When German Chancellor Olaf Scholz visits China starting from Sunday, he will address a whole list of issues. Most of them are of an economic nature, as apparently these are the greatest concerns that can afflict a country.
Massive overcapacity by Chinese manufacturers, state subsidies from China, restricted access to the Chinese market – all of these are causing significant anxiety for German companies, as Michael Radunski writes in his assessment today. Where does the Chancellor begin with such a long list? How does he rhetorically navigate to ensure his criticism gets through? After all, he is not the first German politician to bring these problems to the table.
For years, the same accusations have been brought forth by the German economy against the Chinese government. And how will Scholz react if the Chinese counter with the classic “whataboutism”, arguing that they themselves are severely discriminated against in the EU?
Therefore, it’s already clear: Scholz won’t bring back solutions to major problems from China. At best, there will be small concessions in exchange for his own willingness to compromise. But what else is there? As the Romans said, “Dripping water hollows out stone,” not Confucius.
Party chief Xi Jinping employs the same tactic in his efforts to convince the Taiwanese that they are all Chinese. Just like on Wednesday when he received Taiwan’s former president, Ma Ying-Jeou. Xi stated that no one could prevent the “reunification of the family”, as reported by David Demes.
However, in times of intense identity politics, Xi is hitting a brick wall with this approach. Only a fraction of Taiwanese feel a strong connection with the People’s Republic. Yet, Ma seems to be among them. He advocates for closer ties with China in his homeland. This is not the first time. He already toured the People’s Republic back in 2023.
Whether he is actually doing his Kuomintang party a favor by showcasing a close friendship with Xi Jinping is questionable. In January, Taiwanese voters rejected such a policy once again.
It could become the central theme of Chancellor Olaf Scholz’s trip to China: the difficult situation of German companies in the People’s Republic. Because there is gloominess in the crucial sales market. The biggest problems are:
Just on Wednesday, the AHK in Beijing presented the latest findings from surveys of its members. In addition, there are current studies from the Kiel Institute for the World Economy (IfW) and the Institute of the German Economy (IW).
The main problem: Almost two-thirds (65 percent) of German companies in China see themselves in an unfair competition. “This is a high value that shows our politicians that this is really one of the primary issues that need to be addressed with the Chinese leadership,” said Maximilian Butek, Managing Member of the Executive Board of the German Chamber of Commerce in Beijing. “The legal framework in China weakens the competitiveness of German companies.”
Unfair competition manifests itself in various forms. In the AHK survey, German companies particularly complain about poorer access to the government and local authorities, as well as to expert committees that set standards. “In China, many things are negotiated. The lack of contacts and networks is particularly noticeable,” explains Butek.
Another form of unfair competition is state subsidies – especially when they, as in China, specifically benefit domestic companies. As a study by the Kiel Institute for the World Economy (IfW) shows, more than 99 percent of publicly listed companies in China received direct state subsidies in 2022. According to the IfW, China’s leadership often uses the funds very selectively to win technological leadership in selected key technologies.
According to the IfW, EV manufacturer BYD received particularly high subsidies: while it was around 220 million euros in 2020, it was already 2.1 billion euros in 2022. According to the IfW, leading Chinese providers in the wind turbine sector, such as Goldwind and Mingyang, also benefit greatly from government subsidies.
The consequence for German companies in China: Local competition has dramatically increased in recent years. While German companies can still score points with product quality and technical leadership, the AHK study shows how much the balance of power has shifted, especially in terms of innovation strength: Only half of German companies still believe that their innovation strength is greater than that of their competitors. For AHK’s Butek, this is a surprising factor.
Above all, this circumstance should give cause for thought. Chinese companies like the technology giant Huawei from Shenzhen have been investing a large part of their profits in research and development for years. The result: Especially in industries undergoing comprehensive change, the cards are being reshuffled. According to the AHK survey, in the automotive industry, eleven percent say that their Chinese competitors are already technology leaders today – and another 58 percent expect this to be the case in the next five years.
So it is the combination of the weak economic development in China and the strengthening of local companies (through subsidies and innovation) that makes the unfair competitive conditions for German companies particularly noticeable. Almost all companies (95 percent) expect:
Nevertheless, more than half (54 percent) of the 150 companies surveyed plan further investments in China. The majority of them justify this by saying that they want to remain competitive at all.
However, not only German companies suffer from the weak Chinese economy. In China itself, this creates massive overcapacities – which are now to be sold cheaply on the world market. Chinese products are flooding the German and European markets with low prices.
The consequences are quite ambivalent, as IfW research director Dirk Dohse explained the study results on Wednesday: “While the European industry is often no longer competitive against competition from China in terms of price,” said Dohse. On the other hand: “Without China’s subsidized technology, however, products that Germany needs for the green transformation would also become more expensive and scarcer.”
All these circumstances result in a third problem: Despite all warnings, the German industry still fails to reduce its dependency on China. On the contrary, the situation has even worsened for some products. A recent study by the Institute of the German Economy (IW) mainly mentions medicines, chemical products and electronic products such as laptops and computer accessories, solar cells, magnets and batteries. In areas with high dependencies such as chemical and electronic products, there is “no significant structural derisking of the German economy” to be seen, said IW researcher Juergen Matthes.
According to the IW study, the products with high dependencies on China are often raw materials that are at the beginning of the value chains. “Their absence could – due to indispensability and lack of replaceability – possibly lead to serious production stoppages in the subsequent stages of the supply chain as a result of domino effects.” Important raw materials such as the rare earths scandium and yttrium, but also natural graphite, germanium, and magnesium are mentioned.
Since the Russian invasion of Ukraine, it has become clear to many in Germany how dangerous too much dependency can be. Not only the leadership in Moscow, but also the government in Beijing, use such dependencies to exert political pressure. Sometimes it’s tariffs and import bans, sometimes boycotts or lengthy inspections that are supposed to make companies and entire countries rethink their stance on various issues. Countries like Australia, South Korea, or Lithuania have already had such experiences.
For the urgently needed products graphite, germanium and gallium, the Chinese leadership introduced explicit export controls a few months ago.
With a casual “You haven’t changed at all,” China’s state and party leader Xi Jinping greeted Taiwan’s former president Ma Ying-jeou (KMT) on Wednesday afternoon in the Great Hall of the People in Beijing. In front of a select group of journalists, the two statesmen greeted each other with a long handshake.
Details of the historic meeting had been kept secret until the last moment. It was unclear until Wednesday whether it would even take place. Ma has been in China since April 1 as part of a delegation trip organized by his foundation, accompanied by a group of Taiwanese students. He had hoped for a reunion with his “old friend” Xi Jinping last year already.
The two men last met in 2015 in Singapore. It was the first such meeting between two sitting leaders of both sides. The China-friendly Ma had declared the current visit as a “peace and friendship trip”. However, both the KMT and the ruling DPP had emphasized the private nature of the trip. In Taiwan, Ma’s meeting with Xi was met with sharp criticism. Ma had not emphasized that the people in Taiwan wanted to hold on to their sovereignty and their free institutions, criticized the Taiwanese authority for affairs with mainland China. The Chinese Communist Party continues to put pressure on Taiwan with military intimidation and economic coercion in order to impose its one-China concept on the island republic.
The meeting yesterday took place on the same day that Japanese Prime Minister Kishida arrived in Washington for a long-awaited summit. In Taiwan, this sparked sharp criticism. The summit, which will also be attended by Philippine President Marcos starting Thursday, has the potential to fundamentally change the security framework in the Indo-Pacific. The USA, Japan and the Philippines intend to cooperate even more closely in the future. Not only in the field of maritime rescue but also in countering Chinese grey zone activities in the South and East China Seas. Taiwan is also expected to be a topic at the summit.
So, Ma’s trip was very convenient for the Chinese government. While Washington is trying to build international solidarity and a security architecture for Taiwan, former President Ma supports China’s narrative that the conflict between Taipei and Beijing is an internal Chinese issue. Taiwanese observers said Ma runs the risk of becoming a puppet of Beijing.
Accordingly, Xi made it clear in his public remarks yesterday that he rejects interference from foreign forces in the Taiwan issue. “Compatriots on both sides of the Taiwan Strait are all Chinese. (…) There is no force strong enough to separate us,” Xi told Ma and his delegation. The different political systems of both sides cannot change the fact that they belong to one and the same country, Xi continued, “Attempts by outside forces to interfere cannot stop the historical trend of reunification of our homeland.”
The EU has imposed provisional anti-dumping duties on certain alkyl phosphate esters from China. According to the Brussels authority, the phosphate compositions affected are mainly used as flame retardants in rigid and flexible foam. The provisional anti-dumping duties are remarkably high: They range from 45.1 percent to 68.4 percent. The decision was preceded by an investigation into the imports. The EU investigators will continue the investigation to determine whether the duties will then become permanent in five years’ time.
The EU Commission also published an updated report on state-induced distortions in the Chinese economy on Wednesday. The 700-page paper is intended as a guide for EU industry to facilitate complaints about dumping practices.
So far, such a guide only exists for China. The original version dates back to 2017, but the new version has been expanded to include sectors such as the chip and cleantech industries and electric vehicles. The EU Commission initiates an average of ten anti-dumping investigations per year, so far mainly in the steel and aluminum sectors. ari
Russia, Latin America, Southeast Asia: Chery is the brand among Chinese manufacturers that exports the most. The state-owned company sold over 900,000 vehicles abroad in 2023. However, Chery cars are hardly known in North America and Europe. Breaking into Europe is a significant step that requires thorough preparation. The brand has been working on it for several years, with Jochen Tueting playing a central role.
When a headhunter called in 2013, Tueting was a manager at Ford, with 14 years of experience in overall vehicle development and a degree in mechanical engineering specializing in vehicle technology and internal combustion engines. And now, China? Why not. Tueting was familiar with the country from business trips and had traveled through Asia several times with his wife. The couple wanted to live abroad and moved to Shanghai with their one-year-old son. They stayed for four years until 2017.
Chery’s headquarters is not in Shanghai but in Wuhu, Anhui province, 300 kilometers away. A city that is not as attractive for expats. However, Chery needed international experts to ensure that its vehicles could compete in European and US markets with their expertise.
Therefore, in 2013, the manufacturer opened a second development center in Shanghai to create a vehicle platform for international markets that meets crash requirements in the USA and Europe. A point where some other manufacturers failed in the early 2000s. The manufacturer Landwind once failed in all areas of the ADAC crash test and its test vehicle was subsequently dubbed “the most dangerous car in the world”. A disaster that shaped the image of Chinese car brands for a long time.
Jochen Tueting built up the Shanghai location as head of overall vehicle development from the beginning, with his employee ID bearing the number 5. His team’s task: to internationalize the customer experience in the vehicle – from driving dynamics to steering, to details like the sound of the car, headroom and storage space.
Tueting describes the development center as a melting pot. Local employees were joined by engineers from different countries. In addition to Tueting, two other Germans, a Frenchman, an American, a Brazilian and an Englishman occupy technical leadership positions. It was an inspiring collaboration, Tueting recalls, because each of them came from one of the major international automotive companies. Suddenly, people from Mercedes-Benz, BMW, Renault, Land Rover, Ford and General Motors were working together on a common project in the Shanghai development center. And each brought their own processes and ideas.
However, after four years, it was also time to return to Germany for personal reasons. Tueting remained loyal to Chery. His new mission: to establish a location in Germany. Many factors spoke for the Rhine/Main region. At that time, Opel was taken over by PSA and employees were to be laid off in Ruesselsheim. Additionally, Kia, Hyundai and some Japanese companies were located there with sales organizations or development units. The choice fell on Raunheim in Hesse, where 52 employees from 17 nations now work for Chery.
Jochen Tueting heads the location. From Raunheim, he is responsible for both the design department, which designs new vehicles for international markets and adapts Chinese models to European tastes and the engineering department. A local team takes care of issues such as adapting driver assistance systems. Frequent warning sounds annoy German customers much more than Chinese customers. They also have different ideas about how steering should feel. Additionally, there are hardly any winding country roads in China, so assistance systems need to be trained in new environments.
After initial delays, Chery has now started the European launch. Germany is on the agenda for the second half of the year. For Jochen Tueting, this marks the beginning of the next major challenge – establishing a presence in the market. Julia Fiedler
This culinary work of art comes from the cuisine of the Zhuang minority in the southern Chinese province of Guangxi. All kinds of colorful delicacies are being presented there these days as part of the Hundred Dishes Festival at the Rongan Experimental Primary School in Liuzhou – and are also being eaten despite this elaborate arrangement.
When German Chancellor Olaf Scholz visits China starting from Sunday, he will address a whole list of issues. Most of them are of an economic nature, as apparently these are the greatest concerns that can afflict a country.
Massive overcapacity by Chinese manufacturers, state subsidies from China, restricted access to the Chinese market – all of these are causing significant anxiety for German companies, as Michael Radunski writes in his assessment today. Where does the Chancellor begin with such a long list? How does he rhetorically navigate to ensure his criticism gets through? After all, he is not the first German politician to bring these problems to the table.
For years, the same accusations have been brought forth by the German economy against the Chinese government. And how will Scholz react if the Chinese counter with the classic “whataboutism”, arguing that they themselves are severely discriminated against in the EU?
Therefore, it’s already clear: Scholz won’t bring back solutions to major problems from China. At best, there will be small concessions in exchange for his own willingness to compromise. But what else is there? As the Romans said, “Dripping water hollows out stone,” not Confucius.
Party chief Xi Jinping employs the same tactic in his efforts to convince the Taiwanese that they are all Chinese. Just like on Wednesday when he received Taiwan’s former president, Ma Ying-Jeou. Xi stated that no one could prevent the “reunification of the family”, as reported by David Demes.
However, in times of intense identity politics, Xi is hitting a brick wall with this approach. Only a fraction of Taiwanese feel a strong connection with the People’s Republic. Yet, Ma seems to be among them. He advocates for closer ties with China in his homeland. This is not the first time. He already toured the People’s Republic back in 2023.
Whether he is actually doing his Kuomintang party a favor by showcasing a close friendship with Xi Jinping is questionable. In January, Taiwanese voters rejected such a policy once again.
It could become the central theme of Chancellor Olaf Scholz’s trip to China: the difficult situation of German companies in the People’s Republic. Because there is gloominess in the crucial sales market. The biggest problems are:
Just on Wednesday, the AHK in Beijing presented the latest findings from surveys of its members. In addition, there are current studies from the Kiel Institute for the World Economy (IfW) and the Institute of the German Economy (IW).
The main problem: Almost two-thirds (65 percent) of German companies in China see themselves in an unfair competition. “This is a high value that shows our politicians that this is really one of the primary issues that need to be addressed with the Chinese leadership,” said Maximilian Butek, Managing Member of the Executive Board of the German Chamber of Commerce in Beijing. “The legal framework in China weakens the competitiveness of German companies.”
Unfair competition manifests itself in various forms. In the AHK survey, German companies particularly complain about poorer access to the government and local authorities, as well as to expert committees that set standards. “In China, many things are negotiated. The lack of contacts and networks is particularly noticeable,” explains Butek.
Another form of unfair competition is state subsidies – especially when they, as in China, specifically benefit domestic companies. As a study by the Kiel Institute for the World Economy (IfW) shows, more than 99 percent of publicly listed companies in China received direct state subsidies in 2022. According to the IfW, China’s leadership often uses the funds very selectively to win technological leadership in selected key technologies.
According to the IfW, EV manufacturer BYD received particularly high subsidies: while it was around 220 million euros in 2020, it was already 2.1 billion euros in 2022. According to the IfW, leading Chinese providers in the wind turbine sector, such as Goldwind and Mingyang, also benefit greatly from government subsidies.
The consequence for German companies in China: Local competition has dramatically increased in recent years. While German companies can still score points with product quality and technical leadership, the AHK study shows how much the balance of power has shifted, especially in terms of innovation strength: Only half of German companies still believe that their innovation strength is greater than that of their competitors. For AHK’s Butek, this is a surprising factor.
Above all, this circumstance should give cause for thought. Chinese companies like the technology giant Huawei from Shenzhen have been investing a large part of their profits in research and development for years. The result: Especially in industries undergoing comprehensive change, the cards are being reshuffled. According to the AHK survey, in the automotive industry, eleven percent say that their Chinese competitors are already technology leaders today – and another 58 percent expect this to be the case in the next five years.
So it is the combination of the weak economic development in China and the strengthening of local companies (through subsidies and innovation) that makes the unfair competitive conditions for German companies particularly noticeable. Almost all companies (95 percent) expect:
Nevertheless, more than half (54 percent) of the 150 companies surveyed plan further investments in China. The majority of them justify this by saying that they want to remain competitive at all.
However, not only German companies suffer from the weak Chinese economy. In China itself, this creates massive overcapacities – which are now to be sold cheaply on the world market. Chinese products are flooding the German and European markets with low prices.
The consequences are quite ambivalent, as IfW research director Dirk Dohse explained the study results on Wednesday: “While the European industry is often no longer competitive against competition from China in terms of price,” said Dohse. On the other hand: “Without China’s subsidized technology, however, products that Germany needs for the green transformation would also become more expensive and scarcer.”
All these circumstances result in a third problem: Despite all warnings, the German industry still fails to reduce its dependency on China. On the contrary, the situation has even worsened for some products. A recent study by the Institute of the German Economy (IW) mainly mentions medicines, chemical products and electronic products such as laptops and computer accessories, solar cells, magnets and batteries. In areas with high dependencies such as chemical and electronic products, there is “no significant structural derisking of the German economy” to be seen, said IW researcher Juergen Matthes.
According to the IW study, the products with high dependencies on China are often raw materials that are at the beginning of the value chains. “Their absence could – due to indispensability and lack of replaceability – possibly lead to serious production stoppages in the subsequent stages of the supply chain as a result of domino effects.” Important raw materials such as the rare earths scandium and yttrium, but also natural graphite, germanium, and magnesium are mentioned.
Since the Russian invasion of Ukraine, it has become clear to many in Germany how dangerous too much dependency can be. Not only the leadership in Moscow, but also the government in Beijing, use such dependencies to exert political pressure. Sometimes it’s tariffs and import bans, sometimes boycotts or lengthy inspections that are supposed to make companies and entire countries rethink their stance on various issues. Countries like Australia, South Korea, or Lithuania have already had such experiences.
For the urgently needed products graphite, germanium and gallium, the Chinese leadership introduced explicit export controls a few months ago.
With a casual “You haven’t changed at all,” China’s state and party leader Xi Jinping greeted Taiwan’s former president Ma Ying-jeou (KMT) on Wednesday afternoon in the Great Hall of the People in Beijing. In front of a select group of journalists, the two statesmen greeted each other with a long handshake.
Details of the historic meeting had been kept secret until the last moment. It was unclear until Wednesday whether it would even take place. Ma has been in China since April 1 as part of a delegation trip organized by his foundation, accompanied by a group of Taiwanese students. He had hoped for a reunion with his “old friend” Xi Jinping last year already.
The two men last met in 2015 in Singapore. It was the first such meeting between two sitting leaders of both sides. The China-friendly Ma had declared the current visit as a “peace and friendship trip”. However, both the KMT and the ruling DPP had emphasized the private nature of the trip. In Taiwan, Ma’s meeting with Xi was met with sharp criticism. Ma had not emphasized that the people in Taiwan wanted to hold on to their sovereignty and their free institutions, criticized the Taiwanese authority for affairs with mainland China. The Chinese Communist Party continues to put pressure on Taiwan with military intimidation and economic coercion in order to impose its one-China concept on the island republic.
The meeting yesterday took place on the same day that Japanese Prime Minister Kishida arrived in Washington for a long-awaited summit. In Taiwan, this sparked sharp criticism. The summit, which will also be attended by Philippine President Marcos starting Thursday, has the potential to fundamentally change the security framework in the Indo-Pacific. The USA, Japan and the Philippines intend to cooperate even more closely in the future. Not only in the field of maritime rescue but also in countering Chinese grey zone activities in the South and East China Seas. Taiwan is also expected to be a topic at the summit.
So, Ma’s trip was very convenient for the Chinese government. While Washington is trying to build international solidarity and a security architecture for Taiwan, former President Ma supports China’s narrative that the conflict between Taipei and Beijing is an internal Chinese issue. Taiwanese observers said Ma runs the risk of becoming a puppet of Beijing.
Accordingly, Xi made it clear in his public remarks yesterday that he rejects interference from foreign forces in the Taiwan issue. “Compatriots on both sides of the Taiwan Strait are all Chinese. (…) There is no force strong enough to separate us,” Xi told Ma and his delegation. The different political systems of both sides cannot change the fact that they belong to one and the same country, Xi continued, “Attempts by outside forces to interfere cannot stop the historical trend of reunification of our homeland.”
The EU has imposed provisional anti-dumping duties on certain alkyl phosphate esters from China. According to the Brussels authority, the phosphate compositions affected are mainly used as flame retardants in rigid and flexible foam. The provisional anti-dumping duties are remarkably high: They range from 45.1 percent to 68.4 percent. The decision was preceded by an investigation into the imports. The EU investigators will continue the investigation to determine whether the duties will then become permanent in five years’ time.
The EU Commission also published an updated report on state-induced distortions in the Chinese economy on Wednesday. The 700-page paper is intended as a guide for EU industry to facilitate complaints about dumping practices.
So far, such a guide only exists for China. The original version dates back to 2017, but the new version has been expanded to include sectors such as the chip and cleantech industries and electric vehicles. The EU Commission initiates an average of ten anti-dumping investigations per year, so far mainly in the steel and aluminum sectors. ari
Russia, Latin America, Southeast Asia: Chery is the brand among Chinese manufacturers that exports the most. The state-owned company sold over 900,000 vehicles abroad in 2023. However, Chery cars are hardly known in North America and Europe. Breaking into Europe is a significant step that requires thorough preparation. The brand has been working on it for several years, with Jochen Tueting playing a central role.
When a headhunter called in 2013, Tueting was a manager at Ford, with 14 years of experience in overall vehicle development and a degree in mechanical engineering specializing in vehicle technology and internal combustion engines. And now, China? Why not. Tueting was familiar with the country from business trips and had traveled through Asia several times with his wife. The couple wanted to live abroad and moved to Shanghai with their one-year-old son. They stayed for four years until 2017.
Chery’s headquarters is not in Shanghai but in Wuhu, Anhui province, 300 kilometers away. A city that is not as attractive for expats. However, Chery needed international experts to ensure that its vehicles could compete in European and US markets with their expertise.
Therefore, in 2013, the manufacturer opened a second development center in Shanghai to create a vehicle platform for international markets that meets crash requirements in the USA and Europe. A point where some other manufacturers failed in the early 2000s. The manufacturer Landwind once failed in all areas of the ADAC crash test and its test vehicle was subsequently dubbed “the most dangerous car in the world”. A disaster that shaped the image of Chinese car brands for a long time.
Jochen Tueting built up the Shanghai location as head of overall vehicle development from the beginning, with his employee ID bearing the number 5. His team’s task: to internationalize the customer experience in the vehicle – from driving dynamics to steering, to details like the sound of the car, headroom and storage space.
Tueting describes the development center as a melting pot. Local employees were joined by engineers from different countries. In addition to Tueting, two other Germans, a Frenchman, an American, a Brazilian and an Englishman occupy technical leadership positions. It was an inspiring collaboration, Tueting recalls, because each of them came from one of the major international automotive companies. Suddenly, people from Mercedes-Benz, BMW, Renault, Land Rover, Ford and General Motors were working together on a common project in the Shanghai development center. And each brought their own processes and ideas.
However, after four years, it was also time to return to Germany for personal reasons. Tueting remained loyal to Chery. His new mission: to establish a location in Germany. Many factors spoke for the Rhine/Main region. At that time, Opel was taken over by PSA and employees were to be laid off in Ruesselsheim. Additionally, Kia, Hyundai and some Japanese companies were located there with sales organizations or development units. The choice fell on Raunheim in Hesse, where 52 employees from 17 nations now work for Chery.
Jochen Tueting heads the location. From Raunheim, he is responsible for both the design department, which designs new vehicles for international markets and adapts Chinese models to European tastes and the engineering department. A local team takes care of issues such as adapting driver assistance systems. Frequent warning sounds annoy German customers much more than Chinese customers. They also have different ideas about how steering should feel. Additionally, there are hardly any winding country roads in China, so assistance systems need to be trained in new environments.
After initial delays, Chery has now started the European launch. Germany is on the agenda for the second half of the year. For Jochen Tueting, this marks the beginning of the next major challenge – establishing a presence in the market. Julia Fiedler
This culinary work of art comes from the cuisine of the Zhuang minority in the southern Chinese province of Guangxi. All kinds of colorful delicacies are being presented there these days as part of the Hundred Dishes Festival at the Rongan Experimental Primary School in Liuzhou – and are also being eaten despite this elaborate arrangement.
