The nationwide power outages of late last summer are probably still fresh in the minds of many in China. Millions were left in the dark, and entire factories came to a standstill – with repercussions for supply chains around the globe. This put the guarantee of power security through the expansion of energy storage at the top of the agenda of China’s leadership. And Beijing has big plans, analyzes Nico Beckert. Nevertheless, it is already clear that even billions invested in the ongoing energy transition will not make the grids perfectly secure.
German carmakers in China, especially, have been waiting a long time for this step: the relaxation of joint venture requirements. This obligation dictated that foreign manufacturers could never hold more than 50 percent of a Chinese company and could only operate joint ventures with domestic partners. In the commercial vehicle business, this requirement was dropped two years ago; foreign manufacturers of electric and hybrid cars were already exempt from it. Since the beginning of the year, the requirement to cooperate with domestic companies has largely been lifted for the entire industry. But not all players are happy with this relaxation, writes Christian Domke Seidel in his analysis on the abolition of the joint venture requirement. Because the relaxation comes with a catch.
Those who attended our live event China-Strategy 2022 on Tuesday, unfortunately, encountered some very unfortunate problems with their Zoom access and especially the sound quality. Some of us had noticed during the event that the speakers from China, of all places, could be heard relatively well, while those from Germany could not. Now, the most unlikely cause for us has actually been confirmed: On Tuesday of all days, Germany’s Telekom struggled with significant network outages throughout the country. In China, on the other hand, Zoom servers had an excellent connection. This once again confirms: Compared to China, Germany is still a developing country in all things digital.
Last fall, China experienced a dramatic demonstration of just how delicate the issue of power security can be: Due to bottlenecks, numerous provinces were forced to ration power. Not only did the lights go out in private households, but factories also came to a standstill. This came as a shock to China’s political elites, and foreign investors also viewed the situation with concern.
To ensure that this does not happen again, Beijing is making power security an important goal. However, the energy transition is not to be abandoned. On the contrary: China wants to double its power generation capacity from sun and wind to 1,200 gigawatts by 2030. Coal-fired power is to continue to be forced out of the grid in the long term.
The expansion of power storage is essential for driving the energy transition forward while ensuring a reliable power supply. China is facing the same problems as Germany: Sometimes the wind and sun supply more power than is needed, sometimes there is a lull. The results are power shortages and an unstable grid. Pumped-storage power plants and battery storage systems can absorb renewable energies in times of surplus and feed them back into the grid in the so-called dark doldrums or when power demand is high.
China has big plans for the expansion of its power storage facilities. Pumped storage capacity is to be doubled to 62 gigawatts by 2025. By 2030, it should already be 120 gigawatts. This form of power storage pumps water with surplus energy into a reservoir at higher altitudes. When there is a lull or high demand, the water is then drained and generates power via turbines.
In terms of battery storage, China is even aiming for an eightfold increase of current capacity. At present, the country has 3.5 gigawatts of such storage, mainly in the form of lithium-ion batteries. By 2025, the capacity is expected to grow to 30 gigawatts. Ideally, much of this battery storage will come from spent EV batteries. This way, power storage won’t compete with other sectors for scarce and increasingly expensive battery raw materials. Currently, however, Chinese authorities still have safety concerns. China’s National Energy Administration had most recently proposed a ban on the secondary use of batteries following a fatal explosion at a battery storage facility (China.Table reported).
One problem for the expansion of power storage, however, could be cost. A large part of the responsibility for expanding energy storage lies with the producers of renewable energies:
For operators of solar and wind farms, this means additional investments that fossil fuels simply do not entail. And the solar sector is already plagued by high costs and low profits as it is. Operators often face the problem that utilities are only slowly connecting their wind and solar farms to the power grid, according to the South China Morning Post. One industry representative complains in the report that the power storage market in China “doesn’t have a viable business model now.”
Apart from the issue of cost distribution, there is also a lack of financial incentives. China’s system of electricity rates does not offer extra compensation to suppliers who provide electricity during periods of high demand. “The peak tariff should be at least three times higher compared with the off-peak tariff so that pumped storage projects can be profitable,” Lin Boqiang, an energy expert and dean at the China Institute for Energy Policy Studies at Xiamen University, told SCMP.
China’s plans for power storage sound ambitious, but their dimensions may still be too small. According to industry analysts, China already requires power storage with a capacity of 200 gigawatts by 2030. “The 120GW target [for pumped storage] for 2030 seems not ambitious enough to meet the carbon neutrality goal climate targets,” says one analyst.
The expansion of power storage shows the tremendous challenges China’s planners are facing in the power transition. The restructuring of the power system is open-heart surgery for the Chinese economy, in which the interests of various players have to be reconciled. Last year’s power crisis demonstrated the drastic disruptions that can occur when responsibility for a secure and cost-effective power supply is offloaded to individual actors (China.Table reported).
The current opening of the Chinese economy should not be overrated – warns Juergen Matthes in an interview with China.Table. Matthes is the Head of the International Economics and Economic Outlook competence area at the German Economic Institute (IW) and explains: “There is a gradual but consistent trend in China away from a very restrictive toward a somewhat more open approach to foreign investment in its own country.”
A surprising statement. After all, the political problem areas in the relationship between Europe and China have actually increased in recent years. Sanctions have been met with counter-sanctions, without any resolution of the actual key disputes. The relaxation of the Chinese joint venture requirement appears to be a first, small step toward easing tensions, at least on the economic level.
However, this is not enough for the Federation of German Industries (BDI). Speaking to China.Table, Wolfgang Niedermark, a member of the BDI’s executive board, demands: “The German government and the EU Commission must insist on reciprocity in market access and a level playing field vis-à-vis China. The Chinese government must remove all forms of market access barriers and allow for fair competition between all market participants.”
Matthes believes that this is hardly likely in this form. China would oscillate between opening up on the one hand, and autarky in the sense of dual circulation on the other. Accordingly, the relaxations have a catch, as Matthes explains: “The openings are small steps in areas where it doesn’t hurt China because its own companies are usually already strong enough to face global competition.” This is a limitation that the BDI also sees. Although an enormous sales potential would open up for European companies, the risk of technology transfer would be great. Especially since the Chinese government is increasingly relying on import substitution, favoring domestic companies. “This practice puts German companies at a disadvantage or even excludes them from the Chinese market completely.”
While Chinese companies face a largely barrier-free European market, European companies face a host of restrictions. The Chinese model of a party-state controlled economy would also create an uneven playing field in the West, Niedermark believes, and calls for adjustments to the European legal framework, such as reciprocity in public procurement, stricter anti-subsidy regulations and a common approach to investment control among EU states. “We want to keep our market open, but we need to do more to ensure that market mechanisms actually apply and are not distorted by foreign state-owned enterprises.”
The relaxations that are now being implemented were already announced back in 2018. German carmakers were thus already lying in wait. Just in time for the launch of the relaxations, BMW increased its share in the joint venture with Brilliance from 50 to 75 percent for €3.7 billion (China.Table reported). The Munich-based company had announced this step back in 2018. Audi also immediately announced an expanded partnership with FAW (China.Table reported). A new plant is to be built by 2024, producing 150,000 EVs annually. The German automaker also holds a majority stake in Audi FAW NEV Company, as the company is called.
Going it alone – without a Chinese partner – is out of the question for Audi. “This cooperation gives us a deep insight into the Chinese market – which is why we will maintain this successful model in the future. Our local partner enables us to incorporate expertise and customer requirements into the vehicle at an early stage of development – this has proven very beneficial,” a company spokeswoman told China.Table. BMW shares a similar view. It was important to have a local partner who knew the market and could contribute its know-how. There are no plans to go it alone, nor are there any reasons to question the joint venture with Brilliance, the company made very clear. Niedermark understands this. “Numerous German companies have already been invested in China for years or even decades. The Chinese market will remain important for them in the future.”
Matthes is not surprised by such statements either. He says the Chinese auto market is difficult as it is and is being further complicated by geopolitical policies: “We’re getting word from German companies in China that the market is becoming more difficult because domestic companies are being given more and more preference. The new narrative of wanting to look out for oneself has spread remarkably quickly throughout the system.” The demand expectation of foreign companies in China is somewhat less optimistic, Matthes added. Many would feel like pawns in the geopolitical game.
On the other hand, China is a large and dynamic market. Maintaining or intensifying existing joint ventures is one way to respond to the changing sentiment in the country, Matthes said. “More and more German companies in China are considering what the higher geopolitical risks mean for their business. Some are choosing to appear as Chinese as possible to the outside world to minimize impending problems in day-to-day business.”
It’s obvious why China.Table requested a profile of her, says Lin Hierse when asked what she thinks about requests like this. “We don’t know each other. But what can be seen of me and my work is always linked to questions of identity.”
As the daughter of a German and a Chinese, the 31-year-old journalist grew up in Braunschweig. As a child, she took it for granted that she would grow up in a 100-year-old half-timbered house with a Chinese canopy, eat jiaozi on Christmas Eve and spend her summer vacation in China every two years. However: “From the outside, I was told that this is not normal. That in my own world, two worlds actually collide,” she says. Today, she works on issues relating to home, migration, and identity. This is also the theme of her first novel, “Wovon wir träumen” (What we dream of), which will be released on March 10.
“I didn’t write the novel because I thought it was important that I write about my relationship with China,” she says, “but because it’s a very defining part of my life.” Starting with the death of her Chinese grandmother, Hierse writes about questions regarding her own identity and the relationship with her mother. “Migration is something very formative. When you leave the place where you grew up, it has an impact, not only on your own biography but also on your children’s.”
Hierse is one of the few German journalists with a migrant background. That entails a certain responsibility to keep talking about it. “That is problematic, because I can only take one perspective out of of many. And besides, I also want to work on other topics.”
Even as a girl, Hierse had a passion for writing. But for a long time, professional writing didn’t seem to be an option for her. After school, she studied Asian studies and human geography. Along the way, she blogged for Sinonerds, a community of young people who want to break with China stereotypes. By chance, she learned about the opportunity to do a traineeship at the German newspaper Taz in Berlin, where she has been working as an editor since 2019.
She feels that she has been given the position because she is half-Chinese and can bring this valuable perspective to the profession. But it’s not her plan at all to act as a China expert. Time and again, she has to set herself apart. “That’s how I currently feel about the Olympics. I’d rather sign off on articles about it than write them myself.” To create even more distance, she has renamed her column. “China Town” is now “poetical correctness.” Hierse explains it this way: “Now it’s more about my kind of writing, looking at the more offbeat, and less about my background.”
One topic she likes to discuss is China coverage in the German media. “I often have the feeling that we haven’t understood China properly. And by ‘we’ I mean both ‘we’ in the sense of Germany and journalists.” Although there are colleagues who report in a differentiated manner, there is a lack of expertise in some areas. This is usually limited to classic economic and political topics. But in times of political tension, it is important to understand society in all its diversity.
China’s image is predominantly stereotype-laden and racially colored. “Often, the media can’t think of anything better than plastering a dragon somewhere or showing a crowd of people.” Stories of people were missing. These would show how the big affects the small. For example, in the report by her Zeit colleague Xifan Yang about a young Shanghai woman who moves to Germany to work as a care worker.
Hierse’s novel is another such example. Through her protagonist, she writes about German-Chinese history and wants to show that migration can not only be a trauma, but also a dream. After all, Hierse says, most people migrate because they dream of a good life. Lisa Winter
Children are expensive. But no other country spends as much money on its offspring in relation to its economic power as China. The average cost of raising a child is almost seven times the country’s GDP per capita.
On average, Chinese families spend ¥485,000 (about €68,000) on raising an offspring until the age of 18, according to the YuWa Population Research Institute, a think tank formed by demographers and economists. Not even in the USA is so much spent on a child.
And the figure is even higher in Chinese cities. While the average cost of a child in rural areas is ¥300,000 (around €42,000), it is ¥630,000 (a good €88,000) in the city.
The nationwide power outages of late last summer are probably still fresh in the minds of many in China. Millions were left in the dark, and entire factories came to a standstill – with repercussions for supply chains around the globe. This put the guarantee of power security through the expansion of energy storage at the top of the agenda of China’s leadership. And Beijing has big plans, analyzes Nico Beckert. Nevertheless, it is already clear that even billions invested in the ongoing energy transition will not make the grids perfectly secure.
German carmakers in China, especially, have been waiting a long time for this step: the relaxation of joint venture requirements. This obligation dictated that foreign manufacturers could never hold more than 50 percent of a Chinese company and could only operate joint ventures with domestic partners. In the commercial vehicle business, this requirement was dropped two years ago; foreign manufacturers of electric and hybrid cars were already exempt from it. Since the beginning of the year, the requirement to cooperate with domestic companies has largely been lifted for the entire industry. But not all players are happy with this relaxation, writes Christian Domke Seidel in his analysis on the abolition of the joint venture requirement. Because the relaxation comes with a catch.
Those who attended our live event China-Strategy 2022 on Tuesday, unfortunately, encountered some very unfortunate problems with their Zoom access and especially the sound quality. Some of us had noticed during the event that the speakers from China, of all places, could be heard relatively well, while those from Germany could not. Now, the most unlikely cause for us has actually been confirmed: On Tuesday of all days, Germany’s Telekom struggled with significant network outages throughout the country. In China, on the other hand, Zoom servers had an excellent connection. This once again confirms: Compared to China, Germany is still a developing country in all things digital.
Last fall, China experienced a dramatic demonstration of just how delicate the issue of power security can be: Due to bottlenecks, numerous provinces were forced to ration power. Not only did the lights go out in private households, but factories also came to a standstill. This came as a shock to China’s political elites, and foreign investors also viewed the situation with concern.
To ensure that this does not happen again, Beijing is making power security an important goal. However, the energy transition is not to be abandoned. On the contrary: China wants to double its power generation capacity from sun and wind to 1,200 gigawatts by 2030. Coal-fired power is to continue to be forced out of the grid in the long term.
The expansion of power storage is essential for driving the energy transition forward while ensuring a reliable power supply. China is facing the same problems as Germany: Sometimes the wind and sun supply more power than is needed, sometimes there is a lull. The results are power shortages and an unstable grid. Pumped-storage power plants and battery storage systems can absorb renewable energies in times of surplus and feed them back into the grid in the so-called dark doldrums or when power demand is high.
China has big plans for the expansion of its power storage facilities. Pumped storage capacity is to be doubled to 62 gigawatts by 2025. By 2030, it should already be 120 gigawatts. This form of power storage pumps water with surplus energy into a reservoir at higher altitudes. When there is a lull or high demand, the water is then drained and generates power via turbines.
In terms of battery storage, China is even aiming for an eightfold increase of current capacity. At present, the country has 3.5 gigawatts of such storage, mainly in the form of lithium-ion batteries. By 2025, the capacity is expected to grow to 30 gigawatts. Ideally, much of this battery storage will come from spent EV batteries. This way, power storage won’t compete with other sectors for scarce and increasingly expensive battery raw materials. Currently, however, Chinese authorities still have safety concerns. China’s National Energy Administration had most recently proposed a ban on the secondary use of batteries following a fatal explosion at a battery storage facility (China.Table reported).
One problem for the expansion of power storage, however, could be cost. A large part of the responsibility for expanding energy storage lies with the producers of renewable energies:
For operators of solar and wind farms, this means additional investments that fossil fuels simply do not entail. And the solar sector is already plagued by high costs and low profits as it is. Operators often face the problem that utilities are only slowly connecting their wind and solar farms to the power grid, according to the South China Morning Post. One industry representative complains in the report that the power storage market in China “doesn’t have a viable business model now.”
Apart from the issue of cost distribution, there is also a lack of financial incentives. China’s system of electricity rates does not offer extra compensation to suppliers who provide electricity during periods of high demand. “The peak tariff should be at least three times higher compared with the off-peak tariff so that pumped storage projects can be profitable,” Lin Boqiang, an energy expert and dean at the China Institute for Energy Policy Studies at Xiamen University, told SCMP.
China’s plans for power storage sound ambitious, but their dimensions may still be too small. According to industry analysts, China already requires power storage with a capacity of 200 gigawatts by 2030. “The 120GW target [for pumped storage] for 2030 seems not ambitious enough to meet the carbon neutrality goal climate targets,” says one analyst.
The expansion of power storage shows the tremendous challenges China’s planners are facing in the power transition. The restructuring of the power system is open-heart surgery for the Chinese economy, in which the interests of various players have to be reconciled. Last year’s power crisis demonstrated the drastic disruptions that can occur when responsibility for a secure and cost-effective power supply is offloaded to individual actors (China.Table reported).
The current opening of the Chinese economy should not be overrated – warns Juergen Matthes in an interview with China.Table. Matthes is the Head of the International Economics and Economic Outlook competence area at the German Economic Institute (IW) and explains: “There is a gradual but consistent trend in China away from a very restrictive toward a somewhat more open approach to foreign investment in its own country.”
A surprising statement. After all, the political problem areas in the relationship between Europe and China have actually increased in recent years. Sanctions have been met with counter-sanctions, without any resolution of the actual key disputes. The relaxation of the Chinese joint venture requirement appears to be a first, small step toward easing tensions, at least on the economic level.
However, this is not enough for the Federation of German Industries (BDI). Speaking to China.Table, Wolfgang Niedermark, a member of the BDI’s executive board, demands: “The German government and the EU Commission must insist on reciprocity in market access and a level playing field vis-à-vis China. The Chinese government must remove all forms of market access barriers and allow for fair competition between all market participants.”
Matthes believes that this is hardly likely in this form. China would oscillate between opening up on the one hand, and autarky in the sense of dual circulation on the other. Accordingly, the relaxations have a catch, as Matthes explains: “The openings are small steps in areas where it doesn’t hurt China because its own companies are usually already strong enough to face global competition.” This is a limitation that the BDI also sees. Although an enormous sales potential would open up for European companies, the risk of technology transfer would be great. Especially since the Chinese government is increasingly relying on import substitution, favoring domestic companies. “This practice puts German companies at a disadvantage or even excludes them from the Chinese market completely.”
While Chinese companies face a largely barrier-free European market, European companies face a host of restrictions. The Chinese model of a party-state controlled economy would also create an uneven playing field in the West, Niedermark believes, and calls for adjustments to the European legal framework, such as reciprocity in public procurement, stricter anti-subsidy regulations and a common approach to investment control among EU states. “We want to keep our market open, but we need to do more to ensure that market mechanisms actually apply and are not distorted by foreign state-owned enterprises.”
The relaxations that are now being implemented were already announced back in 2018. German carmakers were thus already lying in wait. Just in time for the launch of the relaxations, BMW increased its share in the joint venture with Brilliance from 50 to 75 percent for €3.7 billion (China.Table reported). The Munich-based company had announced this step back in 2018. Audi also immediately announced an expanded partnership with FAW (China.Table reported). A new plant is to be built by 2024, producing 150,000 EVs annually. The German automaker also holds a majority stake in Audi FAW NEV Company, as the company is called.
Going it alone – without a Chinese partner – is out of the question for Audi. “This cooperation gives us a deep insight into the Chinese market – which is why we will maintain this successful model in the future. Our local partner enables us to incorporate expertise and customer requirements into the vehicle at an early stage of development – this has proven very beneficial,” a company spokeswoman told China.Table. BMW shares a similar view. It was important to have a local partner who knew the market and could contribute its know-how. There are no plans to go it alone, nor are there any reasons to question the joint venture with Brilliance, the company made very clear. Niedermark understands this. “Numerous German companies have already been invested in China for years or even decades. The Chinese market will remain important for them in the future.”
Matthes is not surprised by such statements either. He says the Chinese auto market is difficult as it is and is being further complicated by geopolitical policies: “We’re getting word from German companies in China that the market is becoming more difficult because domestic companies are being given more and more preference. The new narrative of wanting to look out for oneself has spread remarkably quickly throughout the system.” The demand expectation of foreign companies in China is somewhat less optimistic, Matthes added. Many would feel like pawns in the geopolitical game.
On the other hand, China is a large and dynamic market. Maintaining or intensifying existing joint ventures is one way to respond to the changing sentiment in the country, Matthes said. “More and more German companies in China are considering what the higher geopolitical risks mean for their business. Some are choosing to appear as Chinese as possible to the outside world to minimize impending problems in day-to-day business.”
It’s obvious why China.Table requested a profile of her, says Lin Hierse when asked what she thinks about requests like this. “We don’t know each other. But what can be seen of me and my work is always linked to questions of identity.”
As the daughter of a German and a Chinese, the 31-year-old journalist grew up in Braunschweig. As a child, she took it for granted that she would grow up in a 100-year-old half-timbered house with a Chinese canopy, eat jiaozi on Christmas Eve and spend her summer vacation in China every two years. However: “From the outside, I was told that this is not normal. That in my own world, two worlds actually collide,” she says. Today, she works on issues relating to home, migration, and identity. This is also the theme of her first novel, “Wovon wir träumen” (What we dream of), which will be released on March 10.
“I didn’t write the novel because I thought it was important that I write about my relationship with China,” she says, “but because it’s a very defining part of my life.” Starting with the death of her Chinese grandmother, Hierse writes about questions regarding her own identity and the relationship with her mother. “Migration is something very formative. When you leave the place where you grew up, it has an impact, not only on your own biography but also on your children’s.”
Hierse is one of the few German journalists with a migrant background. That entails a certain responsibility to keep talking about it. “That is problematic, because I can only take one perspective out of of many. And besides, I also want to work on other topics.”
Even as a girl, Hierse had a passion for writing. But for a long time, professional writing didn’t seem to be an option for her. After school, she studied Asian studies and human geography. Along the way, she blogged for Sinonerds, a community of young people who want to break with China stereotypes. By chance, she learned about the opportunity to do a traineeship at the German newspaper Taz in Berlin, where she has been working as an editor since 2019.
She feels that she has been given the position because she is half-Chinese and can bring this valuable perspective to the profession. But it’s not her plan at all to act as a China expert. Time and again, she has to set herself apart. “That’s how I currently feel about the Olympics. I’d rather sign off on articles about it than write them myself.” To create even more distance, she has renamed her column. “China Town” is now “poetical correctness.” Hierse explains it this way: “Now it’s more about my kind of writing, looking at the more offbeat, and less about my background.”
One topic she likes to discuss is China coverage in the German media. “I often have the feeling that we haven’t understood China properly. And by ‘we’ I mean both ‘we’ in the sense of Germany and journalists.” Although there are colleagues who report in a differentiated manner, there is a lack of expertise in some areas. This is usually limited to classic economic and political topics. But in times of political tension, it is important to understand society in all its diversity.
China’s image is predominantly stereotype-laden and racially colored. “Often, the media can’t think of anything better than plastering a dragon somewhere or showing a crowd of people.” Stories of people were missing. These would show how the big affects the small. For example, in the report by her Zeit colleague Xifan Yang about a young Shanghai woman who moves to Germany to work as a care worker.
Hierse’s novel is another such example. Through her protagonist, she writes about German-Chinese history and wants to show that migration can not only be a trauma, but also a dream. After all, Hierse says, most people migrate because they dream of a good life. Lisa Winter
Children are expensive. But no other country spends as much money on its offspring in relation to its economic power as China. The average cost of raising a child is almost seven times the country’s GDP per capita.
On average, Chinese families spend ¥485,000 (about €68,000) on raising an offspring until the age of 18, according to the YuWa Population Research Institute, a think tank formed by demographers and economists. Not even in the USA is so much spent on a child.
And the figure is even higher in Chinese cities. While the average cost of a child in rural areas is ¥300,000 (around €42,000), it is ¥630,000 (a good €88,000) in the city.
