Table.Briefing: China (English)

Sights on Google + EU lays out future path

Dear reader,

One piece of news has been somewhat neglected in the headlines surrounding the tariffs that the Americans and Chinese have thrown at each other in recent days. Namely, China has launched an investigation into the US tech company Google – for possible antitrust violations.

Google? Are they even still in China? A legitimate question, as the company’s end customer business in China has effectively ceased in 2010. But with licenses for certain services related to the Android operating system, the Americans earn billions of dollars from Chinese companies every year. Jörn Petring has taken a closer look at the scope of the investigation against Google.

So while China scrutinizes US companies, the European Commission intends to take an even closer look at Chinese companies in the future. Admittedly, it does not explicitly state this. However, while studying the new EU Competition Compass, Emily Kossak couldn’t shake the feeling that many measures primarily target unfair practices by Chinese players.

Meanwhile, Michael Müller, Berlin’s former mayor, focuses on the question of how Germany should position itself in the battle between the superpowers USA and China. The rules-based order is more fragile than it has been for a long time, the SPD politician concludes. He believes that Germany is in danger of being caught between the two fronts, which is why a smart China policy is needed. Find out what this could look like in today’s op-ed.

Your
Marcel Grzanna
Image of Marcel  Grzanna

Feature

Trade war: Why the investigation against Google is a warning shot for the US government

Google headquarters in Beijing

At first glance, the measure seems like a blunt sword, which the Chinese government took last week as part of its countermeasures in the trade dispute with the US. Aside from retaliatory tariffs and further export restrictions on rare metals, the government in Beijing also opened an antitrust investigation into Google.

The move is more problematic for the US tech giant than it first appears. Google already withdrew from the end customer business in 2010 due to censorship in China. Nevertheless, the company continues to generate considerable revenue in the People’s Republic.

China’s smartphone companies need Android

Virtually every Chinese smartphone brand such as Xiaomi, Oppo and Vivo uses Google’s Android operating system as the basis for their devices. Although it is a freely available open-source system, Google has built a lucrative licensing business around the core operating system. Anyone who wants to offer services such as the Play Store, Chrome, Maps or YouTube on their devices in addition to the actual operating system must pay Google fees.

Although Android is used on most devices in China, Google’s paid services are prohibited. Instead, Google charges Chinese manufacturers in the export business, which involves a considerable number of devices. Around 60 percent of smartphones sold in India and Southeast Asia are made by Chinese manufacturers. Chinese devices are also making strong inroads in Latin America and Africa. That means Google earns money from practically every smartphone a Chinese company sells worldwide.

Google keeps exact figures secret

It’s a business worth billions. Google does not disclose exact figures. However, a previous antitrust investigation in the EU revealed that pre-installation contracts cost between 20 and 30 US dollars per device.

“Google conditions are a nuisance. But the companies put up with it because they believe that without services like Google Maps, they would be at a disadvantage in international business,” an employee of a smartphone manufacturer in Shenzhen, southern China, told Table.Briefings. On the one hand, manufacturers welcome Beijing’s denunciation of Google’s practices and the fact that they may be granted certain concessions. However, there is also uncertainty in the industry that Android could fall entirely by the wayside during the Sino-American tech war.

Huawei already had to adapt

After all, it was Washington that tightened the screws first: In 2019, the US government placed Huawei on its Entity List. US companies, including Google, are no longer allowed to do business with Huawei. As a result, the company was forced to abandon Google services and develop its own operating system, Harmony OS. If a widespread escalation were to occur around the Android system, Huawei could potentially benefit. Harmony OS might theoretically also become an alternative for other Chinese manufacturers.

It is already clear that the antitrust investigation launched by China against Google is more than just a “cautious” response to the Trump tariffs. Indeed, Beijing fired a loud warning shot. Unlike in the first trade war in 2018, the Chinese are no longer simply responding to tariffs with counter-tariffs, but are also putting targeted pressure on US technology companies. In late 2024, China investigated the US chip manufacturer Nvidia. Now, another American tech heavyweight, Google, is being targeted. This is Beijing building up bargaining chips.

Apple and Intel also threatened with investigations

Other US companies are already being brought into play. For example, Bloomberg reports that China’s regulators are also considering an investigation into the Apple App Store – specifically, the 30 percent commission and restrictions on payment services are to be examined.

Interestingly, the Chinese market regulator only completed an audit of Apple’s practices in May 2024 and found no violations at the time. However, in light of the new tensions, the issue is now apparently back on the agenda. The Financial Times also mentions Intel, which is also represented on the Chinese market, as a possible next candidate for an antitrust investigation.

Translation missing.

Competition: This compass should show the EU the way forward

EU-Kommissionspräsidentin Ursula von der Leyen
Worried about Europe as a business location: EU Commission President Ursula von der Leyen.


SolarWorld, Volkswagen, Nokia: These are only a few of the names of European companies that have lost the race against Chinese corporations in recent years or have fallen far behind. The European Commission follows this development with concern and attempts to set guidelines to counteract it. One new element is the EU Competition Compass that Commission President Ursula von der Leyen presented last week. The Compass is considered a roadmap for competition with all major economies. But between the lines, the document reveals who the EU plans to target specifically in the future: China.

The Compass is not a random product, but the outcome of the Draghi Report. Former ECB chief Mario Draghi’s analysis of the bloc’s economic future was a PISA shock for European competitiveness. He stressed that if the EU wanted to keep pace with the USA and China, it needed to invest in innovation, make better use of its potential and increase productivity. Or, as the EU Commission stated in the Compass: “Europe faces a world of great power rivalry, competition for technological supremacy, and a scramble for control over resources … if Europe accepts a managed and gradual economic decline, it is condemning itself to a ‘slow agony’.”

It is also no coincidence that some elements of the Compass resemble Germany’s China strategy: de-risking, decisive action against subsidized companies and the promotion of European start-ups are also in Europe’s interest to make the continent more robust and innovative for the international cut-throat competition.

Trade defense instruments

The Compass sees the EU exposed to competition driven by “systematic, state-induced over-investments and subsidies” and “structural non-market overcapacities.” It doesn’t take long to figure out that this primarily refers to China. The EU Commission believes that this overcapacity and subsidies create an unfair competitive environment that puts pressure on European manufacturers. The European steel industry and car manufacturers such as VW, who are being pushed out by BYD and Co, are currently feeling the pinch. Despite punitive tariffs, Chinese EVs are sometimes cheaper than European models. However, European companies are also to be protected from Chinese competition in clean technologies, a sector that the EU wants to lead.

In competition with China, the EU is particularly at risk of losing important production plants such as the Volkswagen factories in Germany. The French pharmaceutical company Euroapi, which produces painkillers such as paracetamol, was also forced to close two European production sites in September 2024 due to intense Chinese competition.

Preferential treatment of European companies

To prevent this, the EU intends to make greater use of trade defense instruments and the Foreign Subsidies Regulation, which has been in force since 2023: Specifically, these include anti-dumping duties, countervailing duties, and sanctions against unfair players. The EU also wants to defend itself against aggressive export strategies – for example, against the flood of packages from online retailers Shein and Temu. The EU launched investigations into fast fashion manufacturer Shein this week, and further measures against other large online marketplaces from China are expected to follow soon.

The following proposal is new: The Commission proposes preferential treatment for European companies in public tenders for strategically important technologies and industries. After all, public procurement accounts for 14 percent of European economic output. Preferential treatment for European start-ups is intended to boost Europe’s innovative strength.

The Commission is also keeping a close eye on European investments in China. It warns companies against making long-term investments that could jeopardize critical infrastructure or disrupt supply chains caused by international tensions. They are also advised to hold back if their investments are threatened by unfair competition. Indeed, more and more large and medium-sized companies are currently withdrawing from the Chinese market. CDU election frontrunner Friedrich Merz recently made even more drastic comments, describing investments in China as a “major risk.”

Industries of ‘certain third countries’ force dependencies

Brussels warns that the EU could become overly dependent on China for critical minerals and materials. In fact, it is already for raw materials such as rare earths and magnesium. Over 90 percent of European imports come from China. The situation is not much better for pharmaceutical raw materials: 60 to 80 percent of imports come from China and India. The EU fears this dependency in particular. The EU writes that one reason is that “industrial policies of certain third countries may intentionally seek to create overcapacities and strategic dependencies.” Excessive dependencies could be used as a weapon against the EU.

The tricky part in the fight against dependencies is supply chain security. A joint procurement platform for critical raw materials and pharmaceuticals aims to improve this security. Keywords such as diversification, resilience and emergency reserves are used – foreign direct investment and exports are to be better scrutinized. There are no concrete details as yet. The Compass remains very vague in many respects.

EU registers as many patents as the USA and China

But regardless of whether it is artificial intelligence, the semiconductor industry, or fintech, the big players are currently based in other parts of the world: in the US or Asia. And Europe would do well to narrow this innovation gap. As the Competition Compass correctly recognizes: “Europe’s share of global patents is comparable to US and China.” Unfortunately, hardly any are commercially exploited.

A “European Innovation Act” is supposed to provide a remedy: On the one hand, it should untangle the bureaucratic maze of 27 different legislations in the member states. On the other hand, it is intended to provide a financial cushion for European companies to compete with DeepSeek, BYD, and Alibaba. In addition to giving preferential treatment to European companies, the Commission proposes so-called AI gigafactories, such as those already existing in Beijing.

All of this has a purpose: The EU does not want to leave future technologies to the US and China. If it wants to secure prosperity, competitiveness and a green future, it must act now – before the gap becomes too wide.

  • Öffentliche Beschaffung

News

Car: Merger of two state-owned manufacturers could dwarf BYD

The state-owned carmakers Dongfeng Motor Group and Chongqing Changan Automobile will presumably be transferred to a joint holding company. According to the South China Morning Post, stock exchange announcements published by both groups on Sunday point to a merger. In terms of sales figures, the merged company would then be the largest car manufacturer in China and would also overtake EV manufacturer BYD. Dongfeng is a Chinese partner of Nissan Motor and Honda as well as the French car manufacturer Peugeot Citroën. Changan Automobile has partnerships with Ford and Mazda.

The Chinese government presumably aims to consolidate the Chinese automotive industry, as the market currently suffers from an excess of competitors and overcapacity. In merged groups, on the other hand, resources can be directed towards more competitive products and technologies. The merger would probably take some time due to its complexity and the impact on local jobs. The merger of the two companies has not yet been officially confirmed.

China produces around 40 million cars a year and sells 23 million vehicles. This makes China the largest car market in the world, even for electric vehicles. Competition for the lowest prices in the EV segment is particularly fierce. Only BYD, Li Auto and Huawei-backed Aito are currently profitable. BYD announced on Monday that it plans to equip affordable smaller models in China with an automated driving system. According to BYD, the “God’s Eye” assistance system will be installed in three models priced below 100,000 yuan (13,280 euros), including the small car Seagull, which costs the equivalent of 9,300 euros in China. BYD thus increases the pressure on competitors such as Tesla. ek

  • BYD
  • Car Industry
  • Chongqing
  • Technologie

Customs duties: German companies cautiously optimistic

German companies operating in China are cautiously optimistic about the tariff dispute between China and the US. According to the German Chamber of Commerce in China, China’s largely mild counter-tariffs on American imports are being met with relief. Conflicts between China and the US, Germany’s main trading partners, are also potentially dangerous for German business in China. This was already evident in the fall of 2024, when around one-third of German companies in China stated that they were severely affected by tensions between China and the US.

Tensions are also noticeable in the latest business climate survey by the German Chamber of Commerce in China. In it, 31 percent of companies stated they felt a “strong impact” from the tensions between China and the US. 47 percent spoke of “some impact,” while only 22 percent said they felt no impact on their business.

At the beginning of his second term in office, US President Donald Trump imposed 10 tariffs on all Chinese imports. In return, China demands 15 percent tariffs on American coal and liquefied natural gas imports. The Department of Commerce has also introduced export controls on metals, which are particularly important for the electronics industry. However, Trump and Xi Jinping are currently both willing to negotiate. ek

  • Exporte

Microdramas: Douyin pulls 585 movies

The Chinese government regulates the booming microdrama market ever more strictly. Douyin, China’s largest video platform and TikTok’s Chinese sister app, removed 585 microdramas in January. The deleted videos had “spread harmful values, violated public order and social morality,” or “spread vulgar content.” This included “exaggerated and eye-catching film titles,” “promotion of gold-digging,” and “misleading perspectives on marriage.” The last point probably refers to the spread of values that oppose Xi Jinping’s attempts to boost population growth with a new “birth culture.”

Douyin had already removed 209 microdramas from its platform in November. Moreover, microdramas will soon require a license. Microdramas are series with episodes between one and 15 minutes long. They have become big business worldwide, bringing in an estimated two billion US dollars a year, and could even double their revenue by 2025 – and these figures do not even include China.

China has become the global market leader in producing and consuming microdramas (weiduanju 微短剧). The market grows by 250 percent annually, generating 5.2 billion dollars in 2023 alone. The government’s ambitions to regulate the industry in line with its growing success are also increasing. aiko

Families: Number of marriages continues to fall

The number of weddings in China fell more sharply than ever before in 2024. According to Nikkei Asia, 6.1 million Chinese couples tied the knot in 2024. This means that the number of marriages fell by a fifth – despite Chinese authorities’ efforts to encourage the population to have more weddings and children. Overall, the number of weddings has fallen by more than half since 2013, when around 13.5 million people said “I do.”

Yet authorities are getting quite creative: Among other things, universities are supposed to educate their students about love and marriage and foster a positive image of weddings and families. Women who are already married are contacted by their neighborhood committees with questions about family planning. Provincial governments are instructed to provide resources to cope with demographic change in China. The authorities also intervene on social media: Censors delete microdramas containing “misleading perspectives” on marriage.

According to UN figures, China’s current population of 1.4 billion could shrink to less than half by 2100. This is largely thanks to the one-child policy from 1980 to 2015 and the country’s rapid urbanization. It is questionable whether the current measures will actually change this situation. After all, they rarely address the root problems: Living in big cities like Shanghai or Beijing is simply too expensive for many Chinese to start a family. Moreover, values among young Chinese are changing: Self-realization and personal freedom are more important to them than starting a family. ek

  • Drei-Kind-Politik

Opinion

China policy: ‘Germany has a special responsibility’

By Michael Müller
Berlin’s former mayor Michael Müller is a member of the Bundestag’s Committee on Foreign Affairs.

Relations with the countries of the Indo-Pacific region, which account for over 60 percent of global GDP and two-thirds of global economic growth, are of pivotal importance to Germany as an export-focused economy. Even though the German government has worked to differentiate and strengthen relations with countries such as Japan and India over the past three years, a smart China policy remains indispensable for German foreign policy.

Although the United States overtook China as Germany’s largest trading partner again last year, Trump’s presidency casts its shadow not only in the economic sphere. One of the new US President’s first official acts was withdrawing from the WHO and the Paris Climate Agreement. These decisions massively weaken international institutions and multilateralism. Meanwhile, the geopolitical focus of the United States is shifting increasingly towards China, which is challenging US supremacy in the Pacific. Both developments are not good news for Germany, which has relied heavily on transatlantic relations in recent decades while trading extensively with China.

Germany risks being caught between the fronts of the conflict between the two superpowers. Escalating tariff disputes and trade issues between Germany’s two most important trading partners would severely affect the economy. A military escalation of the Taiwan question would be a disaster with an uncertain outcome that must be prevented at all costs. Dealing with the world’s most populous country independently of the USA and in close coordination with European partners is therefore imperative.

China has long ceased to be the world’s workbench

In 2019, the EU formulated its approach with the triad of “partner, competitor, rival.” This deliberately ambivalent strategy remains valid and is also reflected in the German Strategy on China, published for the first time in 2023. A realistic China policy requires a smart balance between all three components. The systemic rivalry with liberal democracies is obvious with China as an autocratically governed country that is taking increasingly repressive action against its population. We must clearly distance ourselves from human rights violations and keep a critical eye on its actions towards Taiwan and its neighbors in the region. However, this must not lead us to turn away from the one-China policy; instead, we should work towards de-escalation.

China has long since ceased to be the extended workbench of German companies. Thanks to massive state subsidies, the world’s most populous country has managed to catch up in many sectors and even become the market leader in some. The EU is the largest single market in the world and, as such, is the key to meeting China as a competitor on an equal footing and taking action against competition-distorting industrial policy. However, politicians are not the only ones responsible for guarding against one-sided dependencies; it is also the responsibility of companies to diversify their sales markets and minimize risks.

China plays a central role in the multipolar world order as a shaping power. International crises and conflicts, climate change, arms control and the non-proliferation of nuclear weapons are all global challenges that cannot be solved without China. The country is not an uncomplicated partner, but we need dialogue and cooperation with Beijing. For example, Chancellor Scholz’s visit to Beijing in November 2022 led to a clear condemnation of Russia’s potential use of nuclear weapons by President Xi Jinping and highlighted the importance of direct contact. As Russia’s ally, China has the opportunity to exercise influence on ending the war in Ukraine, and the exchange with Beijing is also important for this.

Germany must court the Global South

Relations between Germany and China are multifaceted and encompass far more than just political and economic aspects. Especially at the municipal level, for example, through town partnerships and in science and culture, numerous points of contact can be used for dialogue beyond big issues. When we discuss the right approach, we should do so not just about China, but also with China. A self-confident and robust dialogue, even on controversial issues, requires a deeper understanding of the other side. To achieve this, we need to know and understand China and further expand our China expertise in the coming years. Exchange with Chinese institutions and civil society is essential for this.

Decoupling from China is neither politically nor economically feasible and would not serve our interests in a multipolar world order. However, reducing one-sided dependencies, diversifying partnerships and building resilience is urgently necessary in order to minimize risks and strengthen our negotiating position in times of fundamental geopolitical and geo-economic change.

The rules-based international order is more fragile than it has been for a long time. Germany and Europe have a vital interest in strengthening it and preventing the formation of a new bloc. However, we must campaign for this in the Global South in particular and make a credible commitment to reforms and more inclusive institutions. We can only successfully integrate China – while preventing unilateral dominance – if we Europeans act as one and coordinate our relations with China. As the largest economy with traditionally close ties with China, Germany has a special responsibility. Under Chancellor Olaf Scholz’s leadership, the German government laid the foundations and set the direction with its China strategy. It is up to the next German government to dovetail and further develop this strategy at a European level.

Michael Müller (SPD) served as Governing Mayor of Berlin from 2014 to 2021. He has been a member of the German Bundestag since 2021, where he is a member of the Foreign Affairs Committee and responsible for China, Japan, Korea and the Middle East.

Editor’s note: Today, more than ever, discussing China means engaging in controversial debate. We aim to reflect the diversity of viewpoints to give you an insight into the breadth of discussions. Opinions do not reflect the views of the editorial team.

  • China
  • China
  • Geopolitics
  • Germany
  • Pariser Klimaabkommen
  • USA

Executive Moves

Han Shenghui has been Head of Greater China at the Sefar Group, a Swiss provider of high-precision screening and filter solutions, since January. Han studied business administration in Berlin, Jinan and Singapore. He works for Sefar from Suzhou in Jiangsu province.

Linda Teo has been Partner Greater China at Kienbaum since January. Teo has 18 years of experience in talent acquisition, including 10 years in China. She acquires top talent throughout the APAC region for the German management consultancy. She is based in Singapore.

Is something changing in your organization? Let us know at heads@table.media!

Dessert

Is the Year of the Snake actually the Year of the Cat? A 700-year-old tomb painting raises this particularly pressing question in the Year of the Snake. The mural, which is on display in the renowned Yuelu Academy from the Song Dynasty (960-1279) in present-day Hunan, depicts twelve animals in bureaucratic garb. However, not only are the twelve animals lined up in a completely different order to that of the current sign of the zodiac. Instead of a snake, a cat’s head is clearly peeking out of the noble robe.

Vietnam, which shares ten of the twelve animals with the Chinese zodiac calendar, also celebrates the cat instead of the snake. The painting’s recent rediscovery has led to heated discussions on Chinese social media over the past two weeks. Some refuse to believe that the snake does not have its rightful place in the Chinese zodiac. Others already welcome the Year of the Cat.

China.Table editorial team

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    One piece of news has been somewhat neglected in the headlines surrounding the tariffs that the Americans and Chinese have thrown at each other in recent days. Namely, China has launched an investigation into the US tech company Google – for possible antitrust violations.

    Google? Are they even still in China? A legitimate question, as the company’s end customer business in China has effectively ceased in 2010. But with licenses for certain services related to the Android operating system, the Americans earn billions of dollars from Chinese companies every year. Jörn Petring has taken a closer look at the scope of the investigation against Google.

    So while China scrutinizes US companies, the European Commission intends to take an even closer look at Chinese companies in the future. Admittedly, it does not explicitly state this. However, while studying the new EU Competition Compass, Emily Kossak couldn’t shake the feeling that many measures primarily target unfair practices by Chinese players.

    Meanwhile, Michael Müller, Berlin’s former mayor, focuses on the question of how Germany should position itself in the battle between the superpowers USA and China. The rules-based order is more fragile than it has been for a long time, the SPD politician concludes. He believes that Germany is in danger of being caught between the two fronts, which is why a smart China policy is needed. Find out what this could look like in today’s op-ed.

    Your
    Marcel Grzanna
    Image of Marcel  Grzanna

    Feature

    Trade war: Why the investigation against Google is a warning shot for the US government

    Google headquarters in Beijing

    At first glance, the measure seems like a blunt sword, which the Chinese government took last week as part of its countermeasures in the trade dispute with the US. Aside from retaliatory tariffs and further export restrictions on rare metals, the government in Beijing also opened an antitrust investigation into Google.

    The move is more problematic for the US tech giant than it first appears. Google already withdrew from the end customer business in 2010 due to censorship in China. Nevertheless, the company continues to generate considerable revenue in the People’s Republic.

    China’s smartphone companies need Android

    Virtually every Chinese smartphone brand such as Xiaomi, Oppo and Vivo uses Google’s Android operating system as the basis for their devices. Although it is a freely available open-source system, Google has built a lucrative licensing business around the core operating system. Anyone who wants to offer services such as the Play Store, Chrome, Maps or YouTube on their devices in addition to the actual operating system must pay Google fees.

    Although Android is used on most devices in China, Google’s paid services are prohibited. Instead, Google charges Chinese manufacturers in the export business, which involves a considerable number of devices. Around 60 percent of smartphones sold in India and Southeast Asia are made by Chinese manufacturers. Chinese devices are also making strong inroads in Latin America and Africa. That means Google earns money from practically every smartphone a Chinese company sells worldwide.

    Google keeps exact figures secret

    It’s a business worth billions. Google does not disclose exact figures. However, a previous antitrust investigation in the EU revealed that pre-installation contracts cost between 20 and 30 US dollars per device.

    “Google conditions are a nuisance. But the companies put up with it because they believe that without services like Google Maps, they would be at a disadvantage in international business,” an employee of a smartphone manufacturer in Shenzhen, southern China, told Table.Briefings. On the one hand, manufacturers welcome Beijing’s denunciation of Google’s practices and the fact that they may be granted certain concessions. However, there is also uncertainty in the industry that Android could fall entirely by the wayside during the Sino-American tech war.

    Huawei already had to adapt

    After all, it was Washington that tightened the screws first: In 2019, the US government placed Huawei on its Entity List. US companies, including Google, are no longer allowed to do business with Huawei. As a result, the company was forced to abandon Google services and develop its own operating system, Harmony OS. If a widespread escalation were to occur around the Android system, Huawei could potentially benefit. Harmony OS might theoretically also become an alternative for other Chinese manufacturers.

    It is already clear that the antitrust investigation launched by China against Google is more than just a “cautious” response to the Trump tariffs. Indeed, Beijing fired a loud warning shot. Unlike in the first trade war in 2018, the Chinese are no longer simply responding to tariffs with counter-tariffs, but are also putting targeted pressure on US technology companies. In late 2024, China investigated the US chip manufacturer Nvidia. Now, another American tech heavyweight, Google, is being targeted. This is Beijing building up bargaining chips.

    Apple and Intel also threatened with investigations

    Other US companies are already being brought into play. For example, Bloomberg reports that China’s regulators are also considering an investigation into the Apple App Store – specifically, the 30 percent commission and restrictions on payment services are to be examined.

    Interestingly, the Chinese market regulator only completed an audit of Apple’s practices in May 2024 and found no violations at the time. However, in light of the new tensions, the issue is now apparently back on the agenda. The Financial Times also mentions Intel, which is also represented on the Chinese market, as a possible next candidate for an antitrust investigation.

    Translation missing.

    Competition: This compass should show the EU the way forward

    EU-Kommissionspräsidentin Ursula von der Leyen
    Worried about Europe as a business location: EU Commission President Ursula von der Leyen.


    SolarWorld, Volkswagen, Nokia: These are only a few of the names of European companies that have lost the race against Chinese corporations in recent years or have fallen far behind. The European Commission follows this development with concern and attempts to set guidelines to counteract it. One new element is the EU Competition Compass that Commission President Ursula von der Leyen presented last week. The Compass is considered a roadmap for competition with all major economies. But between the lines, the document reveals who the EU plans to target specifically in the future: China.

    The Compass is not a random product, but the outcome of the Draghi Report. Former ECB chief Mario Draghi’s analysis of the bloc’s economic future was a PISA shock for European competitiveness. He stressed that if the EU wanted to keep pace with the USA and China, it needed to invest in innovation, make better use of its potential and increase productivity. Or, as the EU Commission stated in the Compass: “Europe faces a world of great power rivalry, competition for technological supremacy, and a scramble for control over resources … if Europe accepts a managed and gradual economic decline, it is condemning itself to a ‘slow agony’.”

    It is also no coincidence that some elements of the Compass resemble Germany’s China strategy: de-risking, decisive action against subsidized companies and the promotion of European start-ups are also in Europe’s interest to make the continent more robust and innovative for the international cut-throat competition.

    Trade defense instruments

    The Compass sees the EU exposed to competition driven by “systematic, state-induced over-investments and subsidies” and “structural non-market overcapacities.” It doesn’t take long to figure out that this primarily refers to China. The EU Commission believes that this overcapacity and subsidies create an unfair competitive environment that puts pressure on European manufacturers. The European steel industry and car manufacturers such as VW, who are being pushed out by BYD and Co, are currently feeling the pinch. Despite punitive tariffs, Chinese EVs are sometimes cheaper than European models. However, European companies are also to be protected from Chinese competition in clean technologies, a sector that the EU wants to lead.

    In competition with China, the EU is particularly at risk of losing important production plants such as the Volkswagen factories in Germany. The French pharmaceutical company Euroapi, which produces painkillers such as paracetamol, was also forced to close two European production sites in September 2024 due to intense Chinese competition.

    Preferential treatment of European companies

    To prevent this, the EU intends to make greater use of trade defense instruments and the Foreign Subsidies Regulation, which has been in force since 2023: Specifically, these include anti-dumping duties, countervailing duties, and sanctions against unfair players. The EU also wants to defend itself against aggressive export strategies – for example, against the flood of packages from online retailers Shein and Temu. The EU launched investigations into fast fashion manufacturer Shein this week, and further measures against other large online marketplaces from China are expected to follow soon.

    The following proposal is new: The Commission proposes preferential treatment for European companies in public tenders for strategically important technologies and industries. After all, public procurement accounts for 14 percent of European economic output. Preferential treatment for European start-ups is intended to boost Europe’s innovative strength.

    The Commission is also keeping a close eye on European investments in China. It warns companies against making long-term investments that could jeopardize critical infrastructure or disrupt supply chains caused by international tensions. They are also advised to hold back if their investments are threatened by unfair competition. Indeed, more and more large and medium-sized companies are currently withdrawing from the Chinese market. CDU election frontrunner Friedrich Merz recently made even more drastic comments, describing investments in China as a “major risk.”

    Industries of ‘certain third countries’ force dependencies

    Brussels warns that the EU could become overly dependent on China for critical minerals and materials. In fact, it is already for raw materials such as rare earths and magnesium. Over 90 percent of European imports come from China. The situation is not much better for pharmaceutical raw materials: 60 to 80 percent of imports come from China and India. The EU fears this dependency in particular. The EU writes that one reason is that “industrial policies of certain third countries may intentionally seek to create overcapacities and strategic dependencies.” Excessive dependencies could be used as a weapon against the EU.

    The tricky part in the fight against dependencies is supply chain security. A joint procurement platform for critical raw materials and pharmaceuticals aims to improve this security. Keywords such as diversification, resilience and emergency reserves are used – foreign direct investment and exports are to be better scrutinized. There are no concrete details as yet. The Compass remains very vague in many respects.

    EU registers as many patents as the USA and China

    But regardless of whether it is artificial intelligence, the semiconductor industry, or fintech, the big players are currently based in other parts of the world: in the US or Asia. And Europe would do well to narrow this innovation gap. As the Competition Compass correctly recognizes: “Europe’s share of global patents is comparable to US and China.” Unfortunately, hardly any are commercially exploited.

    A “European Innovation Act” is supposed to provide a remedy: On the one hand, it should untangle the bureaucratic maze of 27 different legislations in the member states. On the other hand, it is intended to provide a financial cushion for European companies to compete with DeepSeek, BYD, and Alibaba. In addition to giving preferential treatment to European companies, the Commission proposes so-called AI gigafactories, such as those already existing in Beijing.

    All of this has a purpose: The EU does not want to leave future technologies to the US and China. If it wants to secure prosperity, competitiveness and a green future, it must act now – before the gap becomes too wide.

    • Öffentliche Beschaffung

    News

    Car: Merger of two state-owned manufacturers could dwarf BYD

    The state-owned carmakers Dongfeng Motor Group and Chongqing Changan Automobile will presumably be transferred to a joint holding company. According to the South China Morning Post, stock exchange announcements published by both groups on Sunday point to a merger. In terms of sales figures, the merged company would then be the largest car manufacturer in China and would also overtake EV manufacturer BYD. Dongfeng is a Chinese partner of Nissan Motor and Honda as well as the French car manufacturer Peugeot Citroën. Changan Automobile has partnerships with Ford and Mazda.

    The Chinese government presumably aims to consolidate the Chinese automotive industry, as the market currently suffers from an excess of competitors and overcapacity. In merged groups, on the other hand, resources can be directed towards more competitive products and technologies. The merger would probably take some time due to its complexity and the impact on local jobs. The merger of the two companies has not yet been officially confirmed.

    China produces around 40 million cars a year and sells 23 million vehicles. This makes China the largest car market in the world, even for electric vehicles. Competition for the lowest prices in the EV segment is particularly fierce. Only BYD, Li Auto and Huawei-backed Aito are currently profitable. BYD announced on Monday that it plans to equip affordable smaller models in China with an automated driving system. According to BYD, the “God’s Eye” assistance system will be installed in three models priced below 100,000 yuan (13,280 euros), including the small car Seagull, which costs the equivalent of 9,300 euros in China. BYD thus increases the pressure on competitors such as Tesla. ek

    • BYD
    • Car Industry
    • Chongqing
    • Technologie

    Customs duties: German companies cautiously optimistic

    German companies operating in China are cautiously optimistic about the tariff dispute between China and the US. According to the German Chamber of Commerce in China, China’s largely mild counter-tariffs on American imports are being met with relief. Conflicts between China and the US, Germany’s main trading partners, are also potentially dangerous for German business in China. This was already evident in the fall of 2024, when around one-third of German companies in China stated that they were severely affected by tensions between China and the US.

    Tensions are also noticeable in the latest business climate survey by the German Chamber of Commerce in China. In it, 31 percent of companies stated they felt a “strong impact” from the tensions between China and the US. 47 percent spoke of “some impact,” while only 22 percent said they felt no impact on their business.

    At the beginning of his second term in office, US President Donald Trump imposed 10 tariffs on all Chinese imports. In return, China demands 15 percent tariffs on American coal and liquefied natural gas imports. The Department of Commerce has also introduced export controls on metals, which are particularly important for the electronics industry. However, Trump and Xi Jinping are currently both willing to negotiate. ek

    • Exporte

    Microdramas: Douyin pulls 585 movies

    The Chinese government regulates the booming microdrama market ever more strictly. Douyin, China’s largest video platform and TikTok’s Chinese sister app, removed 585 microdramas in January. The deleted videos had “spread harmful values, violated public order and social morality,” or “spread vulgar content.” This included “exaggerated and eye-catching film titles,” “promotion of gold-digging,” and “misleading perspectives on marriage.” The last point probably refers to the spread of values that oppose Xi Jinping’s attempts to boost population growth with a new “birth culture.”

    Douyin had already removed 209 microdramas from its platform in November. Moreover, microdramas will soon require a license. Microdramas are series with episodes between one and 15 minutes long. They have become big business worldwide, bringing in an estimated two billion US dollars a year, and could even double their revenue by 2025 – and these figures do not even include China.

    China has become the global market leader in producing and consuming microdramas (weiduanju 微短剧). The market grows by 250 percent annually, generating 5.2 billion dollars in 2023 alone. The government’s ambitions to regulate the industry in line with its growing success are also increasing. aiko

    Families: Number of marriages continues to fall

    The number of weddings in China fell more sharply than ever before in 2024. According to Nikkei Asia, 6.1 million Chinese couples tied the knot in 2024. This means that the number of marriages fell by a fifth – despite Chinese authorities’ efforts to encourage the population to have more weddings and children. Overall, the number of weddings has fallen by more than half since 2013, when around 13.5 million people said “I do.”

    Yet authorities are getting quite creative: Among other things, universities are supposed to educate their students about love and marriage and foster a positive image of weddings and families. Women who are already married are contacted by their neighborhood committees with questions about family planning. Provincial governments are instructed to provide resources to cope with demographic change in China. The authorities also intervene on social media: Censors delete microdramas containing “misleading perspectives” on marriage.

    According to UN figures, China’s current population of 1.4 billion could shrink to less than half by 2100. This is largely thanks to the one-child policy from 1980 to 2015 and the country’s rapid urbanization. It is questionable whether the current measures will actually change this situation. After all, they rarely address the root problems: Living in big cities like Shanghai or Beijing is simply too expensive for many Chinese to start a family. Moreover, values among young Chinese are changing: Self-realization and personal freedom are more important to them than starting a family. ek

    • Drei-Kind-Politik

    Opinion

    China policy: ‘Germany has a special responsibility’

    By Michael Müller
    Berlin’s former mayor Michael Müller is a member of the Bundestag’s Committee on Foreign Affairs.

    Relations with the countries of the Indo-Pacific region, which account for over 60 percent of global GDP and two-thirds of global economic growth, are of pivotal importance to Germany as an export-focused economy. Even though the German government has worked to differentiate and strengthen relations with countries such as Japan and India over the past three years, a smart China policy remains indispensable for German foreign policy.

    Although the United States overtook China as Germany’s largest trading partner again last year, Trump’s presidency casts its shadow not only in the economic sphere. One of the new US President’s first official acts was withdrawing from the WHO and the Paris Climate Agreement. These decisions massively weaken international institutions and multilateralism. Meanwhile, the geopolitical focus of the United States is shifting increasingly towards China, which is challenging US supremacy in the Pacific. Both developments are not good news for Germany, which has relied heavily on transatlantic relations in recent decades while trading extensively with China.

    Germany risks being caught between the fronts of the conflict between the two superpowers. Escalating tariff disputes and trade issues between Germany’s two most important trading partners would severely affect the economy. A military escalation of the Taiwan question would be a disaster with an uncertain outcome that must be prevented at all costs. Dealing with the world’s most populous country independently of the USA and in close coordination with European partners is therefore imperative.

    China has long ceased to be the world’s workbench

    In 2019, the EU formulated its approach with the triad of “partner, competitor, rival.” This deliberately ambivalent strategy remains valid and is also reflected in the German Strategy on China, published for the first time in 2023. A realistic China policy requires a smart balance between all three components. The systemic rivalry with liberal democracies is obvious with China as an autocratically governed country that is taking increasingly repressive action against its population. We must clearly distance ourselves from human rights violations and keep a critical eye on its actions towards Taiwan and its neighbors in the region. However, this must not lead us to turn away from the one-China policy; instead, we should work towards de-escalation.

    China has long since ceased to be the extended workbench of German companies. Thanks to massive state subsidies, the world’s most populous country has managed to catch up in many sectors and even become the market leader in some. The EU is the largest single market in the world and, as such, is the key to meeting China as a competitor on an equal footing and taking action against competition-distorting industrial policy. However, politicians are not the only ones responsible for guarding against one-sided dependencies; it is also the responsibility of companies to diversify their sales markets and minimize risks.

    China plays a central role in the multipolar world order as a shaping power. International crises and conflicts, climate change, arms control and the non-proliferation of nuclear weapons are all global challenges that cannot be solved without China. The country is not an uncomplicated partner, but we need dialogue and cooperation with Beijing. For example, Chancellor Scholz’s visit to Beijing in November 2022 led to a clear condemnation of Russia’s potential use of nuclear weapons by President Xi Jinping and highlighted the importance of direct contact. As Russia’s ally, China has the opportunity to exercise influence on ending the war in Ukraine, and the exchange with Beijing is also important for this.

    Germany must court the Global South

    Relations between Germany and China are multifaceted and encompass far more than just political and economic aspects. Especially at the municipal level, for example, through town partnerships and in science and culture, numerous points of contact can be used for dialogue beyond big issues. When we discuss the right approach, we should do so not just about China, but also with China. A self-confident and robust dialogue, even on controversial issues, requires a deeper understanding of the other side. To achieve this, we need to know and understand China and further expand our China expertise in the coming years. Exchange with Chinese institutions and civil society is essential for this.

    Decoupling from China is neither politically nor economically feasible and would not serve our interests in a multipolar world order. However, reducing one-sided dependencies, diversifying partnerships and building resilience is urgently necessary in order to minimize risks and strengthen our negotiating position in times of fundamental geopolitical and geo-economic change.

    The rules-based international order is more fragile than it has been for a long time. Germany and Europe have a vital interest in strengthening it and preventing the formation of a new bloc. However, we must campaign for this in the Global South in particular and make a credible commitment to reforms and more inclusive institutions. We can only successfully integrate China – while preventing unilateral dominance – if we Europeans act as one and coordinate our relations with China. As the largest economy with traditionally close ties with China, Germany has a special responsibility. Under Chancellor Olaf Scholz’s leadership, the German government laid the foundations and set the direction with its China strategy. It is up to the next German government to dovetail and further develop this strategy at a European level.

    Michael Müller (SPD) served as Governing Mayor of Berlin from 2014 to 2021. He has been a member of the German Bundestag since 2021, where he is a member of the Foreign Affairs Committee and responsible for China, Japan, Korea and the Middle East.

    Editor’s note: Today, more than ever, discussing China means engaging in controversial debate. We aim to reflect the diversity of viewpoints to give you an insight into the breadth of discussions. Opinions do not reflect the views of the editorial team.

    • China
    • China
    • Geopolitics
    • Germany
    • Pariser Klimaabkommen
    • USA

    Executive Moves

    Han Shenghui has been Head of Greater China at the Sefar Group, a Swiss provider of high-precision screening and filter solutions, since January. Han studied business administration in Berlin, Jinan and Singapore. He works for Sefar from Suzhou in Jiangsu province.

    Linda Teo has been Partner Greater China at Kienbaum since January. Teo has 18 years of experience in talent acquisition, including 10 years in China. She acquires top talent throughout the APAC region for the German management consultancy. She is based in Singapore.

    Is something changing in your organization? Let us know at heads@table.media!

    Dessert

    Is the Year of the Snake actually the Year of the Cat? A 700-year-old tomb painting raises this particularly pressing question in the Year of the Snake. The mural, which is on display in the renowned Yuelu Academy from the Song Dynasty (960-1279) in present-day Hunan, depicts twelve animals in bureaucratic garb. However, not only are the twelve animals lined up in a completely different order to that of the current sign of the zodiac. Instead of a snake, a cat’s head is clearly peeking out of the noble robe.

    Vietnam, which shares ten of the twelve animals with the Chinese zodiac calendar, also celebrates the cat instead of the snake. The painting’s recent rediscovery has led to heated discussions on Chinese social media over the past two weeks. Some refuse to believe that the snake does not have its rightful place in the Chinese zodiac. Others already welcome the Year of the Cat.

    China.Table editorial team

    CHINA.TABLE EDITORIAL OFFICE

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