Fulda is a lecturer at the University of Nottingham. He has lived and worked in the PRC and Taiwan for eight years and is the author of “The Struggle for Democracy in Mainland China, Taiwan, and Hong Kong. Sharp Power and its Discontents” (Routledge, 2020).
Petra Sigmund was already reading books from Asia and China with enthusiasm during her school years. “In the period after the Cultural Revolution in China, so-called scar literature came to Germany, Heavy Wings by Zhang Jie, for example,” says the 54-year-old, recounting her first encounters with the country. Petra Sigmund now heads the Asia and Pacific Division at the Federal Foreign Office. Policy-making is her daily routine, and she always has two questions in mind: “How do we look at China, and how do we need to position ourselves? “
Born in Heidelberg, she graduated high school in 1985. At that time, there was a spirit of optimism in China; Deng Xiaoping opened up the economy of the People’s Republic with various reforms. The changes fascinated Sigmund: “The country was going in a whole new direction. That’s why I decided to study Sinology.” At Freie Universität Berlin and Renmin University in Beijing, she spent the following years studying Chinese studies, political science, and economics. Even on her first trip to the “Middle Kingdom”, Sigmund realized, “I chose the right subjects”.
After graduating, Petra Sigmund began a diplomatic career at the Federal Foreign Office in 1994. Her first post took her to the press section of the Foreign Ministry, after which she worked in Brussels, Berlin, Paris, and Beijing. When the ministry set up its own department in 2017 in view of the increasing importance of Asia and China, Sigmund was appointed Commissioner for East Asia, Southeast Asia, and the Pacific: “I didn’t have to be told twice.”
Two years later, she took over as Head of the Asia and Pacific Division. Since then, she has managed Germany’s Asia and China policy with a staff of around 50, together with the numerous representations on the ground and other departments in the Federal Foreign Office and other ministries. “The view of China has become a cross-cutting issue. Our task is to coordinate this and to shape a coherent policy out of it,” explains Sigmund.
In the last few months, she has spent a lot of time on the investment agreement between China and the EU (China.Table reports on the CAI), which was concluded in December. For Petra Sigmund a stage victory: “We have now taken the first steps to bring more balance in our relations. But we are still a long way from reaching our goal.” She counters criticism of the agreement: “Our successes will not stop us from criticizing what needs to be criticized.”
Petra Sigmund was last in China herself in early 2020, shortly before it became known that the coronavirus can be transmitted from animals to humans. She misses her trips to the People’s Republic and other countries in Asia. She would like to see more genuine exchange between Germans and Chinese people in the coming years: “I would like to see more open dialogue. Because from dialogue and transparency comes trust.” Paul Meerkamp
Taxes in China are to be equalized between expats and locals in the coming year, as Finn Mayer-Kuckuk reports. What seems like a fair solution turns out to be a major annoyance for expats in Beijing or Shanghai: If rents or language courses are no longer tax-deductible, this would definitely have an impact on the state of their wallets. And that’s not all: The changes will also have serious consequences for the respective employers in America and Europe.
E-learning in China is currently experiencing a real boom. In 2020 alone, around €6.5 billion were invested in this industry – more than in the past ten years combined. Frank Sieren shows that this is primarily about more equity between the glittering metropolises and the dusty hinterland. However, the prevailing gold-rush mood should not make people overconfident: Even in this industry, companies are not immune to setbacks.
China is one of the largest beverage markets in the world. According to the China Commercial Industrial Research Institute, this market could be worth a whopping ¥1.3 trillion ($198 billion) by 2024. Ning Wang shows how Genki from Beijing and Nongfu Spring are responding to the desire for modern beverages, especially among young Chinese.
I wish you many new insights while reading!
Anger is rising among employees of foreign companies in China over the planned removal of tax privileges for expatriates. At the end of this year, companies will no longer be able to pay benefits such as rent and school fees tax-free. In a recent survey, the US Chamber of Commerce (AmCham) in Shanghai is already warning that companies are leaving – in a big way. Overall, Shanghai as a business location is suffering from the change: Almost 70 percent of the companies surveyed said it would now be more difficult to find highly qualified personnel to work locally.
European chamber colleagues see it similarly. “China seems to be at peace with the fact of losing more and more foreign forces,” says Jörg Wuttke, president of the EU Chamber of Commerce in Beijing. European business stakeholders wrote in a recent assessment that the previous tax regime had done much to make China an attractive place to do business. “It compensates for some of the higher costs that families face in China.”
Previously, foreign workers could deduct a whole range of expenses. These include:
The opportunities to receive these benefits tax-free from the employer have been readily used by companies and their employees to structure contracts in a tax-efficient manner. For example, if the company pays for the rent and transfers it directly to the operator of the housing complex, this benefit has not counted as a non-cash benefit until now, as would be the case in Germany. The Chinese view was instead: The company provides an apartment – which is then traditionally tax-free. With the modification in the taxation of foreigners, which has been in the works since 2018, this is now changing. Housing and school fees are taxable as part of income.
Since a decent international-level place to stay in Beijing or Shanghai costs several thousand euros in rent, this is a sizeable transfer opportunity. It is similar with the fees for the German or international school. According to the Chamber, typical figures for company employees here are ¥300,000 a year for rent and ¥350,000 for two children at school. This allowed for tax-free benefits of €85,000. Since income tax is perceived as high by international standards at over 40 percent for a manager’s salary, these dodges were highly welcome.
The majority of these benefits will cease at the end of 2021. Instead, the authorities will treat foreigners more like nationals. For example, starting in 2022, ¥1000 (€130) per month can be deducted for children’s education. The same amount applies to rent. However, given the high costs, this is little more than a drop in the ocean compared to the old situation. The EU Chamber points out that although the equalization sounds fair, it is not appropriate in substance because life is more expensive for foreigners. They can’t just send their children to a school around the corner, they have to rely on international schools.
Anger over these changes is high. “Housing is already sinfully expensive, and school fees are also rising due to the elimination of students,” says Wuttke. It has become more difficult to recruit German employees for assignments in China in recent years anyway.
When talking to industry representatives, they are quick to point out the tax competition with other markets in the region. Singapore has a tax flat rate of 15 or 20 percent, with numerous deductions still available. Japan, too, has offered a number of incentives for a return since companies moved their Asian headquarters from Tokyo to Beijing.
The US Chamber of Commerce is calling for tax reform to be postponed. An alternative would be “special tax zones” like those around the Pearl River Delta – because the details of taxation are a matter for the municipalities. The problem for expats is that most of them live in Beijing and Shanghai, where the tax advantages are to be abolished without replacement.
Zero fat, zero sugar, and zero calories – that is Genki Forest’s recipe for success. Within a very short time, the Beijing-based beverage company has managed to make a name for itself in the industry for its “healthy mineral water”. In its latest round of financing, Genki raised so much money that it was able to triple its valuation from last year to $6 billion.
At first, Genki’s initial offering – flavored mineral water in peach, cucumber, or citrus flavors – did not necessarily give the impression of being a product suitable for the masses. After all, fruit-flavored water was already available from beverage manufacturers in other Asian countries. Moreover, Genki’s waters closely resembled the carbonated soft drinks from Coca-Cola or the Perrier mineral waters.
But first impressions should be deceiving: In the year of the COVID-19 pandemic, Genki Forest, which doesn’t disclose its financials, managed to post sales of ¥660 million ($96.6 million) in the first five months of 2020, according to China Daily.
After all, China is one of the largest mineral water markets in the world. According to Statista, mineral water consumption is around 49 million tons a year. And there is obviously still room – for new suppliers like Genki Forest and big winners like Zhong Shanshan.
He rose to become one of China’s richest men last fall with the initial public offering of his mineral water brand, Nongfu Spring. Nongfu Spring posted sales of ¥8.7 billion ($1.3 billion) in the first five months of 2020. In 2019, it was ¥24 billion ($3.6 billion) in the same period.
“So far, beverage producers in the Middle Kingdom have been able to enjoy reliable sales figures that have risen every year,” says Stefanie Schmitt from Germany Trade and Invest (GTAI). However, Schmitt also points to the effects of the COVID-19 year, which have put pressure on the industry’s sales.
According to data from the China Economic Information Network (CEInet), sales in the first half of 2020 fell by 6.4 percent year-on-year. In 2019, they had still recorded a plus of five percent compared to the previous year with the equivalent of around $226 billion, the GTAI report continues.
“The trend that started in major developed countries of carbonated waters replacing other carbonated drinks has reached China,” George Ren, senior partner at Roland Berger in Shanghai told the South China Morning Post. That was last fall when Genki raised so much money through a funding round that the fledgling beverage company’s value reached $2 billion. “There will be increased competition in this market,” Ren predicted at the time.
Genki Forest targets a trend among young and affluent city dwellers: Drinks that promise to make you healthier, fitter, and more beautiful. These are all goals that the cosmetics and fitness industries also claim for themselves and have become even more important to consumers since the pandemic year, especially with products consumed daily, such as water. Among consumers under 30, Genki is already one of China’s top 100 brands.
From the beginning, Genki Forest has also relied on a broad distribution network and distribution via so-called influencers on social media such as Instagram or TikTok, instead of just traditional marketing. Genki’s drinks can be bought and seen in more than 53,000 supermarkets across the country and convenience stores in major cities, some of which are open 24 hours. In addition, more than 130,000 retailers have Genki’s drinks in their assortment, and the export of the drinks abroad via e-commerce retailers such as Alibaba to the USA, Canada, or even to Germany runs smoothly.
Genki Forest, which describes itself as a health-tech beverage start-up, has only been available to buy since 2016, after two years of balancing the brand’s beverage offering in a research and development centre.
The fact that Genki’s beverage mix looked promising was also recognized by venture capitalists such as Sequoia or financial investor Warburg Pincus from the USA – and they invested in Genki at an early stage. A milestone was the online shopping sales day 618 in June last year: At that time, Genki made more sales than Pepsi or Coca-Cola.
Industry consultancy Zhiyan estimates the current size of the Chinese beverage market at around 230 billion yuan ($35 billion). By 2024, it could be as much as 1.3 trillion yuan ($198 billion), according to the China Commercial Industrial Research Institute.
Tang Binsen, founder and CEO of Genki Forest, comes not from the consumer goods sector but from the tech industry. He was previously the head of Elex-Technologies, a gaming company that developed the game “Clash of Kings” in 2014, which has been downloaded 100 million times and is one of the world’s top-selling apps.
But Tang, who won a prize for programming in France at the age of 22 and is one of the backers of a bike-sharing start-up in Australia, has increasingly specialized in consumer goods in recent years. Now that the mineral water business seems to be taking off, he is eyeing a move into the coffee market.
Genki Forest has also expanded its product line beyond beverages: Last year, the company began developing low-fat foods and launched chicken and sausage products.
And through his own investment firm, Challenjers Capital, Genki CEO Tang has long since moved into other consumer sectors: He has invested in instant noodle brand Ramen Talk, sparkling wine brand Hope Water, and craft beer maker Panda Brew. One of Tang’s core beliefs is that at least three of the top ten companies in each industry should be Chinese in the future.
Reading Eberhard Sandschneider’s Opinion on China.Table, I had a sense of déjà vu. In an article for “Aus Politik und Zeitgeschichte” in 2012 – at that time still director of the German Council on Foreign Relations – he had expressed very similar criticism of a values-driven German foreign policy. For transparency, I should mention that I did my doctorate under Sandschneider at the FU Berlin.
The topic of my doctoral thesis, published by Springer VS in 2009, was “Promoting participatory development in the PR China”. Based on my experiences as a practitioner working for German development cooperation (2003-07) I made the case for democracy promotion in the People’s Republic of China. I give Sandschneider great credit for his not only fair but also positive assessment of my dissertation, despite his differing views on German foreign policy. It, therefore, gives me no pleasure to express a fundamental criticism of his opinion piece twelve years later. I formulate my counter-position in the spirit of Ruth Bader Ginsburg: “[one] can disagree without being disagreeable”.
Sandschneider’s perspective on Western relations with China shows a curious continuity. While his attitudes towards the premises of German foreign policy have apparently not changed, a totalitarian change of policy has taken place in the People’s Republic of China under General Secretary Xi Jinping since 2012. He is apparently unaware of the resulting tension.
Instead, Sandschneider criticizes “moralizing China policy” as he always has. He also condemns double standards in American and European policy with regards to China, which in his view primarily pursues geopolitical or economic goals. According to Sandschneider, military tensions in the Taiwan Strait can only be blamed on the “foreign policy posturing of a US administration that has almost been dismissed from office”. He also criticizes Western Magnitsky sanctions against Chinese officials. The latter only lead to “clogging” channels of dialogue. At the same time, he advocates “quiet diplomacy”. Sandschneider castigates the supposed “megalomania” of all those who believed they could “manage” the “rise of China”. Surprisingly, he himself later calls “China policy in the West a permanent and lasting management task”. Sandschneider almost always calls any criticism of the political situation in the PRC “China-bashing“. Instead, he calls for “talking, negotiating, perhaps arguing with this country and its government to find solutions that are acceptable to all sides”.
His calls for dialogue and cooperation sound plausible at first but completely ignore the political-practical obstacles. During my time as a development aid worker in China, I supported diplomats at the German Embassy in Beijing in organizing and conducting meetings between German decision-makers (including Ambassador Stanzel, 2004; Bundestag President Thierse, 2005; and Foreign Minister Steinmeier, 2006) and Chinese NGO representatives. From 2011 to 2014, I coordinated the implementation of an EU-China dialogue program on behalf of the European Commission. The implementation of such genuinely open-ended intercultural encounters was still possible during the period before and shortly after Xi Jinping took office.
However, in 2013, with Document No. 9, the Communist Party of China (CCP) declared constitutional democracy, universal values, civil society, independent journalism, and criticism of the party to be absolutely taboo topics, which apply to both domestic and international discussions with China. This document marked the end of the semi-liberal era under General Secretary Hu Jintao (2002-2012). What possibilities are there for fruitful cooperation or dialogue based on mutual recognition and reciprocity when dialogue systematically excludes democratic values, and the language rules of the Xi discourse are binding on the Chinese side?
The Xi regime’s political censorship now permeates all essential areas of Sino-German cooperation: for example, when civil society cooperation is restricted to a few topics that conform to the regime and existing NGO trust networks are systematically undermined or destroyed; when the framework conditions for cooperation endanger the freedom of science and autonomous scientific cooperation; or when the party-state distorts the necessary “level playing field” of economic cooperation based on equal opportunities, reciprocity and mutual benefit to China’s unilateral long-term advantage.
The short-term win-win situation for individual German companies has so far been combined with a long-term one-sided win-lose cooperation in terms of development policy, which has shaken confidence in the promises made by the Chinese party-state. Why should this time be any different? I therefore find it alarming that Sandschneider does not utter a single critical word about the increasing economic dependence of German companies on the Chinese market. German SMEs should be aware that “made in China 2025“ poses a direct threat to the goal of “Industry 4.0”. The CCP is concerned with first instrumentalizing and co-opting German industry and then replacing it in the long term.
Instead of talking about such challenges in German-Chinese relations, Sandschneider confines himself to comment on the geopolitical rivalry between the US and the PRC. By contrast, I would have expected more (self-)critical reflections on Germany’s China policy from a long-standing advisor to the German government. However, when it comes to the failures on the German side, Sandschneider remains conspicuously silent.
How contemporary, for example, is Germany’s China policy, which is strongly focused on foreign trade promotion? Even as the barricades in Hong Kong were already burning in the summer of 2020, German Economics Minister Altmaier kept repeating the long obsolete slogan “change through trade”. Yet, it should be clear to everyone by now that selling German cars in China has not led to liberal-democratic change.
In addition, the primacy of politics has never really applied in Germany’s China policy since 1989. In my active time in the German development bureaucracy, I experienced executives who made extremely disparaging remarks about members of the Bundestag who were traveling to China. It was clear to the practitioners on the ground that China policy was not shaped by German politicians but by representatives of the Asia-Pacific Committee of German Business.
I find it problematic that since Schröder’s chancellorship, Germany’s China policy has been largely determined by the interests of the German private sector. While such a corporatist approach has ensured enormous corporate profits in the short term, it is questionable when business lobbyists dictate the guidelines of German China policy. Even for companies, the benefits in many industries were often temporary before being marginalized in unfair competition. The decline of the German solar industry exemplifies this misguided development.
This is certainly not a sustainable and industrial and China policy. I agree with Nils Schmid, the foreign policy spokesman of the SPD parliamentary group, on this issue. In an interview with the Financial Times, he pointed out that Germany needs “a real foreign policy for China – not just a business-oriented policy (author’s translation)”. A new German China policy must critically address the systemic totalitarian tendencies of the Xi regime. To this end, the German government should establish an interdepartmental staff unit for dealing with authoritarian states, which would develop recommendations for action for both the federal and state governments.
Sandschneider’s Opinion on China.Table seems out of date. In his article for APuZ in 2012, Sandschneider still called for “the emergence of a rising foreign policy elite with the necessary competence to deal with new global challenges.” On this point, he is undoubtedly right. For a paradigm shift in Germany’s China policy, we now need not only a new program but also new employees.
Andreas Fulda is a lecturer at the University of Nottingham. He has lived and worked in the PRC and Taiwan for eight years and is the author of “The Struggle for Democracy in Mainland China, Taiwan, and Hong Kong. Sharp Power and its Discontents” (Routledge, 2020).
Petra Sigmund was already reading books from Asia and China with enthusiasm during her school years. “In the period after the Cultural Revolution in China, so-called scar literature came to Germany, Heavy Wings by Zhang Jie, for example,” says the 54-year-old, recounting her first encounters with the country. Petra Sigmund now heads the Asia and Pacific Division at the Federal Foreign Office. Policy-making is her daily routine, and she always has two questions in mind: “How do we look at China, and how do we need to position ourselves? “
Born in Heidelberg, she graduated high school in 1985. At that time, there was a spirit of optimism in China; Deng Xiaoping opened up the economy of the People’s Republic with various reforms. The changes fascinated Sigmund: “The country was going in a whole new direction. That’s why I decided to study Sinology.” At Freie Universität Berlin and Renmin University in Beijing, she spent the following years studying Chinese studies, political science, and economics. Even on her first trip to the “Middle Kingdom”, Sigmund realized, “I chose the right subjects”.
After graduating, Petra Sigmund began a diplomatic career at the Federal Foreign Office in 1994. Her first post took her to the press section of the Foreign Ministry, after which she worked in Brussels, Berlin, Paris, and Beijing. When the ministry set up its own department in 2017 in view of the increasing importance of Asia and China, Sigmund was appointed Commissioner for East Asia, Southeast Asia, and the Pacific: “I didn’t have to be told twice.”
Two years later, she took over as Head of the Asia and Pacific Division. Since then, she has managed Germany’s Asia and China policy with a staff of around 50, together with the numerous representations on the ground and other departments in the Federal Foreign Office and other ministries. “The view of China has become a cross-cutting issue. Our task is to coordinate this and to shape a coherent policy out of it,” explains Sigmund.
In the last few months, she has spent a lot of time on the investment agreement between China and the EU (China.Table reports on the CAI), which was concluded in December. For Petra Sigmund a stage victory: “We have now taken the first steps to bring more balance in our relations. But we are still a long way from reaching our goal.” She counters criticism of the agreement: “Our successes will not stop us from criticizing what needs to be criticized.”
Petra Sigmund was last in China herself in early 2020, shortly before it became known that the coronavirus can be transmitted from animals to humans. She misses her trips to the People’s Republic and other countries in Asia. She would like to see more genuine exchange between Germans and Chinese people in the coming years: “I would like to see more open dialogue. Because from dialogue and transparency comes trust.” Paul Meerkamp
