Felix Lee’s analysis two weeks ago stirred up a hornet’s nest: Despite the public consensus that more China expertise is required, the German government and foundations continue to scale back their programs.
He now discusses the matter with Christian Straube, responsible for China at Stiftung Mercator. Straube stresses that the foundation continues to uphold its commitment, but deems it necessary to set new priorities. Direct exchange often fails due to a lack of local partners. Instead, the country is playing an increasingly important role as a transversal topic with other goals of the foundation.
The 6th China International Import Expo starts in Shanghai and Premier Li Qiang once again promises free market access. Fabian Kretschmer takes a critical look at this in his analysis – specifically with a consumer focus. China’s export surplus is so high because its own workforce does not fully benefit from its economic success. If they did, China’s demand for foreign goods would be higher.
That is absolutely correct. However, it should be noted that Germany was also particularly competitive for years and generated high surpluses in foreign trade while wages at home remained comparatively low. But that doesn’t make it any better. And in China’s case, economists even suspect political intent: If the people don’t get rich too quickly, they might be less likely to complain.
There is a lot of talk about China expertise. And yet, it is striking that both the German government and private foundations are scaling back their China programs. How does this fit together?
Naturally, building up China expertise requires financial resources. At first glance, this does not seem to fit together well. The German government’s China strategy, for instance, states that the tasks defined there must be accomplished without placing an additional burden on the national budget. But are cuts really being made everywhere? At Stiftung Mercator, our Beijing office will celebrate its tenth anniversary next year. We continue to maintain an extensive China portfolio with partner organizations such as the Mercator Institute for China Studies (Merics) and the Bildungsnetzwerks China (German Network for Education about China), funding projects such as with the European Council on Foreign Relations and our own operational projects including delegation trips with representatives of the Chinese foundation sector and the Ministry of Civil Affairs.
But Mercator has also discontinued funding for some China programs.
In fact, China has become even more important with our refocused project ‘Europe in the World.’ We see China not just as a region, but as a cross-sectional topic across our fields of activity. This means that we tend to expand China-related projects. But of course, we have to react to the current situation and continually review whether projects with China are in line with our strategic considerations and impact expectations.
Mercator’s most successful project is certainly the establishment of Merics, the Mercator Institute for China Studies. However, Mercator intends to gradually withdraw from funding the program over the next few years.
Over the past ten years, the foundation has already funded the institute with over 30 million euros. The amount of funding is indeed decreasing. However, this is not specific to Merics, but is related to the way we as a foundation build up partner organizations. This process has several funding phases in which the foundation’s funding share decreases on the way to stabilization. Innovation is important to us, and, as a matter of principle, we do not provide long-term funding. At the same time, Stiftung Mercator is a long-term sponsor with funding phases lasting several years. Merics’ third funding phase, for example, runs until 2028.
What about the Bildungsnetzwerk China, the second major China program supported by Stiftung Mercator?
The Bildungsnetzwerk China is currently in its first funding phase and focuses on building China expertise, particularly in the target group of young people, i.e., school children. It also aims to be a vehicle for developing China expertise for a wide range of stakeholders in Germany. The Network is also active in projects that, in turn, receive funding from others, such as the Student Academies in cooperation with the German Federal Foreign Office. We are pleased with the Network’s success in attracting such third-party funding.
Will the financial support for Mercator’s Bildungsnetzwerk remain the same, or will it even be raised?
We have initially extended the funding of the Bildungsnetzwerk until 2026 and are currently planning additional funding phases, as with other partner organizations.
Mercator has also provided financial support for the Bildungsbruecke China-Deutschland, a program for students and trainees in the so-called MINT subjects, i.e., mathematics, computer science, natural sciences and technology, who want to learn more about China. Why is this funding not being extended after three years?
Students and trainees are not part of the core target group of our exchange and encounter work with China. The foundation had supported something that was peripheral to our strategy.
You talk about refocusing on Europe with China as a cross-sectional subject. What exactly does that mean?
That is a misunderstanding; we are by no means focusing solely on Europe. The first focus area of our refocused strategy is: Shaping a more inclusive international order. We aim to address the question of Europe’s role in a dynamically changing world order and how we can support a more future-oriented and inclusive foreign policy. In the second focus area, we want to help maintain constructive relations with China and our second priority country, Turkey. Our third focus area is to promote European integration. Here, too, China is very definitely a cross-sectional issue. We want to talk with countries in the EU and its eastern and south-eastern neighborhoods about China and develop common European positions.
Previously, Stiftung Mercator supported programs that were directly linked to China. Are you now taking a detour via Eastern European countries?
As I said, we continue to deal with China actively. But we also need all these European perspectives in order to strengthen Europe’s agency. They also enrich us because they make Europe’s image of China more diverse and, in turn, we learn more about China. The German government’s China strategy uses the phrase ‘China policy coordination.’ This coordination can also be extended to Europe. This is not yet happening to a sufficient degree.
Until 2019, Stiftung Mercator supported the Zukunftsbruecke, a program in cooperation with the All-China Youth Federation, a sub-organization of the Communist Party, which brought together young leaders from both countries. Such a program would certainly no longer be possible today.
This project was born at a time of different framework conditions. And these have changed fundamentally. I personally have only experienced this project as part of alumni events with a strong German focus and no longer as a joint German-Chinese cooperation.
Wouldn’t it be all the more important, especially in times of geopolitical strife, to establish personal contact with Chinese leaders in order to ease tensions?
Yes, you’re absolutely right. The only question is how such a project can still be organized today. The framework conditions for cooperation have become much more difficult. However, we are trying to reach people on a more individualized level and give Chinese perspectives on global issues a voice in the German-speaking world.
On the Chinese side, the wish for more exchange seems to have increased again after the pandemic.
These are the signals, at least. But we need to look at the underlying structures and whether there really are opportunities for exchange.
In turn, interest in China seems to be declining rapidly in Germany. The number of sinology students has plummeted.
That is, of course, regrettable. But I also see various methodological approaches to promote China expertise. For instance, we are developing teaching materials for schools through the Bildungsnetzwerk China, integrated cross-sectoral China monitoring at MERICS and our own dialogue programs with Chinese participants. The German government’s China strategy marks an important step because it has made the socio-political relevance clear. Of course, we have a considerable staffing problem and simply too few people with expertise on China. And especially with a view to the next generation, politicians should also clarify that China is relevant – and not just a fad, but is here to stay.
Christian Straube is Project Manager at Stiftung Mercator’s Europe in the World department and oversees the China portfolio. Previously, he was Program Manager in the China Program of Stiftung Asienhaus. He studied modern sinology, South Asian political science and economics in Heidelberg and Beijing and received his PhD for his research work at the Max Planck Institute for Social Anthropology at the Martin Luther University Halle-Wittenberg.
China’s premier has once again promised foreign companies the moon. “We will further expand market access,” said Li Qiang on Sunday at the opening ceremony of the annual Import Expo in Shanghai. To the applause of hundreds of CEOs, the 64-year-old promised to increase the People’s Republic’s imports to a total of 17 trillion dollars over the next five years.
However, most entrepreneurs appeared unimpressed by the benign rhetoric. After all, they have heard the same old promises from the party cadres for years, rarely followed by action. The criticism from the European Chamber of Commerce is particularly strong: Vice-President Carlo D’Andrea described the Import Expo as a political showcase primarily serving marketing purposes.
The fact is that no other economic power has such an unbalanced foreign trade as China. For decades, the People’s Republic has been running record-breaking trade surpluses, especially during the pandemic. In other words, China has been flooding the global markets with domestic products, while its 1.4 billion consumers are buying proportionally fewer and fewer foreign goods. The People’s Republic actually produces 18 percent of the world’s economic output, but only generates 13 percent of global consumption.
The European Union, in particular, China’s biggest trading partner, is suffering from the growing imbalance. The figures are staggering: Beijing currently exports almost four times more to the EU than it imports from the EU. The European deficit amounts to nearly 400 billion euros per year.
With the China International Import Expo in Shanghai, launched in 2018, the Chinese government aims to show the outside world that it is taking the problem seriously. According to the event hosts, 289 of the world’s 500 largest companies will attend the trade fair this year to promote greater market share on the Chinese market. And contrary to the political rhetoric, the US economy is strongly represented in terms of numbers.
However, the import expo will unlikely result in more balanced trade relations. This is because the reasons lie much deeper – and are also misunderstood by many economists. They continue to interpret the trade surpluses as a strength of the Chinese economy. However, they are actually a symptom of its weakness: In healthy economies, income would inevitably lead to higher wages and, ultimately, rising imports. In China, however, almost the opposite is happening: Imports stagnate despite record exports.
The problem is of a structural nature. The share of private households in gross domestic product is nowhere as low as in China. Artificially low wages and rudimentary social security systems leave the population with little disposable income in relative terms. As a result, consumer spending as a proportion of GDP is significantly lower (38 percent) than in the USA (68 percent), Japan (56 percent) or Germany (around 52 percent).
Since the end of zero Covid in particular, both Chinese and international economic experts have been calling for the government to launch a massive stimulus package to revive consumption. Even in the medium term, this would be the only way for China to transform from a purely investment-driven economy to consumption-driven growth.
However, the main reason why this has not happened so far is political: In order for households to receive a larger piece of the pie, the government would be forced to give up some of its financial resources – and, ultimately, its political power.
The interpretation of these developments is sobering. “Xi Jinping doesn’t want too much consumption,” says renowned economist and decades-long China expert Barry Naughton. Xi believes people will be better off if they toil and lead a hard life. The professor at the University of California concludes that although Xi wants to lift people out of poverty, his vision of a modern, socialist state does not include them becoming wealthy.
This may sound like a bold claim, but it is something the CPP leader himself states very bluntly in his speeches: In them, Xi regularly calls on the people to literally “eat bitterness” and prepare for hard times. At the same time, he criticizes European-style social welfare states as decadent because they make people “lazy.”
From the political perspective of the 70-year-old, such a view makes perfect sense. Once the Chinese have met their basic day-to-day needs, their desire for self-realization and political participation grows. Nowhere is this more evident than in Shanghai, China’s wealthiest and most consumer-oriented city.
Despite the widespread repression, its residents repeatedly show traces of defiance. At the Halloween festival a few days ago, several young people paraded through the streets of the French Concession in provocative costumes: Some Shanghainese dressed up in white protective suits to denounce the radical lockdowns of the previous year – another marcher dressed up as a personified surveillance camera. And at least one woman stuck dozens of white pieces of paper on her body – the symbol of last December’s anti-government protests. Fabian Kretschmer
According to a media investigation, BASF’s Chinese joint venture partner is suspected of employing forced laborers in Xinjiang. The German chemical giant now plans to conduct a follow-up investigation, as the German newspaper Handelsblatt reported on Sunday. Shareholders of Markor, BASF’s joint venture partner in Xinjiang, are suspected of employing forced laborers. Allegations concern the Zhongtai Group and its subsidiary Zhongtai Chemical.
The Zhongtai Group has been placed on a US sanctions list for products from Xinjiang under the Uyghur Forced Labor Prevention Act (UFLPA) in September. Zhongtai Chemical has been sanctioned since June.
BASF operates two joint ventures in the industrial zone of Korla. According to BASF, the Zhongtai Group indirectly holds minority shares in the joint venture partner Markor via two associated companies. Zhongtai Chemical reportedly holds 24 percent of the shares in Markor. The report revealed this based on an analysis by the software company Datenna, which evaluates data from public sources.
BASF takes the publications on Xinjiang “very seriously” and as an opportunity to regularly review labor relations at the sites of the joint ventures in Korla, the company is quoted in the report. Following an internal audit in 2019 and an external audit in 2020, an additional internal audit was carried out at the joint venture operations in early 2023. “As a result, we can state that none of these audits found any evidence of forced labor or other human rights violations,” the report states. BASF is also in contact with Markor regarding the issue.
BASF also intends to conduct another audit: “We are currently in talks with a renowned auditing firm to renew our joint venture audit from 2020,” the company told Handelsblatt. ari
EU member state Estonia will get a Taiwanese representation. However, the Taipei office is not an official diplomatic embassy or consulate. “Just like many other countries of the European Union, Estonia is also ready to accept the establishment of a nondiplomatic economic or cultural representation of Taipei in order to promote the respective relations,” Foreign Minister Margus Tsahkna said in a statement. The Foreign Ministry emphasized that Estonia continues to pursue the one-China policy, does not recognize Taiwan as a state and will not establish political relations with the country.
“At the same time, we consider it important to revive relations with Taiwan in economy, education, culture, communication between civil society organizations and other such fields,” Tsahkna said. “We also support Taiwan’s participation in international affairs in areas of global interest, such as the fight against pandemics and Taiwan’s participation in the World Health Organization. Reinvigorating relations with Taiwan does not contradict the One China policy’,” the minister added.
The one-China principle is the Chinese Communist Party’s position that there is only one sovereign state under the name of China and that Taiwan is an integral part of it. Over two years ago, the Baltic state of Lithuania opened a Taiwan office in Vilnius and named it “Taiwan.” Beijing saw this as a provocation and imposed a de facto trade embargo on Lithuania. The newly created EU trade instrument against economic coercion is intended to counter such actions. ari
According to the German Mechanical Engineering Industry Association VDMA, almost half of German mechanical engineering companies are reconsidering their business activities in China. However, 42 percent of the companies surveyed plan to expand their activities in China, according to the association’s survey of 304 member companies in Germany and China.
VDMA sees that the main reasons for companies weighing up their options are more challenging local business conditions, increased geopolitical tensions and pressure on Chinese companies to favor domestic suppliers and products. “We are observing a significant increase in the competitiveness of local companies due to increased product quality and technology, but also increased industrial policy interventions by the state,” said Ulrich Ackermann, Head of the Foreign Trade Department at VDMA.
German companies are looking into increasing their focus on the US and Indian markets. Companies are also considering localizing their business more, i.e., limiting supply chains entirely to China – based on the principle of “in China, for China.” The strategy of supplying the global market from China, which was often considered in the past, is thus being abandoned, according to Ackermann.
China is currently Germany’s largest sales market outside Europe by far. flee/rtr
Media reports claim that Chinese EV giant BYD favors Hungary as the location for its first European car plant. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reports that an internal decision has been made to build a car plant in Hungary. The newspaper cites unnamed sources close to the company.
According to an official Chinese website, Hungarian Prime Minister Viktor Orbán recently visited the BYD headquarters in Shenzhen, China, where he met the company’s CEO, Wang Chuanfu. Orbán visited China in mid-October. He was one of the few European representatives to attend a summit there marking the tenth anniversary of the Chinese New Silk Road trade project.
BYD, contacted by Reuters, said that it was still looking for the right location and would make an announcement at the end of the year. The Hungarian government did not immediately respond to requests for comment. In recent media reports, BYD was also considered a possible interested party for the closing Ford plant in Saarlouis, Germany. rtr
The deficit-ridden Chinese EV manufacturer NIO will cut ten percent of jobs and reduce investments. Due to growing competition, the company must increase efficiency and reduce costs, NIO announced. “This is a tough but necessary decision against the fierce competition,” NIO wrote in an email to its employees, obtained by Reuters.
The layoffs are to be completed in November. NIO said it would also defer or cut long-term project investments that would not contribute to financial performance within three years.
EV demand has slowed in China as consumers prefer cheaper plug-in hybrids. Moreover, the price war instigated by Tesla is affecting car manufacturers in this highly competitive market.
NIO is among several Chinese car manufacturers already operating in Europe. According to insiders, NIO is considering expanding its European business through dealerships in order to boost sales. Most recently, NIO operated six branches in Germany, Norway, Sweden, Denmark and the Netherlands. flee/rtr
In Germany, surprisingly few people know about German colonial history in China, says Charlotte Ming. In her hometown of Qingdao in eastern China, things are quite different. From 1898 to 1919, the port city was a leased territory of the German Empire, the so-called colony of Kiautschou.
“People in Qingdao today have a rather rosy picture of this colonial history,” says Ming. For example, when it rains heavily, there are still regular rumors that the sewage system installed by the Germans makes the city practically immune to flooding. The German word for manhole cover – “Gullideckel” – (Gǔ lì gài – 古力盖) even found its way into the Qingdao dialect as a loan word. “But its effect is more than exaggerated,” laughs Ming.
Especially as the sewers only make up a small part of the sewage system of the nine-million-strong city and were primarily intended to serve the colonial rulers at the time. “Urban planning was strictly segregated,” explains Ming. “Racism towards the Chinese people was very pronounced.”
Nevertheless, the German heritage became a unique touristic feature for Qingdao, still defining the city’s identity for many residents today. Ming herself attended a school in Qingdao founded by the famous German sinologist and missionary Richard Wilhelm. “There was a statue of him on the campus. His old study room, where he translated Chinese classics, served as our music room. But I didn’t think much about it at the time.”
Ming left China at the age of 18 to study journalism at the renowned Columbia University in New York. She worked as a journalist in the United States for ten years, including for the photo departments of Time magazine and Getty Images.
In 2018, Ming came to Germany. In Berlin, she noticed that surprisingly few people knew the name of her hometown. As a freelance journalist, she began researching how present Germany’s colonial history actually is in China. “Germany is known for its culture of remembrance. However, little is mentioned about this part of history in school lessons. Many people don’t know, for example, that the Germans were involved in the Boxer War, which claimed tens of thousands of lives and led to extensive looting of Chinese cultural objects.”
In addition to numerous articles, Ming has recently collaborated with the “Bildungsnetzwerk China” (German Network for Education about China) on an audio walk in Berlin that sheds light on the history of some street names in Berlin’s Wedding district. There is the Kiautschou Strasse and the Pekinger Platz, named in 1905 as a direct reminder of the military occupation of Beijing by the Western powers under the leadership of a German field marshal.
The walk ends at the Robert Koch Institute, drawing a link to the present day. “Certain stereotypes from the colonial era have persisted to this day, which became clear in anti-Asian racism during the Coronavirus era, for example,” explains Ming. “That they have strange eating habits, are uneducated and unhygienic. These prejudices already existed back then in Qingdao.”
The project’s title is “Ěrinnern” – a play on words with the German word for remember and an Ěr 耳, the Chinese word for ear. She’s as much interested in the history as how people in Germany and China remember it, Ming says.
The US-educated journalist writes mainly in English, but has also written several articles in Chinese on the subject, for example, on the colonial street names in Berlin, which have been received with great interest, not least by Chinese living in Germany. “In China, people often say that the Germans deal with their history responsibly, in contrast to the Japanese, for example. And I also see this in connection with the Holocaust: not many world powers have achieved this degree of reflection on their own past. But I don’t think the culture of remembrance in Germany is complete if it doesn’t also make colonial history a topic.” Fabian Peltsch
Claus Soong has joined think tank Merics as analyst. Soong will focus on China’s foreign policy, particularly in the Indo-Pacific region and the Global South.
Andy Janz is the new Head of Commercial China at Dubai-based tourism provider HTS. He previously worked as Director of Marketing & Digital Commerce at Gebeco.
Is something changing in your organization? Let us know at heads@table.media!
Felix Lee’s analysis two weeks ago stirred up a hornet’s nest: Despite the public consensus that more China expertise is required, the German government and foundations continue to scale back their programs.
He now discusses the matter with Christian Straube, responsible for China at Stiftung Mercator. Straube stresses that the foundation continues to uphold its commitment, but deems it necessary to set new priorities. Direct exchange often fails due to a lack of local partners. Instead, the country is playing an increasingly important role as a transversal topic with other goals of the foundation.
The 6th China International Import Expo starts in Shanghai and Premier Li Qiang once again promises free market access. Fabian Kretschmer takes a critical look at this in his analysis – specifically with a consumer focus. China’s export surplus is so high because its own workforce does not fully benefit from its economic success. If they did, China’s demand for foreign goods would be higher.
That is absolutely correct. However, it should be noted that Germany was also particularly competitive for years and generated high surpluses in foreign trade while wages at home remained comparatively low. But that doesn’t make it any better. And in China’s case, economists even suspect political intent: If the people don’t get rich too quickly, they might be less likely to complain.
There is a lot of talk about China expertise. And yet, it is striking that both the German government and private foundations are scaling back their China programs. How does this fit together?
Naturally, building up China expertise requires financial resources. At first glance, this does not seem to fit together well. The German government’s China strategy, for instance, states that the tasks defined there must be accomplished without placing an additional burden on the national budget. But are cuts really being made everywhere? At Stiftung Mercator, our Beijing office will celebrate its tenth anniversary next year. We continue to maintain an extensive China portfolio with partner organizations such as the Mercator Institute for China Studies (Merics) and the Bildungsnetzwerks China (German Network for Education about China), funding projects such as with the European Council on Foreign Relations and our own operational projects including delegation trips with representatives of the Chinese foundation sector and the Ministry of Civil Affairs.
But Mercator has also discontinued funding for some China programs.
In fact, China has become even more important with our refocused project ‘Europe in the World.’ We see China not just as a region, but as a cross-sectional topic across our fields of activity. This means that we tend to expand China-related projects. But of course, we have to react to the current situation and continually review whether projects with China are in line with our strategic considerations and impact expectations.
Mercator’s most successful project is certainly the establishment of Merics, the Mercator Institute for China Studies. However, Mercator intends to gradually withdraw from funding the program over the next few years.
Over the past ten years, the foundation has already funded the institute with over 30 million euros. The amount of funding is indeed decreasing. However, this is not specific to Merics, but is related to the way we as a foundation build up partner organizations. This process has several funding phases in which the foundation’s funding share decreases on the way to stabilization. Innovation is important to us, and, as a matter of principle, we do not provide long-term funding. At the same time, Stiftung Mercator is a long-term sponsor with funding phases lasting several years. Merics’ third funding phase, for example, runs until 2028.
What about the Bildungsnetzwerk China, the second major China program supported by Stiftung Mercator?
The Bildungsnetzwerk China is currently in its first funding phase and focuses on building China expertise, particularly in the target group of young people, i.e., school children. It also aims to be a vehicle for developing China expertise for a wide range of stakeholders in Germany. The Network is also active in projects that, in turn, receive funding from others, such as the Student Academies in cooperation with the German Federal Foreign Office. We are pleased with the Network’s success in attracting such third-party funding.
Will the financial support for Mercator’s Bildungsnetzwerk remain the same, or will it even be raised?
We have initially extended the funding of the Bildungsnetzwerk until 2026 and are currently planning additional funding phases, as with other partner organizations.
Mercator has also provided financial support for the Bildungsbruecke China-Deutschland, a program for students and trainees in the so-called MINT subjects, i.e., mathematics, computer science, natural sciences and technology, who want to learn more about China. Why is this funding not being extended after three years?
Students and trainees are not part of the core target group of our exchange and encounter work with China. The foundation had supported something that was peripheral to our strategy.
You talk about refocusing on Europe with China as a cross-sectional subject. What exactly does that mean?
That is a misunderstanding; we are by no means focusing solely on Europe. The first focus area of our refocused strategy is: Shaping a more inclusive international order. We aim to address the question of Europe’s role in a dynamically changing world order and how we can support a more future-oriented and inclusive foreign policy. In the second focus area, we want to help maintain constructive relations with China and our second priority country, Turkey. Our third focus area is to promote European integration. Here, too, China is very definitely a cross-sectional issue. We want to talk with countries in the EU and its eastern and south-eastern neighborhoods about China and develop common European positions.
Previously, Stiftung Mercator supported programs that were directly linked to China. Are you now taking a detour via Eastern European countries?
As I said, we continue to deal with China actively. But we also need all these European perspectives in order to strengthen Europe’s agency. They also enrich us because they make Europe’s image of China more diverse and, in turn, we learn more about China. The German government’s China strategy uses the phrase ‘China policy coordination.’ This coordination can also be extended to Europe. This is not yet happening to a sufficient degree.
Until 2019, Stiftung Mercator supported the Zukunftsbruecke, a program in cooperation with the All-China Youth Federation, a sub-organization of the Communist Party, which brought together young leaders from both countries. Such a program would certainly no longer be possible today.
This project was born at a time of different framework conditions. And these have changed fundamentally. I personally have only experienced this project as part of alumni events with a strong German focus and no longer as a joint German-Chinese cooperation.
Wouldn’t it be all the more important, especially in times of geopolitical strife, to establish personal contact with Chinese leaders in order to ease tensions?
Yes, you’re absolutely right. The only question is how such a project can still be organized today. The framework conditions for cooperation have become much more difficult. However, we are trying to reach people on a more individualized level and give Chinese perspectives on global issues a voice in the German-speaking world.
On the Chinese side, the wish for more exchange seems to have increased again after the pandemic.
These are the signals, at least. But we need to look at the underlying structures and whether there really are opportunities for exchange.
In turn, interest in China seems to be declining rapidly in Germany. The number of sinology students has plummeted.
That is, of course, regrettable. But I also see various methodological approaches to promote China expertise. For instance, we are developing teaching materials for schools through the Bildungsnetzwerk China, integrated cross-sectoral China monitoring at MERICS and our own dialogue programs with Chinese participants. The German government’s China strategy marks an important step because it has made the socio-political relevance clear. Of course, we have a considerable staffing problem and simply too few people with expertise on China. And especially with a view to the next generation, politicians should also clarify that China is relevant – and not just a fad, but is here to stay.
Christian Straube is Project Manager at Stiftung Mercator’s Europe in the World department and oversees the China portfolio. Previously, he was Program Manager in the China Program of Stiftung Asienhaus. He studied modern sinology, South Asian political science and economics in Heidelberg and Beijing and received his PhD for his research work at the Max Planck Institute for Social Anthropology at the Martin Luther University Halle-Wittenberg.
China’s premier has once again promised foreign companies the moon. “We will further expand market access,” said Li Qiang on Sunday at the opening ceremony of the annual Import Expo in Shanghai. To the applause of hundreds of CEOs, the 64-year-old promised to increase the People’s Republic’s imports to a total of 17 trillion dollars over the next five years.
However, most entrepreneurs appeared unimpressed by the benign rhetoric. After all, they have heard the same old promises from the party cadres for years, rarely followed by action. The criticism from the European Chamber of Commerce is particularly strong: Vice-President Carlo D’Andrea described the Import Expo as a political showcase primarily serving marketing purposes.
The fact is that no other economic power has such an unbalanced foreign trade as China. For decades, the People’s Republic has been running record-breaking trade surpluses, especially during the pandemic. In other words, China has been flooding the global markets with domestic products, while its 1.4 billion consumers are buying proportionally fewer and fewer foreign goods. The People’s Republic actually produces 18 percent of the world’s economic output, but only generates 13 percent of global consumption.
The European Union, in particular, China’s biggest trading partner, is suffering from the growing imbalance. The figures are staggering: Beijing currently exports almost four times more to the EU than it imports from the EU. The European deficit amounts to nearly 400 billion euros per year.
With the China International Import Expo in Shanghai, launched in 2018, the Chinese government aims to show the outside world that it is taking the problem seriously. According to the event hosts, 289 of the world’s 500 largest companies will attend the trade fair this year to promote greater market share on the Chinese market. And contrary to the political rhetoric, the US economy is strongly represented in terms of numbers.
However, the import expo will unlikely result in more balanced trade relations. This is because the reasons lie much deeper – and are also misunderstood by many economists. They continue to interpret the trade surpluses as a strength of the Chinese economy. However, they are actually a symptom of its weakness: In healthy economies, income would inevitably lead to higher wages and, ultimately, rising imports. In China, however, almost the opposite is happening: Imports stagnate despite record exports.
The problem is of a structural nature. The share of private households in gross domestic product is nowhere as low as in China. Artificially low wages and rudimentary social security systems leave the population with little disposable income in relative terms. As a result, consumer spending as a proportion of GDP is significantly lower (38 percent) than in the USA (68 percent), Japan (56 percent) or Germany (around 52 percent).
Since the end of zero Covid in particular, both Chinese and international economic experts have been calling for the government to launch a massive stimulus package to revive consumption. Even in the medium term, this would be the only way for China to transform from a purely investment-driven economy to consumption-driven growth.
However, the main reason why this has not happened so far is political: In order for households to receive a larger piece of the pie, the government would be forced to give up some of its financial resources – and, ultimately, its political power.
The interpretation of these developments is sobering. “Xi Jinping doesn’t want too much consumption,” says renowned economist and decades-long China expert Barry Naughton. Xi believes people will be better off if they toil and lead a hard life. The professor at the University of California concludes that although Xi wants to lift people out of poverty, his vision of a modern, socialist state does not include them becoming wealthy.
This may sound like a bold claim, but it is something the CPP leader himself states very bluntly in his speeches: In them, Xi regularly calls on the people to literally “eat bitterness” and prepare for hard times. At the same time, he criticizes European-style social welfare states as decadent because they make people “lazy.”
From the political perspective of the 70-year-old, such a view makes perfect sense. Once the Chinese have met their basic day-to-day needs, their desire for self-realization and political participation grows. Nowhere is this more evident than in Shanghai, China’s wealthiest and most consumer-oriented city.
Despite the widespread repression, its residents repeatedly show traces of defiance. At the Halloween festival a few days ago, several young people paraded through the streets of the French Concession in provocative costumes: Some Shanghainese dressed up in white protective suits to denounce the radical lockdowns of the previous year – another marcher dressed up as a personified surveillance camera. And at least one woman stuck dozens of white pieces of paper on her body – the symbol of last December’s anti-government protests. Fabian Kretschmer
According to a media investigation, BASF’s Chinese joint venture partner is suspected of employing forced laborers in Xinjiang. The German chemical giant now plans to conduct a follow-up investigation, as the German newspaper Handelsblatt reported on Sunday. Shareholders of Markor, BASF’s joint venture partner in Xinjiang, are suspected of employing forced laborers. Allegations concern the Zhongtai Group and its subsidiary Zhongtai Chemical.
The Zhongtai Group has been placed on a US sanctions list for products from Xinjiang under the Uyghur Forced Labor Prevention Act (UFLPA) in September. Zhongtai Chemical has been sanctioned since June.
BASF operates two joint ventures in the industrial zone of Korla. According to BASF, the Zhongtai Group indirectly holds minority shares in the joint venture partner Markor via two associated companies. Zhongtai Chemical reportedly holds 24 percent of the shares in Markor. The report revealed this based on an analysis by the software company Datenna, which evaluates data from public sources.
BASF takes the publications on Xinjiang “very seriously” and as an opportunity to regularly review labor relations at the sites of the joint ventures in Korla, the company is quoted in the report. Following an internal audit in 2019 and an external audit in 2020, an additional internal audit was carried out at the joint venture operations in early 2023. “As a result, we can state that none of these audits found any evidence of forced labor or other human rights violations,” the report states. BASF is also in contact with Markor regarding the issue.
BASF also intends to conduct another audit: “We are currently in talks with a renowned auditing firm to renew our joint venture audit from 2020,” the company told Handelsblatt. ari
EU member state Estonia will get a Taiwanese representation. However, the Taipei office is not an official diplomatic embassy or consulate. “Just like many other countries of the European Union, Estonia is also ready to accept the establishment of a nondiplomatic economic or cultural representation of Taipei in order to promote the respective relations,” Foreign Minister Margus Tsahkna said in a statement. The Foreign Ministry emphasized that Estonia continues to pursue the one-China policy, does not recognize Taiwan as a state and will not establish political relations with the country.
“At the same time, we consider it important to revive relations with Taiwan in economy, education, culture, communication between civil society organizations and other such fields,” Tsahkna said. “We also support Taiwan’s participation in international affairs in areas of global interest, such as the fight against pandemics and Taiwan’s participation in the World Health Organization. Reinvigorating relations with Taiwan does not contradict the One China policy’,” the minister added.
The one-China principle is the Chinese Communist Party’s position that there is only one sovereign state under the name of China and that Taiwan is an integral part of it. Over two years ago, the Baltic state of Lithuania opened a Taiwan office in Vilnius and named it “Taiwan.” Beijing saw this as a provocation and imposed a de facto trade embargo on Lithuania. The newly created EU trade instrument against economic coercion is intended to counter such actions. ari
According to the German Mechanical Engineering Industry Association VDMA, almost half of German mechanical engineering companies are reconsidering their business activities in China. However, 42 percent of the companies surveyed plan to expand their activities in China, according to the association’s survey of 304 member companies in Germany and China.
VDMA sees that the main reasons for companies weighing up their options are more challenging local business conditions, increased geopolitical tensions and pressure on Chinese companies to favor domestic suppliers and products. “We are observing a significant increase in the competitiveness of local companies due to increased product quality and technology, but also increased industrial policy interventions by the state,” said Ulrich Ackermann, Head of the Foreign Trade Department at VDMA.
German companies are looking into increasing their focus on the US and Indian markets. Companies are also considering localizing their business more, i.e., limiting supply chains entirely to China – based on the principle of “in China, for China.” The strategy of supplying the global market from China, which was often considered in the past, is thus being abandoned, according to Ackermann.
China is currently Germany’s largest sales market outside Europe by far. flee/rtr
Media reports claim that Chinese EV giant BYD favors Hungary as the location for its first European car plant. The German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reports that an internal decision has been made to build a car plant in Hungary. The newspaper cites unnamed sources close to the company.
According to an official Chinese website, Hungarian Prime Minister Viktor Orbán recently visited the BYD headquarters in Shenzhen, China, where he met the company’s CEO, Wang Chuanfu. Orbán visited China in mid-October. He was one of the few European representatives to attend a summit there marking the tenth anniversary of the Chinese New Silk Road trade project.
BYD, contacted by Reuters, said that it was still looking for the right location and would make an announcement at the end of the year. The Hungarian government did not immediately respond to requests for comment. In recent media reports, BYD was also considered a possible interested party for the closing Ford plant in Saarlouis, Germany. rtr
The deficit-ridden Chinese EV manufacturer NIO will cut ten percent of jobs and reduce investments. Due to growing competition, the company must increase efficiency and reduce costs, NIO announced. “This is a tough but necessary decision against the fierce competition,” NIO wrote in an email to its employees, obtained by Reuters.
The layoffs are to be completed in November. NIO said it would also defer or cut long-term project investments that would not contribute to financial performance within three years.
EV demand has slowed in China as consumers prefer cheaper plug-in hybrids. Moreover, the price war instigated by Tesla is affecting car manufacturers in this highly competitive market.
NIO is among several Chinese car manufacturers already operating in Europe. According to insiders, NIO is considering expanding its European business through dealerships in order to boost sales. Most recently, NIO operated six branches in Germany, Norway, Sweden, Denmark and the Netherlands. flee/rtr
In Germany, surprisingly few people know about German colonial history in China, says Charlotte Ming. In her hometown of Qingdao in eastern China, things are quite different. From 1898 to 1919, the port city was a leased territory of the German Empire, the so-called colony of Kiautschou.
“People in Qingdao today have a rather rosy picture of this colonial history,” says Ming. For example, when it rains heavily, there are still regular rumors that the sewage system installed by the Germans makes the city practically immune to flooding. The German word for manhole cover – “Gullideckel” – (Gǔ lì gài – 古力盖) even found its way into the Qingdao dialect as a loan word. “But its effect is more than exaggerated,” laughs Ming.
Especially as the sewers only make up a small part of the sewage system of the nine-million-strong city and were primarily intended to serve the colonial rulers at the time. “Urban planning was strictly segregated,” explains Ming. “Racism towards the Chinese people was very pronounced.”
Nevertheless, the German heritage became a unique touristic feature for Qingdao, still defining the city’s identity for many residents today. Ming herself attended a school in Qingdao founded by the famous German sinologist and missionary Richard Wilhelm. “There was a statue of him on the campus. His old study room, where he translated Chinese classics, served as our music room. But I didn’t think much about it at the time.”
Ming left China at the age of 18 to study journalism at the renowned Columbia University in New York. She worked as a journalist in the United States for ten years, including for the photo departments of Time magazine and Getty Images.
In 2018, Ming came to Germany. In Berlin, she noticed that surprisingly few people knew the name of her hometown. As a freelance journalist, she began researching how present Germany’s colonial history actually is in China. “Germany is known for its culture of remembrance. However, little is mentioned about this part of history in school lessons. Many people don’t know, for example, that the Germans were involved in the Boxer War, which claimed tens of thousands of lives and led to extensive looting of Chinese cultural objects.”
In addition to numerous articles, Ming has recently collaborated with the “Bildungsnetzwerk China” (German Network for Education about China) on an audio walk in Berlin that sheds light on the history of some street names in Berlin’s Wedding district. There is the Kiautschou Strasse and the Pekinger Platz, named in 1905 as a direct reminder of the military occupation of Beijing by the Western powers under the leadership of a German field marshal.
The walk ends at the Robert Koch Institute, drawing a link to the present day. “Certain stereotypes from the colonial era have persisted to this day, which became clear in anti-Asian racism during the Coronavirus era, for example,” explains Ming. “That they have strange eating habits, are uneducated and unhygienic. These prejudices already existed back then in Qingdao.”
The project’s title is “Ěrinnern” – a play on words with the German word for remember and an Ěr 耳, the Chinese word for ear. She’s as much interested in the history as how people in Germany and China remember it, Ming says.
The US-educated journalist writes mainly in English, but has also written several articles in Chinese on the subject, for example, on the colonial street names in Berlin, which have been received with great interest, not least by Chinese living in Germany. “In China, people often say that the Germans deal with their history responsibly, in contrast to the Japanese, for example. And I also see this in connection with the Holocaust: not many world powers have achieved this degree of reflection on their own past. But I don’t think the culture of remembrance in Germany is complete if it doesn’t also make colonial history a topic.” Fabian Peltsch
Claus Soong has joined think tank Merics as analyst. Soong will focus on China’s foreign policy, particularly in the Indo-Pacific region and the Global South.
Andy Janz is the new Head of Commercial China at Dubai-based tourism provider HTS. He previously worked as Director of Marketing & Digital Commerce at Gebeco.
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