Table.Briefing: China (English)

Ian Buruma on geopolitics + AHK innovation report

Dear reader,

Dutch-English writer, essayist and historian Ian Buruma has a keen sense of the big and small connections in world history. Buruma has authored numerous books, including on Chinese cultural phenomena and the fate of Chinese dissidents. Fabian Peltsch spoke with him about how the upcoming US elections will impact relations with China and its rise as a superpower.

Buruma sees US Vice President Harris as a continuation of Joe Biden and former President Trump as a destabilizing factor. However, regardless of the election outcome, Buruma believes that the Sino-Russian connection could even revitalize the endangered Pax Americana because other Asian countries once again seek the protection of the United States.

The ongoing debate about the right level of de-risking includes the issue of research and development. German companies in China opt for an approach that runs counter to political arguments: They increasingly localize their research and development work on-site in China. The German Chamber of Foreign Trade (AHK) in China argues in its “Innovation Report 2024,” published this Monday, that a strong research presence in China is essential.

This is the only way to avoid being left behind by Chinese competitors, says the report, which is available to Table.Briefings in advance. Joern Petring has examined the survey-based report. Companies state that they intend to strengthen the competitiveness of their products and reach more customers in China by increasing their local research activities. At the same time, German companies increasingly use the People’s Republic as an innovation center for global markets.

Your
Christiane Kühl
Image of Christiane  Kühl

Interview

Ian Buruma: ‘People realize that Pax Americana cannot last forever’

Writer, essayist and historian Ian Buruma.

Mr. Buruma, in 2022, you wrote in the New York Times that Joe Biden represented the “setting sun of Pax Americana” and should make way for a younger Democrat. This idea seems to be fulfilled with the nomination of Kamala Harris.

Biden is a defender of the status quo: the US as the military protector of the democratic world, the importance of democratic institutions, free market economics, and so on. I support much of this myself, and don’t believe Kamala Harris would be very different. But she is younger, more energetic, and a woman born from diverse ethnic parents. This makes her an exciting candidate, despite the fact that her policies are not so different from those of Joe Biden.

What would her election mean for the rise of China as a world power, and what would Trump’s re-election mean?

I doubt whether she has thought much about China. A Trump administration would be more destabilizing, because of his total unpredictability. He likes the idea of making deals with dictators, but with him, everything is personal. If he felt that China was threatening his claims to being a tough guy, he could just as easily embark on a war.

What is the qualitative difference between Trump’s fake news and Xi’s one-sided propaganda spread through censorship filters – is one of them more effective in the long term?

The difference is that Trump still has to function in a democracy. His propaganda and lies can be challenged. Xi’s propaganda cannot. It is hard to say which is more effective, because the two leaders operate in entirely different systems.

What role could the friendship between Russia and China, which is characterized by a certain opaqueness and mistrust, play in a possible end to the Pax Americana?

It’s hard to say. China will dominate the relationship with Russia, which the Russians will find increasingly hard to bear. The one great interest they have in common is their enmity to the US. This scares other countries in Asia, even India. So, the effect of Sino-Russian aggression might be to actually strengthen Pax Americana because other Asian countries will seek American protection. Whether that would work depends, of course, on who is in the White House.

In your book “Year Zero: A History of 1945”, you discuss the significance of the end of the Second World War and describe history as an interlude between great powers and alliances of convenience and circumstance. Can you imagine a new world order in which South Korea and Japan reunite with China, for example, after a rapid fall of Taiwan without resistance from the USA?

It is possible but not likely. The interests of Japan and South Korea are too different from those of China, and neither country, especially Japan, would wish to be dominated by China. It is more likely that Japan and South Korea would form an alliance with other countries in Asia to balance China. But this will not be easy. Japan would have to take a leadership role, which neither the Japanese nor other Asians would welcome yet. But perhaps an aggressive China and an unreliable US will force them into such a situation.

In “Wages Of Guilt,” you compared the more or less fragile foundations of Germany and Japan’s basic pacifist attitudes. Japan has now rearmed and Germany has also increased its defense budget given the Ukraine crisis. How do you assess these developments with regard to the self-definition of both countries after the Second World War?

There is no doubt that both countries are changing. There is less of an aversion to taking more responsibility for their own military security. This is partly because historical memories are fading. The shock of losing a catastrophic war is no longer felt as keenly as before. Guilt over the horrendous crimes committed by Japan and Germany doesn’t impact politics in the same way it once did.

The other reason opinions on national defense are changing is that Russia and China are becoming more threatening. Finally, the fact that the Japanese and Germans can no longer take it for granted that the US will protect them is an added reason to take security seriously. Whether these changes are taking place fast enough to save Ukraine – and possibly Taiwan – remains unclear. There are still strong forces against Japan or Germany taking responsibility for collective security. This is what Sahra Wagenknecht and the AfD have in common, this and crude anti-Americanism. But the fact that more people in both countries are beginning to realize that Pax Americana cannot last forever is probably a good thing.

One of your books, “Bad Elements,” deals with Chinese dissidents. We just had two cases in Germany where dissidents turned out to be spies for the Chinese government, and another one was exposed as a fraudster. Do you think the role of Chinese dissidents abroad has suffered and changed since Tiananmen? Can Hongkongers, now one of the biggest Chinese dissident diasporas abroad, still have some political influence?

The sad fact is that most dissidents abroad do not have much influence, either abroad or in the countries they left behind. They grow out of touch. They are quickly forgotten. They fight among themselves in sheer frustration. This is why a country like China is often happy to hand over a jailed dissident to a foreign country. When this happens, China is applauded for making a gesture of goodwill, and it gets rid of a potentially dangerous opponent of the regime. This is why Navalny, for example, decided that he had to go back to Russia, knowing what risk he was taking. Abroad, his influence on Russians would have dwindled.

Your books often draw on films and literature to describe the sentiment of a particular time – do you also follow up on Chinese movies such as “Wolf Warrior” to understand the People’s Republic, or does it make less sense due to the rather strict censorship?

No, I think it still makes sense. More than books, let alone scholarly books, the cinema is where most people get their ideas of the past, as well as the present. It is always useful to follow propaganda, in films, and other media, if you have the stomach for it, to get an insight into what rulers want people to believe. How much people in a dictatorship really believe what they are told is an open question. A lack of free information and debate makes people cynical and, at the same time, receptive to bizarre conspiracy theories, which can then be manipulated by the rulers. 

The Dutch-English writer, essayist and historian Ian Buruma studied history, Chinese literature and Japanese cinema. His books on China include “Bad Elements: Chinese Rebels from Los Angeles to Beijing” and the novel “‎ The China Lover.” He received the Erasmus Prize in 2008 for his outstanding contributions to culture, society and social sciences in Europe. Buruma was editor of “The New York Review of Books” and is Professor of Democracy, Human Rights and Journalism at Bard College.

  • Geopolitics
  • Indo-Pacific
  • Joe Biden
  • Menschenrechte
  • Trump 2024
  • Ukraine-Krieg
  • USA
Translation missing.

Feature

AHK report: Why German companies conduct more research than ever before

Volkswagen’s research and production center for electric cars in Hefei: not falling behind

Despite, or perhaps because of, the ongoing debate about de-risking, German companies are expanding their research activities in China. This is revealed in a report by the German Chamber of Commerce (AHK) in China. The report has been made available to Table.Briefings ahead of its planned publication this Monday. Contrary to what German politicians have been saying, the Chamber argues in its “Innovation Report 2024” that a strong research presence in China is essential to avoid falling behind the Chinese competition.

The survey-based report shows that German companies are increasingly localizing their research and development efforts. The aim is to strengthen the competitiveness of their products and reach more customers in China. At the same time, German companies are increasingly using the People’s Republic as an innovation center for global markets.

Companies rely on localized research

“German companies in China are investing in local innovations and strategic partnerships with customers and suppliers in order to stay competitive in the highly contested and dynamic market environment,” says Martin Klose, Managing Director of the German Chamber of Commerce in South and Southwest China.

Companies could “gain a competitive advantage by working with partners within the Chinese ecosystem,” says Tunde Laleye, Partner and General Manager in China at the consultancy BearingPoint, which was involved in the report. He argues that a stronger presence in China would shorten research cycles and accelerate time to market.

China as a global innovation center

The key findings at a glance:

  • The localization trend continues: 63 percent of the companies surveyed state that they conduct research in China (+6 percentage points compared to 2022). 69 percent of respondents say they develop in China (+4 percentage points compared to 2022).
  • Most respondents (64 percent) cite the increased competitiveness of their products as a reason, followed by access to existing or new markets (62 percent) and better brand awareness (52 percent).
  • China is seen as a global innovation center: 29 percent of German companies conduct research in China for global markets. In 2022, it was only 25 percent.
  • The companies see themselves at a speed disadvantage: 56 percent cite the time it takes to market launch as their biggest weakness compared to Chinese competitors. Only 13 percent believe that they are faster.
  • The biggest advantage for 37 percent of German companies is their ability to understand customer needs. Only 20 percent believe that Chinese companies have the upper hand here.
  • 85 percent of respondents cited price-sensitive customers as the main driver of innovation, followed by the increasing innovative power of competitors (82 percent) and personnel costs (72 percent).
  • The survey found that companies prioritize product innovations (65 percent) over other areas, such as process and service innovations (43 percent and 40 percent, respectively) when it comes to research in China.

Chinese competitors hot on the heels

“In terms of innovative strength, Chinese companies are hot on the heels of their German competitors and are already ahead in some cases,” warns Klose. “This is precisely why German investments in China are also skyrocketing, especially in the automotive industry,” Klose continues. “Even if the gap is narrowing, I am confident that German companies will hold their own. They continue to excel with quality and optimize their products and services locally – which, in turn, makes them stronger in global markets.”

Expert Tunde Laleye advises companies to continue adapting their products in China to local preferences. “Innovation should be seen as part of customers’ overall perceived added value. Options for this include free trial offers, early involvement in product development and local services,” says Laleye.

Laleye adds that having a strong team is one of the most important prerequisites for innovation success. “In order to attract and retain top talent, companies need to offer good packages and invest specifically in further training.” He concludes that collaborations with local companies and universities are also recommended to be as close as possible to new ideas, technologies, and talent.

  • Company
  • De-Risking
  • Research
  • Trade
Translation missing.

News

PwC study: German automotive suppliers under pressure from Chinese competitors

According to management consultants PwC, German automotive suppliers are losing ground to their Chinese competitors. “Although they are increasing their expenditure on research and development, decisive innovations are rarely coming from Germany and more often from Asia,” the industry experts state in a new study. They examined key performance indicators from 84 of the top 100 suppliers that generate more than half of their revenue in the automotive sector. In terms of innovation, “Chinese suppliers showed particularly ambitious entrepreneurship. Despite uncertain sales forecasts, they are investing dynamically and thus creating facts for the future.”

Naturally, government funding also helps them, while Western suppliers have to obtain financing on the capital market. However, PwC says this is only half the truth: “Chinese suppliers have systematically worked on the competitiveness of their overhead costs.” It shows that even state funding is of little help without smart corporate decisions.

China’s suppliers: growth through investment and innovation

According to PwC, the global market share of Chinese suppliers has doubled to almost ten percent since 2020 – while the share of German suppliers has declined from 27 to 25 percent in the same period. One driver of Chinese growth is battery demand. “Overall, the competition from China is pulling away in terms of sales growth – albeit at the expense of capital efficiency,” write the experts. But the “air is getting thinner for German automotive suppliers.” The authors recommend more self-confidence and a risk appetite.

Instead of investing heavily with the aim of becoming technology leaders, they are too timid, the PwC strategy consultants criticize . The scarce access to capital puts them under additional pressure. “Technological leaps, new competitors and, not least, political influence are influencing the pace,” say the authors. “Suppliers who want to remain successful in this situation must strategically reinvent themselves with a view to three core issues: flexibility, focus and entrepreneurship.” ck

  • Car Industry
  • Suppliers

Trade: Why Russian companies lament payment difficulties

According to insiders, Russian companies face delays and rising costs for their payments to trading partners in China. As a result, transactions worth several billion yuan are on hold, Reuters reports, citing sources in Russia. Chinese state banks have reportedly suspended a large number of transactions with Russia. Payments worth billions of yuan have been held up as a result, said an insider close to the government who wished to remain anonymous. The problem worsened in August.

In June, the US Department of Treasury threatened to impose so-called secondary sanctions on Chinese banks and other countries that finance business with Russia. Since then, Chinese banks have adopted a stricter stance, Reuters quoted the representative of a leading Russian e-commerce platform as saying. “At that moment, all cross-border payments to China stopped. We found solutions, but it took about three weeks, which is a very long time, trade volumes fell drastically during that time,” said the source. One working solution was to buy gold, move it to Hong Kong and sell it there, depositing cash in a local bank account, the person said.

Russia deals go through third countries due to sanctions

Moreover, insiders say some Russian companies have used intermediaries in third countries. They are said to help process the transactions and thus circumvent the checks carried out by Chinese banks. However, this has increased the costs for transaction processing to up to six percent of the total. Previously, they had been almost zero.

Hong Kong has become a hotspot for sanctioned Russian business with the help of shadow companies, as the New York Times recently reported. A study published in August by the Committee for Freedom in Hong Kong also found that banned goods have been flowing through the trading hub not only to Russia, but also to Iran and North Korea for years.

The government in Moscow acknowledged the problems, but emphasized that solutions would be found. Bilateral business with large corporations such as Russia’s raw materials suppliers is reportedly still working well, and only smaller companies trading in consumer goods are experiencing problems. China is Russia’s largest trading partner, supplying industrial equipment and consumer goods, among other things. Conversely, the People’s Republic is an important sales market for Russian export hits such as oil, gas and agricultural products. rtr/ck

  • Geopolitik

Solar consolidation: Tongwei acquires majority stake in competitor Runergy

China’s ailing solar sector is apparently about to see the biggest takeover in its history. One of the industry leaders, Tongwei, has announced the acquisition of a majority stake in ailing competitor Runergy. Tongwei will pay up to five billion yuan (634 million euros) for 51 percent of the shares. According to climate analysts at the consulting agency Trivium China, however, this would be “quite a setback” for Runergy: The company had an estimated value of around 40 billion yuan in a recently failed IPO attempt.

According to Trivium China, Tongwei is the world’s largest manufacturer of polysilicon and solar cells. Its module production also climbed to fifth place worldwide in 2023. Runergy is no unknown quantity: The company has been one of the world’s five largest manufacturers of solar cells in recent years. “The acquisition of Runergy gives the company control of a large module factory currently under construction in Alabama, as well as significant cell and wafer production capacity in Thailand and Vietnam,” Trivium China wrote on Friday.

With massive overcapacity, China’s solar industry is in a severe crisis. Due to the collapse of prices, many companies suspend capacity, and some face bankruptcy. That is why observers have been expecting a wave of consolidation for some time. According to Trivium experts, giants such as Tongwei have enormous cash reserves and extremely low production costs, allowing them to survive the current slump in demand. However, Trivium says that to restore balance to the market, smaller manufacturers will have to go bankrupt and capacity will have to be expanded to a lesser extent, in addition to takeovers. ck

  • Konjunktur
  • Solar

Sabina Reef: Chinese and Philippine vessels collide again

The conflict between China and the Philippines over territorial claims in the South China Sea has once again resulted in a collision between two ships in disputed waters. On Saturday, both countries blamed each other for the collision. The Chinese Coast Guard reported that a Philippine ship had deliberately rammed a Chinese ship in the Sabina Reef area. The Philippine Coast Guard presented the incident in exactly the opposite way. The Sabina Reef is located in the Philippines’ 200-nautical-mile economic zone. The Chinese Coast Guard nevertheless accused the crew of the Philippine ship of having illegally entered the region.

China called on the Philippines to withdraw from the sea area immediately. The Chinese Coast Guard will take all necessary measures “to resolutely protect the country’s territorial sovereignty and maritime rights and interests,” Beijing said. The Philippine Coast Guard stated that the Chinese side had ignored maritime collision avoidance rules and carried out dangerous maneuvers, resulting in material damage. Similar incidents had been occurring practically on a weekly basis in the area around the particularly disputed Spratly Islands. rtr

  • Geopolitik
Translation missing.

Executive Moves

Daniel Holmberg has been Head of Vehicle Engineering China at Volvo since August. Holmberg has worked for the Swedish car manufacturer for over twelve years, most recently as Engineering Manager. Holmberg is moving from Gothenburg to Shanghai for his new post.

Jean Lu will become the new China Managing Director of the British Standard Chartered Bank. She has been with the bank for ten years and has already held several management positions, including Head of Corporate and Investment Banking in China. Lu previously worked at the Bank of China. Lu’s predecessor, Jerry Zhang, has been appointed as the bank’s global Co-Head of Financial Institutions Coverage.

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

China.Table editorial team

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    Dutch-English writer, essayist and historian Ian Buruma has a keen sense of the big and small connections in world history. Buruma has authored numerous books, including on Chinese cultural phenomena and the fate of Chinese dissidents. Fabian Peltsch spoke with him about how the upcoming US elections will impact relations with China and its rise as a superpower.

    Buruma sees US Vice President Harris as a continuation of Joe Biden and former President Trump as a destabilizing factor. However, regardless of the election outcome, Buruma believes that the Sino-Russian connection could even revitalize the endangered Pax Americana because other Asian countries once again seek the protection of the United States.

    The ongoing debate about the right level of de-risking includes the issue of research and development. German companies in China opt for an approach that runs counter to political arguments: They increasingly localize their research and development work on-site in China. The German Chamber of Foreign Trade (AHK) in China argues in its “Innovation Report 2024,” published this Monday, that a strong research presence in China is essential.

    This is the only way to avoid being left behind by Chinese competitors, says the report, which is available to Table.Briefings in advance. Joern Petring has examined the survey-based report. Companies state that they intend to strengthen the competitiveness of their products and reach more customers in China by increasing their local research activities. At the same time, German companies increasingly use the People’s Republic as an innovation center for global markets.

    Your
    Christiane Kühl
    Image of Christiane  Kühl

    Interview

    Ian Buruma: ‘People realize that Pax Americana cannot last forever’

    Writer, essayist and historian Ian Buruma.

    Mr. Buruma, in 2022, you wrote in the New York Times that Joe Biden represented the “setting sun of Pax Americana” and should make way for a younger Democrat. This idea seems to be fulfilled with the nomination of Kamala Harris.

    Biden is a defender of the status quo: the US as the military protector of the democratic world, the importance of democratic institutions, free market economics, and so on. I support much of this myself, and don’t believe Kamala Harris would be very different. But she is younger, more energetic, and a woman born from diverse ethnic parents. This makes her an exciting candidate, despite the fact that her policies are not so different from those of Joe Biden.

    What would her election mean for the rise of China as a world power, and what would Trump’s re-election mean?

    I doubt whether she has thought much about China. A Trump administration would be more destabilizing, because of his total unpredictability. He likes the idea of making deals with dictators, but with him, everything is personal. If he felt that China was threatening his claims to being a tough guy, he could just as easily embark on a war.

    What is the qualitative difference between Trump’s fake news and Xi’s one-sided propaganda spread through censorship filters – is one of them more effective in the long term?

    The difference is that Trump still has to function in a democracy. His propaganda and lies can be challenged. Xi’s propaganda cannot. It is hard to say which is more effective, because the two leaders operate in entirely different systems.

    What role could the friendship between Russia and China, which is characterized by a certain opaqueness and mistrust, play in a possible end to the Pax Americana?

    It’s hard to say. China will dominate the relationship with Russia, which the Russians will find increasingly hard to bear. The one great interest they have in common is their enmity to the US. This scares other countries in Asia, even India. So, the effect of Sino-Russian aggression might be to actually strengthen Pax Americana because other Asian countries will seek American protection. Whether that would work depends, of course, on who is in the White House.

    In your book “Year Zero: A History of 1945”, you discuss the significance of the end of the Second World War and describe history as an interlude between great powers and alliances of convenience and circumstance. Can you imagine a new world order in which South Korea and Japan reunite with China, for example, after a rapid fall of Taiwan without resistance from the USA?

    It is possible but not likely. The interests of Japan and South Korea are too different from those of China, and neither country, especially Japan, would wish to be dominated by China. It is more likely that Japan and South Korea would form an alliance with other countries in Asia to balance China. But this will not be easy. Japan would have to take a leadership role, which neither the Japanese nor other Asians would welcome yet. But perhaps an aggressive China and an unreliable US will force them into such a situation.

    In “Wages Of Guilt,” you compared the more or less fragile foundations of Germany and Japan’s basic pacifist attitudes. Japan has now rearmed and Germany has also increased its defense budget given the Ukraine crisis. How do you assess these developments with regard to the self-definition of both countries after the Second World War?

    There is no doubt that both countries are changing. There is less of an aversion to taking more responsibility for their own military security. This is partly because historical memories are fading. The shock of losing a catastrophic war is no longer felt as keenly as before. Guilt over the horrendous crimes committed by Japan and Germany doesn’t impact politics in the same way it once did.

    The other reason opinions on national defense are changing is that Russia and China are becoming more threatening. Finally, the fact that the Japanese and Germans can no longer take it for granted that the US will protect them is an added reason to take security seriously. Whether these changes are taking place fast enough to save Ukraine – and possibly Taiwan – remains unclear. There are still strong forces against Japan or Germany taking responsibility for collective security. This is what Sahra Wagenknecht and the AfD have in common, this and crude anti-Americanism. But the fact that more people in both countries are beginning to realize that Pax Americana cannot last forever is probably a good thing.

    One of your books, “Bad Elements,” deals with Chinese dissidents. We just had two cases in Germany where dissidents turned out to be spies for the Chinese government, and another one was exposed as a fraudster. Do you think the role of Chinese dissidents abroad has suffered and changed since Tiananmen? Can Hongkongers, now one of the biggest Chinese dissident diasporas abroad, still have some political influence?

    The sad fact is that most dissidents abroad do not have much influence, either abroad or in the countries they left behind. They grow out of touch. They are quickly forgotten. They fight among themselves in sheer frustration. This is why a country like China is often happy to hand over a jailed dissident to a foreign country. When this happens, China is applauded for making a gesture of goodwill, and it gets rid of a potentially dangerous opponent of the regime. This is why Navalny, for example, decided that he had to go back to Russia, knowing what risk he was taking. Abroad, his influence on Russians would have dwindled.

    Your books often draw on films and literature to describe the sentiment of a particular time – do you also follow up on Chinese movies such as “Wolf Warrior” to understand the People’s Republic, or does it make less sense due to the rather strict censorship?

    No, I think it still makes sense. More than books, let alone scholarly books, the cinema is where most people get their ideas of the past, as well as the present. It is always useful to follow propaganda, in films, and other media, if you have the stomach for it, to get an insight into what rulers want people to believe. How much people in a dictatorship really believe what they are told is an open question. A lack of free information and debate makes people cynical and, at the same time, receptive to bizarre conspiracy theories, which can then be manipulated by the rulers. 

    The Dutch-English writer, essayist and historian Ian Buruma studied history, Chinese literature and Japanese cinema. His books on China include “Bad Elements: Chinese Rebels from Los Angeles to Beijing” and the novel “‎ The China Lover.” He received the Erasmus Prize in 2008 for his outstanding contributions to culture, society and social sciences in Europe. Buruma was editor of “The New York Review of Books” and is Professor of Democracy, Human Rights and Journalism at Bard College.

    • Geopolitics
    • Indo-Pacific
    • Joe Biden
    • Menschenrechte
    • Trump 2024
    • Ukraine-Krieg
    • USA
    Translation missing.

    Feature

    AHK report: Why German companies conduct more research than ever before

    Volkswagen’s research and production center for electric cars in Hefei: not falling behind

    Despite, or perhaps because of, the ongoing debate about de-risking, German companies are expanding their research activities in China. This is revealed in a report by the German Chamber of Commerce (AHK) in China. The report has been made available to Table.Briefings ahead of its planned publication this Monday. Contrary to what German politicians have been saying, the Chamber argues in its “Innovation Report 2024” that a strong research presence in China is essential to avoid falling behind the Chinese competition.

    The survey-based report shows that German companies are increasingly localizing their research and development efforts. The aim is to strengthen the competitiveness of their products and reach more customers in China. At the same time, German companies are increasingly using the People’s Republic as an innovation center for global markets.

    Companies rely on localized research

    “German companies in China are investing in local innovations and strategic partnerships with customers and suppliers in order to stay competitive in the highly contested and dynamic market environment,” says Martin Klose, Managing Director of the German Chamber of Commerce in South and Southwest China.

    Companies could “gain a competitive advantage by working with partners within the Chinese ecosystem,” says Tunde Laleye, Partner and General Manager in China at the consultancy BearingPoint, which was involved in the report. He argues that a stronger presence in China would shorten research cycles and accelerate time to market.

    China as a global innovation center

    The key findings at a glance:

    • The localization trend continues: 63 percent of the companies surveyed state that they conduct research in China (+6 percentage points compared to 2022). 69 percent of respondents say they develop in China (+4 percentage points compared to 2022).
    • Most respondents (64 percent) cite the increased competitiveness of their products as a reason, followed by access to existing or new markets (62 percent) and better brand awareness (52 percent).
    • China is seen as a global innovation center: 29 percent of German companies conduct research in China for global markets. In 2022, it was only 25 percent.
    • The companies see themselves at a speed disadvantage: 56 percent cite the time it takes to market launch as their biggest weakness compared to Chinese competitors. Only 13 percent believe that they are faster.
    • The biggest advantage for 37 percent of German companies is their ability to understand customer needs. Only 20 percent believe that Chinese companies have the upper hand here.
    • 85 percent of respondents cited price-sensitive customers as the main driver of innovation, followed by the increasing innovative power of competitors (82 percent) and personnel costs (72 percent).
    • The survey found that companies prioritize product innovations (65 percent) over other areas, such as process and service innovations (43 percent and 40 percent, respectively) when it comes to research in China.

    Chinese competitors hot on the heels

    “In terms of innovative strength, Chinese companies are hot on the heels of their German competitors and are already ahead in some cases,” warns Klose. “This is precisely why German investments in China are also skyrocketing, especially in the automotive industry,” Klose continues. “Even if the gap is narrowing, I am confident that German companies will hold their own. They continue to excel with quality and optimize their products and services locally – which, in turn, makes them stronger in global markets.”

    Expert Tunde Laleye advises companies to continue adapting their products in China to local preferences. “Innovation should be seen as part of customers’ overall perceived added value. Options for this include free trial offers, early involvement in product development and local services,” says Laleye.

    Laleye adds that having a strong team is one of the most important prerequisites for innovation success. “In order to attract and retain top talent, companies need to offer good packages and invest specifically in further training.” He concludes that collaborations with local companies and universities are also recommended to be as close as possible to new ideas, technologies, and talent.

    • Company
    • De-Risking
    • Research
    • Trade
    Translation missing.

    News

    PwC study: German automotive suppliers under pressure from Chinese competitors

    According to management consultants PwC, German automotive suppliers are losing ground to their Chinese competitors. “Although they are increasing their expenditure on research and development, decisive innovations are rarely coming from Germany and more often from Asia,” the industry experts state in a new study. They examined key performance indicators from 84 of the top 100 suppliers that generate more than half of their revenue in the automotive sector. In terms of innovation, “Chinese suppliers showed particularly ambitious entrepreneurship. Despite uncertain sales forecasts, they are investing dynamically and thus creating facts for the future.”

    Naturally, government funding also helps them, while Western suppliers have to obtain financing on the capital market. However, PwC says this is only half the truth: “Chinese suppliers have systematically worked on the competitiveness of their overhead costs.” It shows that even state funding is of little help without smart corporate decisions.

    China’s suppliers: growth through investment and innovation

    According to PwC, the global market share of Chinese suppliers has doubled to almost ten percent since 2020 – while the share of German suppliers has declined from 27 to 25 percent in the same period. One driver of Chinese growth is battery demand. “Overall, the competition from China is pulling away in terms of sales growth – albeit at the expense of capital efficiency,” write the experts. But the “air is getting thinner for German automotive suppliers.” The authors recommend more self-confidence and a risk appetite.

    Instead of investing heavily with the aim of becoming technology leaders, they are too timid, the PwC strategy consultants criticize . The scarce access to capital puts them under additional pressure. “Technological leaps, new competitors and, not least, political influence are influencing the pace,” say the authors. “Suppliers who want to remain successful in this situation must strategically reinvent themselves with a view to three core issues: flexibility, focus and entrepreneurship.” ck

    • Car Industry
    • Suppliers

    Trade: Why Russian companies lament payment difficulties

    According to insiders, Russian companies face delays and rising costs for their payments to trading partners in China. As a result, transactions worth several billion yuan are on hold, Reuters reports, citing sources in Russia. Chinese state banks have reportedly suspended a large number of transactions with Russia. Payments worth billions of yuan have been held up as a result, said an insider close to the government who wished to remain anonymous. The problem worsened in August.

    In June, the US Department of Treasury threatened to impose so-called secondary sanctions on Chinese banks and other countries that finance business with Russia. Since then, Chinese banks have adopted a stricter stance, Reuters quoted the representative of a leading Russian e-commerce platform as saying. “At that moment, all cross-border payments to China stopped. We found solutions, but it took about three weeks, which is a very long time, trade volumes fell drastically during that time,” said the source. One working solution was to buy gold, move it to Hong Kong and sell it there, depositing cash in a local bank account, the person said.

    Russia deals go through third countries due to sanctions

    Moreover, insiders say some Russian companies have used intermediaries in third countries. They are said to help process the transactions and thus circumvent the checks carried out by Chinese banks. However, this has increased the costs for transaction processing to up to six percent of the total. Previously, they had been almost zero.

    Hong Kong has become a hotspot for sanctioned Russian business with the help of shadow companies, as the New York Times recently reported. A study published in August by the Committee for Freedom in Hong Kong also found that banned goods have been flowing through the trading hub not only to Russia, but also to Iran and North Korea for years.

    The government in Moscow acknowledged the problems, but emphasized that solutions would be found. Bilateral business with large corporations such as Russia’s raw materials suppliers is reportedly still working well, and only smaller companies trading in consumer goods are experiencing problems. China is Russia’s largest trading partner, supplying industrial equipment and consumer goods, among other things. Conversely, the People’s Republic is an important sales market for Russian export hits such as oil, gas and agricultural products. rtr/ck

    • Geopolitik

    Solar consolidation: Tongwei acquires majority stake in competitor Runergy

    China’s ailing solar sector is apparently about to see the biggest takeover in its history. One of the industry leaders, Tongwei, has announced the acquisition of a majority stake in ailing competitor Runergy. Tongwei will pay up to five billion yuan (634 million euros) for 51 percent of the shares. According to climate analysts at the consulting agency Trivium China, however, this would be “quite a setback” for Runergy: The company had an estimated value of around 40 billion yuan in a recently failed IPO attempt.

    According to Trivium China, Tongwei is the world’s largest manufacturer of polysilicon and solar cells. Its module production also climbed to fifth place worldwide in 2023. Runergy is no unknown quantity: The company has been one of the world’s five largest manufacturers of solar cells in recent years. “The acquisition of Runergy gives the company control of a large module factory currently under construction in Alabama, as well as significant cell and wafer production capacity in Thailand and Vietnam,” Trivium China wrote on Friday.

    With massive overcapacity, China’s solar industry is in a severe crisis. Due to the collapse of prices, many companies suspend capacity, and some face bankruptcy. That is why observers have been expecting a wave of consolidation for some time. According to Trivium experts, giants such as Tongwei have enormous cash reserves and extremely low production costs, allowing them to survive the current slump in demand. However, Trivium says that to restore balance to the market, smaller manufacturers will have to go bankrupt and capacity will have to be expanded to a lesser extent, in addition to takeovers. ck

    • Konjunktur
    • Solar

    Sabina Reef: Chinese and Philippine vessels collide again

    The conflict between China and the Philippines over territorial claims in the South China Sea has once again resulted in a collision between two ships in disputed waters. On Saturday, both countries blamed each other for the collision. The Chinese Coast Guard reported that a Philippine ship had deliberately rammed a Chinese ship in the Sabina Reef area. The Philippine Coast Guard presented the incident in exactly the opposite way. The Sabina Reef is located in the Philippines’ 200-nautical-mile economic zone. The Chinese Coast Guard nevertheless accused the crew of the Philippine ship of having illegally entered the region.

    China called on the Philippines to withdraw from the sea area immediately. The Chinese Coast Guard will take all necessary measures “to resolutely protect the country’s territorial sovereignty and maritime rights and interests,” Beijing said. The Philippine Coast Guard stated that the Chinese side had ignored maritime collision avoidance rules and carried out dangerous maneuvers, resulting in material damage. Similar incidents had been occurring practically on a weekly basis in the area around the particularly disputed Spratly Islands. rtr

    • Geopolitik
    Translation missing.

    Executive Moves

    Daniel Holmberg has been Head of Vehicle Engineering China at Volvo since August. Holmberg has worked for the Swedish car manufacturer for over twelve years, most recently as Engineering Manager. Holmberg is moving from Gothenburg to Shanghai for his new post.

    Jean Lu will become the new China Managing Director of the British Standard Chartered Bank. She has been with the bank for ten years and has already held several management positions, including Head of Corporate and Investment Banking in China. Lu previously worked at the Bank of China. Lu’s predecessor, Jerry Zhang, has been appointed as the bank’s global Co-Head of Financial Institutions Coverage.

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

    China.Table editorial team

    CHINA.TABLE EDITORIAL OFFICE

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