The worst fears are coming true. After Beijing abandoned zero-Covid, the leadership radically opened up and without any plan left the people to their fate. Reliable data is no longer available because testing is virtually non-existent. However, estimates predict millions of infected in the next few weeks – and millions of dead.
Reports of overflowing crematories are coming in from Chongqing, Guangzhou and Beijing, and images of hospitals with body bags everywhere are circulating on social media. It brings back memories of Wuhan at the beginning of the pandemic. But back then, the virus was new. Xi Jinping is personally responsible for this latest catastrophe. With just a little more foresight and less ideological stubbornness, he could have prevented this suffering. Virologists already fear that the next devastating variant could emerge in China.
With the Covid tsunami now going full steam across the country, holding on to the already insane quarantine rule for foreign visitors makes even less sense. Experts believe it will soon be lifted. The German business community may be pleased, as it will make traveling to and from China easier. But who would want to travel to a country on the brink of a health disaster anytime soon? Everyone should avoid China in the coming weeks.
Despite rising infection levels, the city of Beijing continues to open up. Bars, gyms and karaoke stores are set to reopen. Although a city spokesman admitted that despite infections “progressing rapidly”, “original prevention and control policies and measures that should be canceled should be canceled resolutely”. The goal was to “resume work and normal life as soon as possible”. China continues to focus on protecting health, a Foreign Ministry spokeswoman said.
Experts, however, have a much bleaker outlook on the near future than the government. “The global economic fallout from China’s new mega tsunami wave will be ugly,” writes Chinese-born US epidemiologist Eric Feigl-Ding on Twitter. Feigl-Ding also warns of global pharmaceutical shortages. If China were now to restrict exports for the benefit of its own people, vital medications would be missing in the West (China.Table reported).
Feigl-Ding also expects the death toll to exceed current estimates. While Hong Kong researchers expect just under one million deaths (China.Table reported), he fears several million. A high, steep wave is looming.
Official numbers continue to be unreliable. Echoing the debate over “died of Covid” or “died with Covid,” China now decided to only count fatal cases of pneumonia caused by Sars-CoV-2 and definitely nothing else as Covid deaths. However, such cases are rare.
At the same time, the pandemic is rapidly becoming visible. For example, the famous Beijing opera singer Chu Lanlan now also reportedly died from COVID-19-related complications. The streets of major cities are partly deserted. People stay at home out of fear of contagion. Security guards keep reporters away from crematoriums so they cannot count the backlog of hearses, as they have in recent days.
In retrospect, however, the reasons behind last week’s hasty opening become clearer. Behind the facade of zero-Covid, the infection wave was already building up (China.Table reported). Half-hearted containment cannot stop Omicron once it has gained a foothold. The government was left with two options: Drastic lockdowns like the one in Shanghai in the spring, only nationwide this time – or surrender. A virus that multiplies exponentially does not allow for the compromises and gray areas that normally make up politics.
The surrender was then sold as the great opening to save face. That is not optimal either. But the complete opening still seemed like a better option:
The question remains why Beijing did not choose a controlled, gradual plan for the opening. In the land of five-year plans, this would actually have been the obvious thing to do. The government could have given the population the prospect of opening up, introduced gradual relaxations and built up immunity through boosters and infections.
But the leadership missed the opportunity for such an orderly scenario:
The Western democracies got caught up in their typical debates and battles of interests in their response to Covid and thus were not as effective as they could have been. China now represents the other extreme, with an ideological leadership that steered the country in one direction for too long without having to respond to opposition.
Now the party spreads new false statements to justify the change of course. Suddenly there is talk of a “common cold”. The State Council’s disease prevention commission also downplayed Omicron as relatively harmless on Wednesday – even though it recommends vaccination to prevent severe infections. The propaganda falls from one extreme to the other. In fact, Omicron is almost as deadly to elderly and debilitated patients as earlier variants. The BF.7 variant that is currently circulating in China is also two to three times more contagious than Omicron was in its first variant anyway (China.Table reported). There is growing concern worldwide that new variants could breed among the many infected.
The violent infection wave now rightly frightens the Chinese population. After all, China’s media taught them to fear Covid. Now, the virus is everywhere.
Travelers who have landed in China in recent days have picked a bad timing: Although the entire country rapidly becomes infected, arrivals still have to spend five to eight days in hotel quarantine. The rule has long since stopped making sense. After all, with several million new infections every day, what difference can a few more positive cases from outside the country make?
Beijing seems to be aware that it is time to end quarantine. Many observers believe a corresponding announcement is imminent. “This rule will probably also be abolished soon,” said Joerg Wuttke, President of the EU Chamber of Commerce. The German Chamber of Commerce in Beijing is also optimistic. “We assume that the international travel restrictions will soon be withdrawn,” said a spokeswoman.
To make travel easier for German expats, the chamber launched a popular offer for charter flights during the pandemic. The package includes a flight to Qingdao in eastern China and accommodations in a comfortable local quarantine hotel. As planned, the chamber said, the offer will expire in March.
Many things suggest that travel without quarantine will long be possible again by then. The German business community speculates that a far-reaching relaxation could happen in mid-January. Concrete measures are already emerging at the border between Hong Kong and Mainland China. Hong Kong’s Chief Executive John Lee is expected to visit Beijing this Wednesday, where he will discuss the opening of China’s main land border with President Xi Jinping, according to Hong Kong media reports.
Currently, only 2,500 travelers a day are allowed to cross the border from Hong Kong into neighboring Shenzhen. They must then go into quarantine there. But according to local media reports, Hong Kong authorities have begun preparing border posts for the start of quarantine-free travel. Border officials are reportedly ramping up operations again these days. The express train between Hong Kong and the mainland could also start running again soon.
The Hong Kong newspaper South China Morning Post quotes government sources as saying that the border could be fully opened “in early January.” Sources in Shenzhen mention January 9 as a possible date. Other Chinese cities such as Beijing or Shanghai should then quickly follow suit.
That something is in motion is already apparent in Macau. Travel between Macau and the Mainland has long been possible again without quarantine. However, people traveling to Macau from abroad have to go through hotel quarantine, just like on the Chinese Mainland. However, this rule was significantly eased by the Chinese special administrative region last week.
Although there is still a mandatory five days of isolation officially, it can also be spent at home or in any hotel in the city. Three hotels in Macau confirmed to China.Table that the isolation is not enforced very strictly. For example, they say that for the duration of the quarantine, people initially only have a red and then a yellow health code on their smartphones. However, many hotels apparently allow them to leave their room and hotel during this time. After completion of the official quarantine, they must then remain in the city for a few more days, until nine days after arrival in Macau, onward travel to Mainland China is possible without further restrictions.
Even if travel to China will soon be possible again without an exhausting mandatory quarantine after almost three years, it will probably take some time before travel actually returns to normal. International airlines will need time to adjust to the new situation. If China opens its borders in the coming weeks, flights are likely to remain limited for the time being. Joern Petring
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.
The entry of the shipping company Cosco into a terminal in the Port of Hamburg, the planned takeover of the Dortmund chip manufacturer Elmos, Huawei’s participation in the German 5G mobile network – more and more Chinese investments are currently becoming a public bone of contention. The concern is clear: After the disaster with Russia, we do not want to become increasingly economically dependent on the next autocracy – especially one that tramples on human rights at home and possibly harbors its own war plans against Taiwan.
But a coherent strategy by the German government regarding China is not yet discernible. It shambles from case to case and relies too much on defensive measures. Now would be the time for an offensive investment agenda to make Europe more attractive, more sovereign and more crisis-proof as an industrial location.
Corporate headquarters and ministries currently play out a severe crisis scenario. If China were to invade Taiwan in the near future, the West would impose extensive economic sanctions. The USA would set the pace. In extreme cases, it could act as it did with Iran and impose secondary sanctions on all those who refuse to join in.
This could result in a fatal decision for German companies: Doing business either with the USA or with China – both would no longer be possible. For many years, the equidistant tightrope act with good relations on all sides was a politically dubious but economically highly effective recipe for success of the German export industry.
Such a Taiwan scenario may seem unlikely – at least that is how interested parties keep emphasizing it. But if it were to happen, it would be an economic shock for the global economy and for Germany in particular that would dwarf anything seen before. Germany’s trade volume with China is around 250 billion euros per year, more than four times as much as with Russia. And the dependencies are far more diverse.
With Russia, it “only” concerned energy imports that had to be replaced. As a sales market, however, Russia is practically irrelevant. China is a completely different story. Renowned German DAX companies, above all the carmakers, generate more than a third of their total corporate sales there. If these sales were to suddenly disappear, they would have to fight for survival, because no other market could absorb such volumes in such a short time.
Moreover, we are dependent on all kinds of imports. In the event of a sudden loss of Chinese suppliers, all wheels would come to a standstill in faraway Europe, because often no alternative is available at short notice. The German Council of Economic Experts recently identified 248 cases of critical import dependency in Germany. These include raw materials and intermediate products that are essential for value creation – and for which there are also very few sources of supply worldwide.
Looking at the total trade volume of these goods, around half come from China. Specifically, this includes various IT devices, antibiotics, rotor blades for wind turbines and solar panels. It is bitter, but without China, the German energy transition has died – a late consequence of the industrial policy disaster of 2013, when the solar industry and more than a hundred thousand jobs were simply allowed to move to Beijing at lavish subsidies.
In short, a sudden end to trade relations with China would be an economic disaster. That is why no one wants to force it. Nevertheless, there could be circumstances in which it does happen – such as in the Taiwan scenario. To somehow prepare for this eventuality, all kinds of political initiatives are currently being developed, including the German government’s national security strategy, which is to be presented next year.
The same happens in many companies. The key word here is “diversification”. Nolens volens, many companies are restructuring their supply chains toward “China plus 1”. From now on, there should be at least one alternative in another country at all levels. That is why so many business delegations are traveling to Vietnam, India or Singapore right now. Chinese company bosses also go there and specifically set up production facilities. In the event of a crisis, business with Western partners could possibly continue.
Another strategy to save the China business is localization. The Bundesbank recently recorded a significant increase in German direct investment in China. Behind this are often DAX-listed companies and large SMEs that want to set up a local closed production line, sometimes in the hope that they will hold even in the event of a conflict because it can do without goods flows from the West.
Produced in China and for China – but under the umbrella of a German holding company. Whether this strategy will really work remains to be seen. Politicians can often only look on, because investment decisions are made by the companies. Some may even speculate that further expansion of their China business is worthwhile simply because the state will somehow come to their rescue in the event of a possible downfall.
Privatize profits, socialize losses – this is a popular motif of corporate governance, and not just since the financial crisis. Policymakers could indeed try to nip this fully-comprehensive insurance mentality in the bud and step in to exert more control. But how credible is that in an emergency? Furthermore, the German government would then need a strategic goal of what it wants to achieve with its policy. But it is lacking this.
Instead, individual Chinese investments are arbitrarily made the subject of a public debate. It remains unclear by what criteria. Wherever Germany’s vital security interests are affected, intensive scrutiny is a given. If there is even the slightest risk that a Chinese state-owned company could control a German data network and send it into blackout at the behest of the state leadership, all lights must immediately turn red.
The situation is similar for the loss of critical intellectual property. However, the rather general argument that an investment such as Cosco’s should not be approved because China could potentially expand its global market position, as a result, is not really enough to justify a ban. After all, such a quest for a strong market position is inherent in many investments, regardless of their origin. In general, the control approach is a dangerous one.
The core message that comes across fairly quickly is that Chinese investments are generally no longer welcome. However, anyone who thinks this should be aware of the consequences. Because sooner or later, Beijing would naturally find an answer and restrict German investment. The problem with such an intervention spiral is that far more money and jobs are on the line for us. Because Germany continues to invest much more in China than the other way around.
Instead of being purely defensive, Germany and Europe would do better to take the offensive. If we want to break away from China and other autocracies, we need more domestic investment in strategically important areas that are still critically dependent on imports. First and foremost in renewables and hydrogen, but also in important components such as semiconductors or batteries. Such industrial policy is not per se protectionist or anti-China.
It does not throw a spanner in the works of others, but constructively builds up domestic production capacities. That is a huge difference. Government money will also have to flow for this. But we should not deceive ourselves: In our age of geo-economic bloc formation, there is no way around it anyway. State-capitalist China has always heavily nurtured and subsidized its companies.
And with Joe Biden’s Inflation Reduction Act (IRA), the United States is about to become the second major player in this field. For example, he is laying out billions to promote electric mobility. For us, this is both a curse and a blessing. On the one hand, from a global perspective, there are truly worse things than the promotion of climate-friendly technologies in the USA. On the other hand, we are risking losing market share in future-oriented sectors where we actually thought to still be at the forefront.
That is why Europe must act to maintain a balance with the subsidies of others. At the EU summit meeting taking place in Brussels these days, leaders are trying to come up with a powerful response. But it is not yet clear whether they will succeed, or whether the issue risks being lost in the dispute and the plethora of other crises – from the Ukraine war to Viktor Orbán.
The good thing is that the right answer could answer several open questions at once. Because a European investment agenda with corresponding reforms of EU state aid and fiscal rules would not only be the right response to the new American industrial policy. In the end, dependencies on China can also only be reduced through an offensive strategy.
The focus should lie on building on own strengths – not on the media scandalization when Chinese investors try to become active in Europe.
This text was first published in the German weekly newspaper Wochentaz on 17.12.2022.
The famous ice sculpture show in Harbin, the capital of Heilongjiang province in the far northeast, has not yet started. But preparations are in full swing. Hundreds of ice sculptors are hammering, chiseling, carving and sweeping at the objects v because the clock is ticking. The show begins on December 23. The name of the location v “Sun Island” – may be irritating. But there is no reason to fear that the sculptures will be exposed to too much light and possibly melt. Harbin is known for constant minus 20 degrees – well into February.
The worst fears are coming true. After Beijing abandoned zero-Covid, the leadership radically opened up and without any plan left the people to their fate. Reliable data is no longer available because testing is virtually non-existent. However, estimates predict millions of infected in the next few weeks – and millions of dead.
Reports of overflowing crematories are coming in from Chongqing, Guangzhou and Beijing, and images of hospitals with body bags everywhere are circulating on social media. It brings back memories of Wuhan at the beginning of the pandemic. But back then, the virus was new. Xi Jinping is personally responsible for this latest catastrophe. With just a little more foresight and less ideological stubbornness, he could have prevented this suffering. Virologists already fear that the next devastating variant could emerge in China.
With the Covid tsunami now going full steam across the country, holding on to the already insane quarantine rule for foreign visitors makes even less sense. Experts believe it will soon be lifted. The German business community may be pleased, as it will make traveling to and from China easier. But who would want to travel to a country on the brink of a health disaster anytime soon? Everyone should avoid China in the coming weeks.
Despite rising infection levels, the city of Beijing continues to open up. Bars, gyms and karaoke stores are set to reopen. Although a city spokesman admitted that despite infections “progressing rapidly”, “original prevention and control policies and measures that should be canceled should be canceled resolutely”. The goal was to “resume work and normal life as soon as possible”. China continues to focus on protecting health, a Foreign Ministry spokeswoman said.
Experts, however, have a much bleaker outlook on the near future than the government. “The global economic fallout from China’s new mega tsunami wave will be ugly,” writes Chinese-born US epidemiologist Eric Feigl-Ding on Twitter. Feigl-Ding also warns of global pharmaceutical shortages. If China were now to restrict exports for the benefit of its own people, vital medications would be missing in the West (China.Table reported).
Feigl-Ding also expects the death toll to exceed current estimates. While Hong Kong researchers expect just under one million deaths (China.Table reported), he fears several million. A high, steep wave is looming.
Official numbers continue to be unreliable. Echoing the debate over “died of Covid” or “died with Covid,” China now decided to only count fatal cases of pneumonia caused by Sars-CoV-2 and definitely nothing else as Covid deaths. However, such cases are rare.
At the same time, the pandemic is rapidly becoming visible. For example, the famous Beijing opera singer Chu Lanlan now also reportedly died from COVID-19-related complications. The streets of major cities are partly deserted. People stay at home out of fear of contagion. Security guards keep reporters away from crematoriums so they cannot count the backlog of hearses, as they have in recent days.
In retrospect, however, the reasons behind last week’s hasty opening become clearer. Behind the facade of zero-Covid, the infection wave was already building up (China.Table reported). Half-hearted containment cannot stop Omicron once it has gained a foothold. The government was left with two options: Drastic lockdowns like the one in Shanghai in the spring, only nationwide this time – or surrender. A virus that multiplies exponentially does not allow for the compromises and gray areas that normally make up politics.
The surrender was then sold as the great opening to save face. That is not optimal either. But the complete opening still seemed like a better option:
The question remains why Beijing did not choose a controlled, gradual plan for the opening. In the land of five-year plans, this would actually have been the obvious thing to do. The government could have given the population the prospect of opening up, introduced gradual relaxations and built up immunity through boosters and infections.
But the leadership missed the opportunity for such an orderly scenario:
The Western democracies got caught up in their typical debates and battles of interests in their response to Covid and thus were not as effective as they could have been. China now represents the other extreme, with an ideological leadership that steered the country in one direction for too long without having to respond to opposition.
Now the party spreads new false statements to justify the change of course. Suddenly there is talk of a “common cold”. The State Council’s disease prevention commission also downplayed Omicron as relatively harmless on Wednesday – even though it recommends vaccination to prevent severe infections. The propaganda falls from one extreme to the other. In fact, Omicron is almost as deadly to elderly and debilitated patients as earlier variants. The BF.7 variant that is currently circulating in China is also two to three times more contagious than Omicron was in its first variant anyway (China.Table reported). There is growing concern worldwide that new variants could breed among the many infected.
The violent infection wave now rightly frightens the Chinese population. After all, China’s media taught them to fear Covid. Now, the virus is everywhere.
Travelers who have landed in China in recent days have picked a bad timing: Although the entire country rapidly becomes infected, arrivals still have to spend five to eight days in hotel quarantine. The rule has long since stopped making sense. After all, with several million new infections every day, what difference can a few more positive cases from outside the country make?
Beijing seems to be aware that it is time to end quarantine. Many observers believe a corresponding announcement is imminent. “This rule will probably also be abolished soon,” said Joerg Wuttke, President of the EU Chamber of Commerce. The German Chamber of Commerce in Beijing is also optimistic. “We assume that the international travel restrictions will soon be withdrawn,” said a spokeswoman.
To make travel easier for German expats, the chamber launched a popular offer for charter flights during the pandemic. The package includes a flight to Qingdao in eastern China and accommodations in a comfortable local quarantine hotel. As planned, the chamber said, the offer will expire in March.
Many things suggest that travel without quarantine will long be possible again by then. The German business community speculates that a far-reaching relaxation could happen in mid-January. Concrete measures are already emerging at the border between Hong Kong and Mainland China. Hong Kong’s Chief Executive John Lee is expected to visit Beijing this Wednesday, where he will discuss the opening of China’s main land border with President Xi Jinping, according to Hong Kong media reports.
Currently, only 2,500 travelers a day are allowed to cross the border from Hong Kong into neighboring Shenzhen. They must then go into quarantine there. But according to local media reports, Hong Kong authorities have begun preparing border posts for the start of quarantine-free travel. Border officials are reportedly ramping up operations again these days. The express train between Hong Kong and the mainland could also start running again soon.
The Hong Kong newspaper South China Morning Post quotes government sources as saying that the border could be fully opened “in early January.” Sources in Shenzhen mention January 9 as a possible date. Other Chinese cities such as Beijing or Shanghai should then quickly follow suit.
That something is in motion is already apparent in Macau. Travel between Macau and the Mainland has long been possible again without quarantine. However, people traveling to Macau from abroad have to go through hotel quarantine, just like on the Chinese Mainland. However, this rule was significantly eased by the Chinese special administrative region last week.
Although there is still a mandatory five days of isolation officially, it can also be spent at home or in any hotel in the city. Three hotels in Macau confirmed to China.Table that the isolation is not enforced very strictly. For example, they say that for the duration of the quarantine, people initially only have a red and then a yellow health code on their smartphones. However, many hotels apparently allow them to leave their room and hotel during this time. After completion of the official quarantine, they must then remain in the city for a few more days, until nine days after arrival in Macau, onward travel to Mainland China is possible without further restrictions.
Even if travel to China will soon be possible again without an exhausting mandatory quarantine after almost three years, it will probably take some time before travel actually returns to normal. International airlines will need time to adjust to the new situation. If China opens its borders in the coming weeks, flights are likely to remain limited for the time being. Joern Petring
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.
The entry of the shipping company Cosco into a terminal in the Port of Hamburg, the planned takeover of the Dortmund chip manufacturer Elmos, Huawei’s participation in the German 5G mobile network – more and more Chinese investments are currently becoming a public bone of contention. The concern is clear: After the disaster with Russia, we do not want to become increasingly economically dependent on the next autocracy – especially one that tramples on human rights at home and possibly harbors its own war plans against Taiwan.
But a coherent strategy by the German government regarding China is not yet discernible. It shambles from case to case and relies too much on defensive measures. Now would be the time for an offensive investment agenda to make Europe more attractive, more sovereign and more crisis-proof as an industrial location.
Corporate headquarters and ministries currently play out a severe crisis scenario. If China were to invade Taiwan in the near future, the West would impose extensive economic sanctions. The USA would set the pace. In extreme cases, it could act as it did with Iran and impose secondary sanctions on all those who refuse to join in.
This could result in a fatal decision for German companies: Doing business either with the USA or with China – both would no longer be possible. For many years, the equidistant tightrope act with good relations on all sides was a politically dubious but economically highly effective recipe for success of the German export industry.
Such a Taiwan scenario may seem unlikely – at least that is how interested parties keep emphasizing it. But if it were to happen, it would be an economic shock for the global economy and for Germany in particular that would dwarf anything seen before. Germany’s trade volume with China is around 250 billion euros per year, more than four times as much as with Russia. And the dependencies are far more diverse.
With Russia, it “only” concerned energy imports that had to be replaced. As a sales market, however, Russia is practically irrelevant. China is a completely different story. Renowned German DAX companies, above all the carmakers, generate more than a third of their total corporate sales there. If these sales were to suddenly disappear, they would have to fight for survival, because no other market could absorb such volumes in such a short time.
Moreover, we are dependent on all kinds of imports. In the event of a sudden loss of Chinese suppliers, all wheels would come to a standstill in faraway Europe, because often no alternative is available at short notice. The German Council of Economic Experts recently identified 248 cases of critical import dependency in Germany. These include raw materials and intermediate products that are essential for value creation – and for which there are also very few sources of supply worldwide.
Looking at the total trade volume of these goods, around half come from China. Specifically, this includes various IT devices, antibiotics, rotor blades for wind turbines and solar panels. It is bitter, but without China, the German energy transition has died – a late consequence of the industrial policy disaster of 2013, when the solar industry and more than a hundred thousand jobs were simply allowed to move to Beijing at lavish subsidies.
In short, a sudden end to trade relations with China would be an economic disaster. That is why no one wants to force it. Nevertheless, there could be circumstances in which it does happen – such as in the Taiwan scenario. To somehow prepare for this eventuality, all kinds of political initiatives are currently being developed, including the German government’s national security strategy, which is to be presented next year.
The same happens in many companies. The key word here is “diversification”. Nolens volens, many companies are restructuring their supply chains toward “China plus 1”. From now on, there should be at least one alternative in another country at all levels. That is why so many business delegations are traveling to Vietnam, India or Singapore right now. Chinese company bosses also go there and specifically set up production facilities. In the event of a crisis, business with Western partners could possibly continue.
Another strategy to save the China business is localization. The Bundesbank recently recorded a significant increase in German direct investment in China. Behind this are often DAX-listed companies and large SMEs that want to set up a local closed production line, sometimes in the hope that they will hold even in the event of a conflict because it can do without goods flows from the West.
Produced in China and for China – but under the umbrella of a German holding company. Whether this strategy will really work remains to be seen. Politicians can often only look on, because investment decisions are made by the companies. Some may even speculate that further expansion of their China business is worthwhile simply because the state will somehow come to their rescue in the event of a possible downfall.
Privatize profits, socialize losses – this is a popular motif of corporate governance, and not just since the financial crisis. Policymakers could indeed try to nip this fully-comprehensive insurance mentality in the bud and step in to exert more control. But how credible is that in an emergency? Furthermore, the German government would then need a strategic goal of what it wants to achieve with its policy. But it is lacking this.
Instead, individual Chinese investments are arbitrarily made the subject of a public debate. It remains unclear by what criteria. Wherever Germany’s vital security interests are affected, intensive scrutiny is a given. If there is even the slightest risk that a Chinese state-owned company could control a German data network and send it into blackout at the behest of the state leadership, all lights must immediately turn red.
The situation is similar for the loss of critical intellectual property. However, the rather general argument that an investment such as Cosco’s should not be approved because China could potentially expand its global market position, as a result, is not really enough to justify a ban. After all, such a quest for a strong market position is inherent in many investments, regardless of their origin. In general, the control approach is a dangerous one.
The core message that comes across fairly quickly is that Chinese investments are generally no longer welcome. However, anyone who thinks this should be aware of the consequences. Because sooner or later, Beijing would naturally find an answer and restrict German investment. The problem with such an intervention spiral is that far more money and jobs are on the line for us. Because Germany continues to invest much more in China than the other way around.
Instead of being purely defensive, Germany and Europe would do better to take the offensive. If we want to break away from China and other autocracies, we need more domestic investment in strategically important areas that are still critically dependent on imports. First and foremost in renewables and hydrogen, but also in important components such as semiconductors or batteries. Such industrial policy is not per se protectionist or anti-China.
It does not throw a spanner in the works of others, but constructively builds up domestic production capacities. That is a huge difference. Government money will also have to flow for this. But we should not deceive ourselves: In our age of geo-economic bloc formation, there is no way around it anyway. State-capitalist China has always heavily nurtured and subsidized its companies.
And with Joe Biden’s Inflation Reduction Act (IRA), the United States is about to become the second major player in this field. For example, he is laying out billions to promote electric mobility. For us, this is both a curse and a blessing. On the one hand, from a global perspective, there are truly worse things than the promotion of climate-friendly technologies in the USA. On the other hand, we are risking losing market share in future-oriented sectors where we actually thought to still be at the forefront.
That is why Europe must act to maintain a balance with the subsidies of others. At the EU summit meeting taking place in Brussels these days, leaders are trying to come up with a powerful response. But it is not yet clear whether they will succeed, or whether the issue risks being lost in the dispute and the plethora of other crises – from the Ukraine war to Viktor Orbán.
The good thing is that the right answer could answer several open questions at once. Because a European investment agenda with corresponding reforms of EU state aid and fiscal rules would not only be the right response to the new American industrial policy. In the end, dependencies on China can also only be reduced through an offensive strategy.
The focus should lie on building on own strengths – not on the media scandalization when Chinese investors try to become active in Europe.
This text was first published in the German weekly newspaper Wochentaz on 17.12.2022.
The famous ice sculpture show in Harbin, the capital of Heilongjiang province in the far northeast, has not yet started. But preparations are in full swing. Hundreds of ice sculptors are hammering, chiseling, carving and sweeping at the objects v because the clock is ticking. The show begins on December 23. The name of the location v “Sun Island” – may be irritating. But there is no reason to fear that the sculptures will be exposed to too much light and possibly melt. Harbin is known for constant minus 20 degrees – well into February.
