Annalena Baerbock has to jump into the deep end. She is taking on the post of Germany’s Federal Minister for Foreign Affairs in a situation with great uncertainties and shifts in global politics. But while Russia’s interest in Ukraine seems downright threatening, the situation with China is more complex than dangerous. Like Germany, Beijing’s primary interest is stability.
Baerbock now initially played it safe at the meeting of G7 foreign ministers in Liverpool on the weekend. This was, after all, her first appearance on the international stage in her new role. China is a partner, competitor, and rival. She repeated the same formula the EU uses to frame its relationship with the Asian superpower. The G7 foreign ministers debated China intensively and expressed “concern” about “coercive economic measures” by China. This refers to measures such as the embargo against Lithuania. This, in turn, is what the EU foreign ministers want to discuss today.
Baerbock’s tasks now also include avoiding a new spiral toward new trade restrictions. This is where the interests of the German and Chinese economies meet. The car brand NIO is a good example of this. It is currently working on its entry into the German market. The time when Germany sold vehicles in China and not vice versa is slowly coming to an end. In today’s interview, Hui Zhang, Vice President of NIO Europe, explains how he plans to overcome the biggest obstacle to market entry: the lack of an established brand.
It’s not just global politics that are rapidly getting colder. Meteorologists are also predicting a cold winter. There is a connection between the two issues. Anyone who heats with imported gas is dependent on their suppliers. This has is also caused repeated debates in connection with Russia’s pipelines. China faces a similar dilemma, analyzes Christiane Kuehl. In an effort to consume less coal, the share of natural gas as a fuel is increasing. And with it, import dependency. China’s solution? More gas from its partner Russia instead of its rival, the USA.
Mr. Zhang, what image should NIO have in Europe?
At the very top is our mission ‘shape a joyful lifestyle’. This is the reason why William Li founded this company in 2014. He wanted to use smart electric vehicle technologies to create a platform where NIO and the so-called ‘users of NIO’ could share a positive attitude towards life, joy, and their experiences with the brand, and grow together. We have succeeded in establishing this image in China. It is important for us to now have this image in the European market as well.
How can such an image be conveyed?
Different aspects create this image. NIO is a premium brand. We insist on the highest quality standards. The second aspect is safety. The ES8, which we have had on the Norwegian market since the end of September, received five stars in the EuroNCAP crash test. The third point is the design. The image rests on these pillars. Next to this is our user community. The community feeling that we already have in China should also exist in Europe.
European customers are considered to be less tech-savvy than Chinese customers. How is community building supposed to work over here?
I wouldn’t say that European society has less experience with communities. YouTube, Facebook, WhatsApp, Airbnb, Miles and More, Payback already manage that. It is now a question of doing the same in the mobility sector. However, the car industry has had a different value chain for 130 years. On the other hand, that doesn’t mean you can’t change it. In Norway, we wanted to establish a User Advisory Board (UAB) before the launch. The goal was to find 200 users because Norway is a small country with 5.5 million inhabitants. But we actually received 600 applications. After the introduction of the NIO House in Oslo, we now have up to 2,000 visitors a day. Many of them take part in events and activities at NIO House. If the topics are right and important, we draw a group of people on which we can base the community.
European customers are very critical of Chinese brands. How do you intend to increase acceptance?
We need to create facts.
People have to get in the car for that.
That is part of our strategy. We want to give people the opportunity to access the vehicle through test drives and other channels. There is a saying in China: Better to see something once than to hear about it a thousand times.
How are the plans progressing in Europe?
We began in Norway. In 2022, we will start in Germany and Sweden. But the other European markets will also come. I can’t give any exact figures on unit sales, but we want to be a significant player in the premium segment in the near future. That is our goal. We currently have around 200 employees in Europe, spread across our locations in Munich, Oxford and Oslo. Munich is our European and global headquarters for design. In Oxford, we carry out research and development in the area of ‘advanced engineering’ and in Oslo, we have our first sales and service headquarters.
What does ‘advanced engineering’ mean?
This relates to vehicle architecture. In Silicon Valley and Shanghai, we are researching artificial intelligence.
How do sales and distribution work in Europe?
We have both a NIO House and a NIO Space for distribution. The first NIO House is located in Oslo. It is the first one outside China. There, we present the cars and meet with the customers. So it is also used as a community place. The NIO Space is the second point of sale. It is a scaled-down version of the NIO House. For the service, we have a hybrid model. On the one hand an own service, on the other hand, a partner network. The first NIO Service Center will open in Norway soon.
Your competitors have branches in almost every location. Is that a goal of NIO?
The way our colleagues from Wolfsburg are structured is a result of historical factors. We are aware that the density of the network plays a role. That’s why we want to offer new forms – for example, a service vehicle. We have already launched it on the Norwegian market. The partner network also allows us to be geographically close to our customers. However, we know that a few thousand service locations will not be created overnight. But we believe that we can achieve a similar result as the competition using digital tools.
Are there differences between European and Chinese NIO models?
Not exactly. Because we aimed for an international design for the vehicles right from the start. There are no cars that are developed exclusively for Europe or China. We only adapt details that are essential for the car’s functionality. The charging flap, for example. Because of the different charging standards in China and Europe, they are built differently.
Chinese cars usually do not have a permanently integrated navigation system.
In Europe, we have our navigation service provider. We cooperate with TomTom for the ES8.
Even the classic car radio does not exist in China.
We have digital radio on offer. We need the local content and the local partners for our customers in Europe.
Company founder Li has not ruled out production in Europe. The investment in Lotus has therefore fuelled speculation.
Right now, the only thing I can say is that we are not planning any production in Europe. Lotus is another matter. NIO Capital has acquired a stake in Lotus. This is an independent company that bears the NIO name – even though NIO is involved, of course.
Was Nio’s global strategy planned from the beginning?
I can definitely confirm that. From the very beginning, the goal was to build a global company. A premium brand must have a global presence. But it is also clear that this goal must be achieved step by step. From 2014 to 2018, we focused on developing the first vehicle. Now the time has come to go abroad, which we have done by entering the Norwegian market.
What lessons have you learned so far in Europe?
First, that technical adjustment is required: the charging connection, the content providers, the navigation system. Second, that Europe is not a single market, but consists of 47 countries with regional cultural differences. And third, we learned that a local team is important for local customers. The European market also has a different character than the Chinese market. Its nature differs from country to country. One example: In China, over 90 percent of cars are sold to private customers. In Germany, sixty to seventy percent of premium cars are company cars. That makes a big difference in terms of supply and service.
Sales figures slumped in October. What was the reason for that?
The figures in October are due to a factory update that we carried out. In the only factory where we manufacture vehicles, production unit numbers have declined as a result.
The semiconductor shortage wasn’t a reason?
Of course, NIO is a company that also suffers under this. But our sales figures are not yet ten or twenty times those of some of our competitors. We hope, like the whole industry, that the situation will have improved significantly by the middle of next year.
Startups in the mobility sector need a lot of money and know-how. You have prominent investors. What have they brought in besides money?
Investors are investors. NIO functions independently. But in addition, the respective investors bring in networks across the value chain. They facilitate access to certain ecosystems. Together, better collaborations can be achieved.
The Chinese electric car brand NIO has shipped 80,940, including November – mainly in China. The company is backed by major investors such as Tencent and Baidu; it is therefore considered the best-known start-up in the Chinese mobility sector. That is why NIO is repeatedly mentioned in the same breath as Tesla from the very beginning. After a price rally, the brand was even worth more than BMW on the stock market at one point. The first models will be available in Germany in 2022.
Hui Zhang is a globetrotter. The 49-year-old lives and works mainly in Munich, where NIO has its global design headquarters. Regular commuting to Oslo and Shanghai is, therefore, a must. Zhang doesn’t know it any other way. He studied economics in Beijing, Pforzheim, and Utah. In 2002, he began his career at mechanical engineering company Voith AG and automotive supplier Kiekert. In 2010, he took over the position of General Manager at Lotus China. After an interlude as a member of the board at electronics manufacturer Leoni, he joined NIO, where he has been Vice President for Europe since 2016.
China has been the world’s largest importer of oil for quite some time. Since 2018, it has also imported more natural gas than any other country. Liquefied natural gas is taking an increasingly large share. And so by 2021, China could also overtake Japan as the largest importer of liquefied natural gas (LNG). This fall, just weeks before the onset of the cold North China winter, the country’s power crisis drove demand higher despite horrendous gas prices.
China indeed has its own gas reserves. Its stored gas reserves stood at 14.8 trillion cubic meters in 2020. Nevertheless, gas became scarce in summer. While natural gas regularly flows in through the pipelines from Russia, for example, LNG has to be shipped with special freighters.
Normally, China buys liquefied gas for the winter in the second half of each year. But the recovery after the pandemic was so surprisingly dynamic that the power demand was higher than expected. This was compounded by power outages in the summer. Both led to an unseasonal LNG demand peak in the second quarter. In the first half of the year, China’s LNG imports were 28 percent higher than in the previous year, which was rather low due to Covid. World gas prices rose rapidly during this period. As a result, China’s gas buyers largely withdrew from the overpriced spot markets for liquefied natural gas in July – only to return to them frantically just a little later. The country’s LNG imports, therefore, fluctuated sharply between March and October.
According to the National Energy Administration (NEA), China’s total gas demand in the country is expected to rise to between 365 and 370 billion cubic meters (bcm), 11 to 13 percent higher than in 2020. These increases are well above the expectations of many analysts. IHS Markit, for example, had projected growth in demand of around six percent between 2021 and 2025.
Finally, amid the power crisis, the National Development and Reform Commission (NDRC) stepped in. It would help expand domestic gas production and import LNG spot markets. In a hastily-convened meeting, the NDRC instructed state-owned oil and gas companies Petrochina, Sinopec, and CNOOC to do everything in their power to ensure there is enough natural gas in the winter.
The NDRC has already placed orders for almost 175 billion cubic meters of gas, the Natural Gas Intelligence service reported in mid-November. That is almost enough for the heating season from mid-November to mid-March. Last year, gas was also in short supply during the winter. This year, meteorologists fear that the winter will be particularly cold due to the climate phenomenon La Niña. But China’s plan is not to just stay warm during the cold season. It is also concerned with long-term power security. To this end, China needs to expand its gas production more quickly. But it still won’t be able to get around natural gas from overseas.
The share of natural gas in the energy mix should also increase as part of climate policy. Greenhouse gas emissions are lower for gas than for coal or oil. It is therefore considered an important raw material for the transition to climate-neutral energy production. In the pre-Covid year of 2019, natural gas accounted for only about eight percent of power consumption in China (10,390,620 terajoules/TJ), according to the International Energy Agency (IEA). Most of that has gone to space heating since the switch from coal to gas heating in the noughties. The share diverted to power generation is minimal.
China has only been importing natural gas since 2006. The first LNG came from Australia in 2006, followed by the first pipeline gas from Central Asia in 2010. Since then, the power-hungry country’s dependence on imports has continued to grow. The People’s Republic buys the most LNG from Australia, followed by the US and Qatar. However, Beijing has been in conflict with both Washington and Canberra for months over power claims, trade issues, human rights, and security in the Indo-Pacific.
The imports from the very countries with which China is at odds with show the disadvantages of the LNG strategy. The fact that Beijing still has to buy more and more LNG from these countries is a tangible geopolitical disadvantage. In 2018, imports already accounted for 43 percent of China’s gas consumption, 60 percent of which was LNG. This share is still similar today; in September it was just over 63 percent.
The boom of US LNG in China’s energy mix is still relatively recent. In early January 2020, China’s negotiator Liu He promised the US – then still under former President Donald Trump – electricity purchases in exchange for tariff reductions in an initial agreement to resolve the conflict. China pledged to buy an additional $18.5 billion of raw materials from the US in 2020 and as much as $33.9 billion in 2021, each compared to 2017. From January to August 2021, China imported 5.44 million tons of LNG from the US, up 375 percent from the same period a year earlier. “China is set to see more LNG imports from the US as at least five Chinese companies are in advanced talks to secure long-term LNG supplies from US exporters,” China Daily quoted Bloomberg New Energy Finance analyst Li Ziyue as saying.
Sinopec signed a 20-year supply contract with US exporter Venture Global LNG. But it is not just the big three that are placing orders in America, but smaller companies as well: Local gas suppliers such as Zhejiang Energy, power companies, or other companies that want to make a profit. For example, privately-held ENN Natural Gas Co. inked a 13-year deal with Cheniere Energy this summer, according to Reuters; It was the first major gas deal between the two countries since 2018.
However, LNG cannot simply be shipped on a whim. To expand trade sustainably, so-called LNG terminals must be built along the coast. These facilities can cool the gas to such an extent that it liquefies. Analysts still see the limited capacities in China as an obstacle to a rapid expansion of imports. But the buildup is happening as fast as just about anything that is politically desired in China. In 2018, China owned ten LNG terminals; in 2019, it was already more than 20. Another ten are under construction or planned, and they are getting bigger. In Yantai, in the province of Shandong, Sinopec began construction in December on an LNG terminal with a wharf for LNG carriers, four tanks, and facilities for the distribution of the liquid, which is made gaseous again by heating. Sinopec and other groups are also building huge underground gas storage facilities.
To meet its gas needs and not become too dependent on LNG, China is relying in parallel on increased supplies of natural gas from Russia’s vast Siberian fields. For example, the amount of gas that Russia pumps to China through the “Power of Siberia” pipeline on a daily basis is expected to increase by half by the end of the year compared to August. Russian supplies are also highly welcome geopolitically, as they diversify China’s pool of suppliers. Gas trade between China and Russia this year is already 60 percent higher than in the same period last year, the NEA informs. Petrochina has already announced plans to significantly increase pipeline orders to have enough gas supplies for the Olympic winter.
Pipeline supplies from Myanmar, Kazakhstan, and other Central Asian states are also expected to rise. Overall, energy and commodities information provider S&P Global Platts expects China’s pipeline gas imports of 162 million cubic meters per day this heating season to be 19 percent higher than a year ago.
China also wants to increase domestic gas production of existing and new gas fields. This also includes offshore gas deposits. In June, for example, CNOOC activated the first gas field developed by China in the South China Sea, called Linshui 17-2. This expansion into disputed territories is also likely to raise geopolitical questions.
As the world’s largest, strongest, and longest-surviving dictatorship, contemporary China lacks the rule of law. Yet it is increasingly using its rubber-stamp parliament to enact domestic legislation asserting territorial claims and rights in international law. In fact, China has become quite adept at waging “lawfare” – the misuse and abuse of law for political and strategic ends.
Under “commander-in-chief” Xi Jinping’s bullying leadership, lawfare has developed into a critical component of China’s broader approach to asymmetrical or hybrid warfare. The blurring of the line between war and peace is enshrined in the regime’s official strategy as the “Three Warfares” (san zhong zhanfa) doctrine. Just as the pen can be mightier than the sword, so, too, can lawfare, psychological warfare, and public-opinion warfare.
Through these methods, Xi is advancing expansionism without firing a shot. Already, China’s bulletless aggression is proving to be a game changer in Asia. Waging the Three Warfares in conjunction with military operations has yielded China significant territorial gains.
Within this larger strategy, lawfare is aimed at rewriting rules to animate historical fantasies and legitimize unlawful actions retroactively. For example, China recently enacted a Land Borders Law to support its territorial revisionism in the Himalayas. And to advance its expansionism in the South and East China Seas, it enacted the Coast Guard Law and the Maritime Traffic Safety Law earlier this year.
The new laws, authorizing the use of force in disputed areas, were established amid rising tensions with neighboring countries. The Land Borders Law comes amid a military stalemate in the Himalayas, where more than 100,000 Chinese and Indian troops have been locked in standoffs for nearly 20 months following repeated Chinese incursions into Indian territory.
The Coast Guard Law, by treating disputed waters as China’s, not only violates the United Nations Convention on the Law of the Sea; it also could trigger armed conflict with Japan or the United States. The Land Borders Law likewise threatens to spark war with India by signaling China’s intent to determine borders unilaterally. It even extends to the Tibet-originating transboundary rivers, where China proclaims a right to divert as much of the shared waters as it wishes.
These recent laws follow the success of the Three Warfares strategy in redrawing the map of the South China Sea – despite an international arbitral tribunal’s ruling rejecting Chinese territorial claims there – and then swallowing Hong Kong, which had long flourished under democratic institutions as a major global financial center.
In the South China Sea, through which around one-third of global maritime trade passes, Xi’s regime has stepped up lawfare to consolidate Chinese control, turning its contrived historical claims into reality. Last year, while other claimant countries were battling the COVID-19 pandemic, Xi’s government created two new administrative districts to strengthen its claims over the Spratly and Paracel Islands and other land features. And in further defiance of international law, China gave Mandarin-language names to 80 islands, reefs, seamounts, shoals, and ridges, 55 of which are fully submerged.
The Hong Kong National Security Law, enacted in mid-2020, is a similarly aggressive act of lawfare. Xi has used the law to crush Hong Kong’s pro-democracy movement and rescind the guarantees enshrined in China’s UN-registered treaty with the United Kingdom. The treaty committed China to preserving Hong Kong citizens’ basic rights, freedoms, and political self-determination for at least 50 years after regaining sovereignty over the territory.
The strategy’s success in unraveling Hong Kong’s autonomy raises the question of whether China will now enact similar legislation aimed at Taiwan or even invoke its 2005 Anti-Secession Law, which underscored its resolve to bring the island democracy under mainland rule. With China escalating its psychological and information warfare, there is a real danger that it could move against Taiwan after the Beijing Winter Olympics in February.
Xi’s expansionism has not spared even tiny Bhutan, with a population of just 784,000. Riding roughshod over a 1998 bilateral treaty that obligated China “not to resort to unilateral action to alter the status quo of the border,” the regime has built militarized villages in Bhutan’s northern and western borderlands.
As these examples show, domestic legislation is increasingly providing China with a pretext to flout binding international law, including bilateral and multilateral treaties to which it is a party. With more than one million detainees, Xi’s Muslim gulag in Xinjiang has made a mockery of the 1948 Genocide Convention, to which China acceded in 1983 (with the rider that it does not consider itself bound by Article IX, the clause allowing any party in a dispute to lodge a complaint with the International Court of Justice). And because effective control is the shibboleth of a strong territorial claim in international law, Xi is using new legislation to undergird China’s administration of disputed areas, including with newly implanted residents.
Establishing such facts on the ground is integral to Xi’s territorial aggrandizement. That is why China has taken pains to create artificial islands and administrative districts in the South China Sea, and to pursue a militarized village-building spree in Himalayan borderlands that India, Bhutan, and Nepal consider to be within their own national boundaries.
Despite these encroachments, very little international attention has been given to Xi’s lawfare or broader hybrid warfare. The focus on China’s military buildup obscures the fact that the country is quietly expanding its maritime and land boundaries without firing a shot. Given Xi’s overarching goal – to achieve global primacy for China under his leadership – the world’s democracies need to devise a concerted strategy to counter his Three Warfares.
Brahma Chellaney, Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow at the Robert Bosch Academy in Berlin, is the author of several books, including Asian Juggernaut, Water: Asia’s New Battleground, and Water, Peace, and War: Confronting the Global Water Crisis.
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
In the English language, man’s best friend often doesn’t come off well, for example, when you are “working like a dog”, or when someone turned out to be a “mean dog”, when everything else goes “to the dogs” or you end up being “sick as a dog”.
Even in Chinese, our barking four-legged friends do not have it easy. Because for some time now, the Chinese Internet and colloquial language have coined a whole slew of new words. One of the most famous representatives in the 996 era (you know, working from 9 AM to 9 PM, 6 days a week) is the “overtime dog” (加班狗 jiābāngou), on whose desk work orders from the boss pile up.
So don’t be surprised if you come across dogs hustling at desks in the WeChat emoji repertoire. There is even a delivery service in China that has christened itself the “Overtime Dog” and retrieves the necessary food supplies for stressed-out people. Alternatively, the hustling overtime folk in China also like to refer to themselves self-ironic (自黑 zìhēi) as “brick hauling dogs” (搬砖狗 bānzhuāngou). Meanwhile, in school and university rooms, “pupil” or “student” dogs (学生狗 xuéshenggou) whine under packed schedules, mountains of homework and chores from their teachers, and lofty expectations from their parents.
In matters of the heart,” single dogs” 单身狗 (dānshēngou) roam the online and linguistic landscape in China. The neologism serves as an ironically self-pitying label for lonely bachelors and bachelorettes still on the hunt for a suitable heartthrob. But the fact that being with someone doesn’t automatically mean that things are better is evident by another “dog breed”: the “girlfriend dog” 马子狗 (mazigou), which is based on the common Taiwanese term 马子 (mazi) for “steady girlfriend”. He is a toothless lapdog whose real mistress and owner is the steady girlfriend or wife who sets the tone in all aspects of life.
The one thing that all these new breeds have in common is that they are under the strict thumb of others and often have little to yip about. The linguistic “dog tag” is usually hung around their own necks with a wink. In conclusion, the only question that remains is which doggie you are? In any case, there are hardly any limits to linguistic creativity in Chinese!
Verena Menzel runs the language school New Chinese in Beijing.
Annalena Baerbock has to jump into the deep end. She is taking on the post of Germany’s Federal Minister for Foreign Affairs in a situation with great uncertainties and shifts in global politics. But while Russia’s interest in Ukraine seems downright threatening, the situation with China is more complex than dangerous. Like Germany, Beijing’s primary interest is stability.
Baerbock now initially played it safe at the meeting of G7 foreign ministers in Liverpool on the weekend. This was, after all, her first appearance on the international stage in her new role. China is a partner, competitor, and rival. She repeated the same formula the EU uses to frame its relationship with the Asian superpower. The G7 foreign ministers debated China intensively and expressed “concern” about “coercive economic measures” by China. This refers to measures such as the embargo against Lithuania. This, in turn, is what the EU foreign ministers want to discuss today.
Baerbock’s tasks now also include avoiding a new spiral toward new trade restrictions. This is where the interests of the German and Chinese economies meet. The car brand NIO is a good example of this. It is currently working on its entry into the German market. The time when Germany sold vehicles in China and not vice versa is slowly coming to an end. In today’s interview, Hui Zhang, Vice President of NIO Europe, explains how he plans to overcome the biggest obstacle to market entry: the lack of an established brand.
It’s not just global politics that are rapidly getting colder. Meteorologists are also predicting a cold winter. There is a connection between the two issues. Anyone who heats with imported gas is dependent on their suppliers. This has is also caused repeated debates in connection with Russia’s pipelines. China faces a similar dilemma, analyzes Christiane Kuehl. In an effort to consume less coal, the share of natural gas as a fuel is increasing. And with it, import dependency. China’s solution? More gas from its partner Russia instead of its rival, the USA.
Mr. Zhang, what image should NIO have in Europe?
At the very top is our mission ‘shape a joyful lifestyle’. This is the reason why William Li founded this company in 2014. He wanted to use smart electric vehicle technologies to create a platform where NIO and the so-called ‘users of NIO’ could share a positive attitude towards life, joy, and their experiences with the brand, and grow together. We have succeeded in establishing this image in China. It is important for us to now have this image in the European market as well.
How can such an image be conveyed?
Different aspects create this image. NIO is a premium brand. We insist on the highest quality standards. The second aspect is safety. The ES8, which we have had on the Norwegian market since the end of September, received five stars in the EuroNCAP crash test. The third point is the design. The image rests on these pillars. Next to this is our user community. The community feeling that we already have in China should also exist in Europe.
European customers are considered to be less tech-savvy than Chinese customers. How is community building supposed to work over here?
I wouldn’t say that European society has less experience with communities. YouTube, Facebook, WhatsApp, Airbnb, Miles and More, Payback already manage that. It is now a question of doing the same in the mobility sector. However, the car industry has had a different value chain for 130 years. On the other hand, that doesn’t mean you can’t change it. In Norway, we wanted to establish a User Advisory Board (UAB) before the launch. The goal was to find 200 users because Norway is a small country with 5.5 million inhabitants. But we actually received 600 applications. After the introduction of the NIO House in Oslo, we now have up to 2,000 visitors a day. Many of them take part in events and activities at NIO House. If the topics are right and important, we draw a group of people on which we can base the community.
European customers are very critical of Chinese brands. How do you intend to increase acceptance?
We need to create facts.
People have to get in the car for that.
That is part of our strategy. We want to give people the opportunity to access the vehicle through test drives and other channels. There is a saying in China: Better to see something once than to hear about it a thousand times.
How are the plans progressing in Europe?
We began in Norway. In 2022, we will start in Germany and Sweden. But the other European markets will also come. I can’t give any exact figures on unit sales, but we want to be a significant player in the premium segment in the near future. That is our goal. We currently have around 200 employees in Europe, spread across our locations in Munich, Oxford and Oslo. Munich is our European and global headquarters for design. In Oxford, we carry out research and development in the area of ‘advanced engineering’ and in Oslo, we have our first sales and service headquarters.
What does ‘advanced engineering’ mean?
This relates to vehicle architecture. In Silicon Valley and Shanghai, we are researching artificial intelligence.
How do sales and distribution work in Europe?
We have both a NIO House and a NIO Space for distribution. The first NIO House is located in Oslo. It is the first one outside China. There, we present the cars and meet with the customers. So it is also used as a community place. The NIO Space is the second point of sale. It is a scaled-down version of the NIO House. For the service, we have a hybrid model. On the one hand an own service, on the other hand, a partner network. The first NIO Service Center will open in Norway soon.
Your competitors have branches in almost every location. Is that a goal of NIO?
The way our colleagues from Wolfsburg are structured is a result of historical factors. We are aware that the density of the network plays a role. That’s why we want to offer new forms – for example, a service vehicle. We have already launched it on the Norwegian market. The partner network also allows us to be geographically close to our customers. However, we know that a few thousand service locations will not be created overnight. But we believe that we can achieve a similar result as the competition using digital tools.
Are there differences between European and Chinese NIO models?
Not exactly. Because we aimed for an international design for the vehicles right from the start. There are no cars that are developed exclusively for Europe or China. We only adapt details that are essential for the car’s functionality. The charging flap, for example. Because of the different charging standards in China and Europe, they are built differently.
Chinese cars usually do not have a permanently integrated navigation system.
In Europe, we have our navigation service provider. We cooperate with TomTom for the ES8.
Even the classic car radio does not exist in China.
We have digital radio on offer. We need the local content and the local partners for our customers in Europe.
Company founder Li has not ruled out production in Europe. The investment in Lotus has therefore fuelled speculation.
Right now, the only thing I can say is that we are not planning any production in Europe. Lotus is another matter. NIO Capital has acquired a stake in Lotus. This is an independent company that bears the NIO name – even though NIO is involved, of course.
Was Nio’s global strategy planned from the beginning?
I can definitely confirm that. From the very beginning, the goal was to build a global company. A premium brand must have a global presence. But it is also clear that this goal must be achieved step by step. From 2014 to 2018, we focused on developing the first vehicle. Now the time has come to go abroad, which we have done by entering the Norwegian market.
What lessons have you learned so far in Europe?
First, that technical adjustment is required: the charging connection, the content providers, the navigation system. Second, that Europe is not a single market, but consists of 47 countries with regional cultural differences. And third, we learned that a local team is important for local customers. The European market also has a different character than the Chinese market. Its nature differs from country to country. One example: In China, over 90 percent of cars are sold to private customers. In Germany, sixty to seventy percent of premium cars are company cars. That makes a big difference in terms of supply and service.
Sales figures slumped in October. What was the reason for that?
The figures in October are due to a factory update that we carried out. In the only factory where we manufacture vehicles, production unit numbers have declined as a result.
The semiconductor shortage wasn’t a reason?
Of course, NIO is a company that also suffers under this. But our sales figures are not yet ten or twenty times those of some of our competitors. We hope, like the whole industry, that the situation will have improved significantly by the middle of next year.
Startups in the mobility sector need a lot of money and know-how. You have prominent investors. What have they brought in besides money?
Investors are investors. NIO functions independently. But in addition, the respective investors bring in networks across the value chain. They facilitate access to certain ecosystems. Together, better collaborations can be achieved.
The Chinese electric car brand NIO has shipped 80,940, including November – mainly in China. The company is backed by major investors such as Tencent and Baidu; it is therefore considered the best-known start-up in the Chinese mobility sector. That is why NIO is repeatedly mentioned in the same breath as Tesla from the very beginning. After a price rally, the brand was even worth more than BMW on the stock market at one point. The first models will be available in Germany in 2022.
Hui Zhang is a globetrotter. The 49-year-old lives and works mainly in Munich, where NIO has its global design headquarters. Regular commuting to Oslo and Shanghai is, therefore, a must. Zhang doesn’t know it any other way. He studied economics in Beijing, Pforzheim, and Utah. In 2002, he began his career at mechanical engineering company Voith AG and automotive supplier Kiekert. In 2010, he took over the position of General Manager at Lotus China. After an interlude as a member of the board at electronics manufacturer Leoni, he joined NIO, where he has been Vice President for Europe since 2016.
China has been the world’s largest importer of oil for quite some time. Since 2018, it has also imported more natural gas than any other country. Liquefied natural gas is taking an increasingly large share. And so by 2021, China could also overtake Japan as the largest importer of liquefied natural gas (LNG). This fall, just weeks before the onset of the cold North China winter, the country’s power crisis drove demand higher despite horrendous gas prices.
China indeed has its own gas reserves. Its stored gas reserves stood at 14.8 trillion cubic meters in 2020. Nevertheless, gas became scarce in summer. While natural gas regularly flows in through the pipelines from Russia, for example, LNG has to be shipped with special freighters.
Normally, China buys liquefied gas for the winter in the second half of each year. But the recovery after the pandemic was so surprisingly dynamic that the power demand was higher than expected. This was compounded by power outages in the summer. Both led to an unseasonal LNG demand peak in the second quarter. In the first half of the year, China’s LNG imports were 28 percent higher than in the previous year, which was rather low due to Covid. World gas prices rose rapidly during this period. As a result, China’s gas buyers largely withdrew from the overpriced spot markets for liquefied natural gas in July – only to return to them frantically just a little later. The country’s LNG imports, therefore, fluctuated sharply between March and October.
According to the National Energy Administration (NEA), China’s total gas demand in the country is expected to rise to between 365 and 370 billion cubic meters (bcm), 11 to 13 percent higher than in 2020. These increases are well above the expectations of many analysts. IHS Markit, for example, had projected growth in demand of around six percent between 2021 and 2025.
Finally, amid the power crisis, the National Development and Reform Commission (NDRC) stepped in. It would help expand domestic gas production and import LNG spot markets. In a hastily-convened meeting, the NDRC instructed state-owned oil and gas companies Petrochina, Sinopec, and CNOOC to do everything in their power to ensure there is enough natural gas in the winter.
The NDRC has already placed orders for almost 175 billion cubic meters of gas, the Natural Gas Intelligence service reported in mid-November. That is almost enough for the heating season from mid-November to mid-March. Last year, gas was also in short supply during the winter. This year, meteorologists fear that the winter will be particularly cold due to the climate phenomenon La Niña. But China’s plan is not to just stay warm during the cold season. It is also concerned with long-term power security. To this end, China needs to expand its gas production more quickly. But it still won’t be able to get around natural gas from overseas.
The share of natural gas in the energy mix should also increase as part of climate policy. Greenhouse gas emissions are lower for gas than for coal or oil. It is therefore considered an important raw material for the transition to climate-neutral energy production. In the pre-Covid year of 2019, natural gas accounted for only about eight percent of power consumption in China (10,390,620 terajoules/TJ), according to the International Energy Agency (IEA). Most of that has gone to space heating since the switch from coal to gas heating in the noughties. The share diverted to power generation is minimal.
China has only been importing natural gas since 2006. The first LNG came from Australia in 2006, followed by the first pipeline gas from Central Asia in 2010. Since then, the power-hungry country’s dependence on imports has continued to grow. The People’s Republic buys the most LNG from Australia, followed by the US and Qatar. However, Beijing has been in conflict with both Washington and Canberra for months over power claims, trade issues, human rights, and security in the Indo-Pacific.
The imports from the very countries with which China is at odds with show the disadvantages of the LNG strategy. The fact that Beijing still has to buy more and more LNG from these countries is a tangible geopolitical disadvantage. In 2018, imports already accounted for 43 percent of China’s gas consumption, 60 percent of which was LNG. This share is still similar today; in September it was just over 63 percent.
The boom of US LNG in China’s energy mix is still relatively recent. In early January 2020, China’s negotiator Liu He promised the US – then still under former President Donald Trump – electricity purchases in exchange for tariff reductions in an initial agreement to resolve the conflict. China pledged to buy an additional $18.5 billion of raw materials from the US in 2020 and as much as $33.9 billion in 2021, each compared to 2017. From January to August 2021, China imported 5.44 million tons of LNG from the US, up 375 percent from the same period a year earlier. “China is set to see more LNG imports from the US as at least five Chinese companies are in advanced talks to secure long-term LNG supplies from US exporters,” China Daily quoted Bloomberg New Energy Finance analyst Li Ziyue as saying.
Sinopec signed a 20-year supply contract with US exporter Venture Global LNG. But it is not just the big three that are placing orders in America, but smaller companies as well: Local gas suppliers such as Zhejiang Energy, power companies, or other companies that want to make a profit. For example, privately-held ENN Natural Gas Co. inked a 13-year deal with Cheniere Energy this summer, according to Reuters; It was the first major gas deal between the two countries since 2018.
However, LNG cannot simply be shipped on a whim. To expand trade sustainably, so-called LNG terminals must be built along the coast. These facilities can cool the gas to such an extent that it liquefies. Analysts still see the limited capacities in China as an obstacle to a rapid expansion of imports. But the buildup is happening as fast as just about anything that is politically desired in China. In 2018, China owned ten LNG terminals; in 2019, it was already more than 20. Another ten are under construction or planned, and they are getting bigger. In Yantai, in the province of Shandong, Sinopec began construction in December on an LNG terminal with a wharf for LNG carriers, four tanks, and facilities for the distribution of the liquid, which is made gaseous again by heating. Sinopec and other groups are also building huge underground gas storage facilities.
To meet its gas needs and not become too dependent on LNG, China is relying in parallel on increased supplies of natural gas from Russia’s vast Siberian fields. For example, the amount of gas that Russia pumps to China through the “Power of Siberia” pipeline on a daily basis is expected to increase by half by the end of the year compared to August. Russian supplies are also highly welcome geopolitically, as they diversify China’s pool of suppliers. Gas trade between China and Russia this year is already 60 percent higher than in the same period last year, the NEA informs. Petrochina has already announced plans to significantly increase pipeline orders to have enough gas supplies for the Olympic winter.
Pipeline supplies from Myanmar, Kazakhstan, and other Central Asian states are also expected to rise. Overall, energy and commodities information provider S&P Global Platts expects China’s pipeline gas imports of 162 million cubic meters per day this heating season to be 19 percent higher than a year ago.
China also wants to increase domestic gas production of existing and new gas fields. This also includes offshore gas deposits. In June, for example, CNOOC activated the first gas field developed by China in the South China Sea, called Linshui 17-2. This expansion into disputed territories is also likely to raise geopolitical questions.
As the world’s largest, strongest, and longest-surviving dictatorship, contemporary China lacks the rule of law. Yet it is increasingly using its rubber-stamp parliament to enact domestic legislation asserting territorial claims and rights in international law. In fact, China has become quite adept at waging “lawfare” – the misuse and abuse of law for political and strategic ends.
Under “commander-in-chief” Xi Jinping’s bullying leadership, lawfare has developed into a critical component of China’s broader approach to asymmetrical or hybrid warfare. The blurring of the line between war and peace is enshrined in the regime’s official strategy as the “Three Warfares” (san zhong zhanfa) doctrine. Just as the pen can be mightier than the sword, so, too, can lawfare, psychological warfare, and public-opinion warfare.
Through these methods, Xi is advancing expansionism without firing a shot. Already, China’s bulletless aggression is proving to be a game changer in Asia. Waging the Three Warfares in conjunction with military operations has yielded China significant territorial gains.
Within this larger strategy, lawfare is aimed at rewriting rules to animate historical fantasies and legitimize unlawful actions retroactively. For example, China recently enacted a Land Borders Law to support its territorial revisionism in the Himalayas. And to advance its expansionism in the South and East China Seas, it enacted the Coast Guard Law and the Maritime Traffic Safety Law earlier this year.
The new laws, authorizing the use of force in disputed areas, were established amid rising tensions with neighboring countries. The Land Borders Law comes amid a military stalemate in the Himalayas, where more than 100,000 Chinese and Indian troops have been locked in standoffs for nearly 20 months following repeated Chinese incursions into Indian territory.
The Coast Guard Law, by treating disputed waters as China’s, not only violates the United Nations Convention on the Law of the Sea; it also could trigger armed conflict with Japan or the United States. The Land Borders Law likewise threatens to spark war with India by signaling China’s intent to determine borders unilaterally. It even extends to the Tibet-originating transboundary rivers, where China proclaims a right to divert as much of the shared waters as it wishes.
These recent laws follow the success of the Three Warfares strategy in redrawing the map of the South China Sea – despite an international arbitral tribunal’s ruling rejecting Chinese territorial claims there – and then swallowing Hong Kong, which had long flourished under democratic institutions as a major global financial center.
In the South China Sea, through which around one-third of global maritime trade passes, Xi’s regime has stepped up lawfare to consolidate Chinese control, turning its contrived historical claims into reality. Last year, while other claimant countries were battling the COVID-19 pandemic, Xi’s government created two new administrative districts to strengthen its claims over the Spratly and Paracel Islands and other land features. And in further defiance of international law, China gave Mandarin-language names to 80 islands, reefs, seamounts, shoals, and ridges, 55 of which are fully submerged.
The Hong Kong National Security Law, enacted in mid-2020, is a similarly aggressive act of lawfare. Xi has used the law to crush Hong Kong’s pro-democracy movement and rescind the guarantees enshrined in China’s UN-registered treaty with the United Kingdom. The treaty committed China to preserving Hong Kong citizens’ basic rights, freedoms, and political self-determination for at least 50 years after regaining sovereignty over the territory.
The strategy’s success in unraveling Hong Kong’s autonomy raises the question of whether China will now enact similar legislation aimed at Taiwan or even invoke its 2005 Anti-Secession Law, which underscored its resolve to bring the island democracy under mainland rule. With China escalating its psychological and information warfare, there is a real danger that it could move against Taiwan after the Beijing Winter Olympics in February.
Xi’s expansionism has not spared even tiny Bhutan, with a population of just 784,000. Riding roughshod over a 1998 bilateral treaty that obligated China “not to resort to unilateral action to alter the status quo of the border,” the regime has built militarized villages in Bhutan’s northern and western borderlands.
As these examples show, domestic legislation is increasingly providing China with a pretext to flout binding international law, including bilateral and multilateral treaties to which it is a party. With more than one million detainees, Xi’s Muslim gulag in Xinjiang has made a mockery of the 1948 Genocide Convention, to which China acceded in 1983 (with the rider that it does not consider itself bound by Article IX, the clause allowing any party in a dispute to lodge a complaint with the International Court of Justice). And because effective control is the shibboleth of a strong territorial claim in international law, Xi is using new legislation to undergird China’s administration of disputed areas, including with newly implanted residents.
Establishing such facts on the ground is integral to Xi’s territorial aggrandizement. That is why China has taken pains to create artificial islands and administrative districts in the South China Sea, and to pursue a militarized village-building spree in Himalayan borderlands that India, Bhutan, and Nepal consider to be within their own national boundaries.
Despite these encroachments, very little international attention has been given to Xi’s lawfare or broader hybrid warfare. The focus on China’s military buildup obscures the fact that the country is quietly expanding its maritime and land boundaries without firing a shot. Given Xi’s overarching goal – to achieve global primacy for China under his leadership – the world’s democracies need to devise a concerted strategy to counter his Three Warfares.
Brahma Chellaney, Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow at the Robert Bosch Academy in Berlin, is the author of several books, including Asian Juggernaut, Water: Asia’s New Battleground, and Water, Peace, and War: Confronting the Global Water Crisis.
Copyright: Project Syndicate, 2021.
www.project-syndicate.org
In the English language, man’s best friend often doesn’t come off well, for example, when you are “working like a dog”, or when someone turned out to be a “mean dog”, when everything else goes “to the dogs” or you end up being “sick as a dog”.
Even in Chinese, our barking four-legged friends do not have it easy. Because for some time now, the Chinese Internet and colloquial language have coined a whole slew of new words. One of the most famous representatives in the 996 era (you know, working from 9 AM to 9 PM, 6 days a week) is the “overtime dog” (加班狗 jiābāngou), on whose desk work orders from the boss pile up.
So don’t be surprised if you come across dogs hustling at desks in the WeChat emoji repertoire. There is even a delivery service in China that has christened itself the “Overtime Dog” and retrieves the necessary food supplies for stressed-out people. Alternatively, the hustling overtime folk in China also like to refer to themselves self-ironic (自黑 zìhēi) as “brick hauling dogs” (搬砖狗 bānzhuāngou). Meanwhile, in school and university rooms, “pupil” or “student” dogs (学生狗 xuéshenggou) whine under packed schedules, mountains of homework and chores from their teachers, and lofty expectations from their parents.
In matters of the heart,” single dogs” 单身狗 (dānshēngou) roam the online and linguistic landscape in China. The neologism serves as an ironically self-pitying label for lonely bachelors and bachelorettes still on the hunt for a suitable heartthrob. But the fact that being with someone doesn’t automatically mean that things are better is evident by another “dog breed”: the “girlfriend dog” 马子狗 (mazigou), which is based on the common Taiwanese term 马子 (mazi) for “steady girlfriend”. He is a toothless lapdog whose real mistress and owner is the steady girlfriend or wife who sets the tone in all aspects of life.
The one thing that all these new breeds have in common is that they are under the strict thumb of others and often have little to yip about. The linguistic “dog tag” is usually hung around their own necks with a wink. In conclusion, the only question that remains is which doggie you are? In any case, there are hardly any limits to linguistic creativity in Chinese!
Verena Menzel runs the language school New Chinese in Beijing.
