Table.Briefing: China

Interview Gabriel Felbermayr + Shopping app Temu

Dear reader,

Russia is persevering. The Western alliance has not managed to bring the aggressor to its knees by halting trade, despite its economy also being urgently dependent on spare parts and intermediate goods. Circumventing the sanctions is considered a big reason. But China, with its vast and diverse economy, sees itself as Russia’s trading partner and does not even consider joining the sanctions. Felix Lee spoke with economist Gabriel Felbermayr, who sees this as a critical reason for the West’s miscalculation.

Felbermayr generally considers it naïve to think that sanctions can bring about significant political changes. Nevertheless, he sees the punitive measures against Russia as an important signal. He says the leadership in Beijing is paying attention to whether the West is holding out despite losing prosperity. For Taiwan’s sake.

What we are seeing instead is an expedited division of the global economy. It is splitting into a Western sphere around the USA and a Chinese-dominated sphere, between which the exchange of high-tech products is becoming increasingly difficult. However, this does not stop trade in cheap goods.

Fabian Peltsch notes a new peak in the cheap shopping trend with the new platform Temu. It ships super-cheap goods straight from China. Superfluous junk, some say. But many young people see great bargains in the goods shipped from the Far East. They eagerly fill their shopping carts and give the new app a high turnover.

Your
Finn Mayer-Kuckuk
Image of Finn  Mayer-Kuckuk

Interview

‘China benefits most from Russia sanctions’

Gabriel Felbermayr zur Abkopplung Chinas
Gabriel Felbermayr is the Director of the Austrian Institute of Economic Research.

Mr. Felbermayr, have the Western sanctions against Russia failed?

No, they have not. However, something has happened that we could have expected: That they have little political impact and no devastating economic effect as long as the coalition of sanctioning countries is so small.

Russia’s economy is even growing. What good are sanctions when a player as big as China fills the voids left by the West?

It is not just China, but a number of countries that have stepped into the breach. Still, the costs for the Russian economy are high. The fact that Russia’s economy is growing slightly may also have to do with the high levels of activity necessary to sustain the war. The war industry is booming. Russia’s economy may be growing by half a percent now, but without war, it would probably have grown by three and a half percent. This means it has already lost three percentage points. This loss of growth is mainly attributable to the West’s sanctions. However, the idea that the West can trigger a dramatic recession has not panned out.

So a very clear misjudgment by the West.

Yes. We have underestimated how much Russia has prepared for these sanctions. We have had a sanctions regime against Russia since 2014. We then tightened it significantly in March 2022. However, Russia has already very successfully dealt with the first wave of sanctions by finding other suppliers and sales markets and realigning its domestic economy. The Kremlin knew that the West would react with further sanctions if Ukraine was invaded. The short-term shock for the Russian economy was lower because preparations were already underway, while in the West, only a small minority believed that war would happen.

Which side has probably suffered more economic damage then?

That can’t be answered clearly yet because the numbers are not all there yet. We have seen less damage in Russia. But that is also true for the West. After the war broke out a year ago, most economic research institutes had expected things to get turbulent for the German industry in 2022 and even a recession. That did not come to pass. We continued to purchase Russian gas until late summer. In addition, Russian oil continued to enter the global market and kept the international market price low accordingly. In general, when trade between two countries is interrupted, the economic costs are typically distributed roughly equally. In percentage of economic output, however, this means much greater damage for Russia than for the West. Russia has a much smaller per capita income.

China is obviously the big profiteer.

Yes, that is true. But so is the US. The Americans benefit from Europe’s exit from Russian gas and Europe’s entry into American liquefied gas. India has also significantly benefited because it has been able to buy oil at low prices that would otherwise have gone to Europe. The Turkish economy, in turn, has been able to profit similarly as a trans-shipment hub, as have Armenia and Kazakhstan. The list of profiteers goes well beyond China.

Who is benefiting the most?

In absolute terms, it is clearly China, the Chinese economy is vast, after all. In percentages, however, it is the Central Asian countries, because they are small economies and have particularly good conditions as transshipment points for evading sanctions. China can cheaply buy raw materials from Russia. That is an advantage, of course. But China would have to import raw materials anyway, so it is not an additional business. For the Central Asian countries, on the other hand, these are new business activities. On the export side, China also has no advantages because Russia, which is poorer because of the sanctions, buys fewer furniture, toys and shoes from China. So China does not benefit on the sales side.

Europe and the US also want to reduce trade with China as tensions rise. Can increased trade with Russia compensate for this for China?

No, because the Russian economy is too small for that. Russia accounts for 2.5 percent of global economic output. The West, on the other hand, accounts for almost half. Russia, which covers a large area, is also difficult for Chinese companies to access logistically due to its long transportation routes.

How can the West prevent sanctions from being circumvented via other countries?

There are already ways, so-called extraterritorial sanctions against countries that do not participate in the Western sanctions. This would make the sanctions more effective. But if Kazakhs, Armenians and Turks are also sanctioned, that means more costs for the West as well. So it’s always a very double-edged approach.

Is there a risk of a rift in the global economy? The West on the one side, Russia, China and all the states that do not participate in the Russia sanctions on the other?

Yes, we are talking about fragmentation. We no longer have a single global economy, but at least three. There are the states ostracized by the West – Russia, Iran, North Korea, and possibly China in the future. Then there is the bloc of economic heavyweights like India, Brazil and South Africa, which the West accuses of opportunistically thinking only of their own benefit. These states no longer want the West to tell them who they can and cannot trade with, but see themselves as their own centers of power. And then there is the so-called West.

Can a conclusion be drawn as to whether sanctions are generally right or wrong?

That sanctions lead to political changes in the sanctioned country is naïve in my view. Putin has probably factored in the costs of an attack on Ukraine and the consequences. But that does not mean that the sanctions are wrong. The West had to react and demonstrate its strength. The Russia sanctions are not only about Russia, but also about a united stance of the West towards China on the Taiwan issue. The leadership in Beijing is very closely observing whether the West can hold out, even if it means inflation and loss of livelihood. The fact that the Western coalition is holding together is, therefore, of high strategic value.

Gabriel Felbermayr (46) is the Director of the Austrian Institute of Economic Research and is, among other things, a member of the Scientific Advisory Board of the German Federal Ministry of Economic Affairs and Climate Action. Until September 2021, he was President of the Kiel Institute for the World Economy (IfW). Among other things, Felbermayer has conducted extensive studies on the effects of the sanctions regime against Russia and examines the dependencies of the German economy on China.

  • Geopolitics
  • Russland
  • Sanctions

Feature

Temu: Cheap shopping app with Chinese characteristics

Apple-like smartwatch for 18 Euros? Temu ships straight from China.

A humidifier in the shape of a smoke-spewing dragon for 1.61 euros? Donald Trump socks with glued-on ankle toupee for 2.48 euros? A cleaning brush specifically designed for Apple AirPods for 88 cents? On Temu, the app from the Chinese e-commerce provider Pinduoduo offers just about everything you’ll never need – but at prices that make you wonder if you should grab it after all.

The company launched in Germany last week with huge discounts and digital lucky wheels. The app offers users up to 90 percent off in the first few weeks. “Shop Like a Billionaire” is one of the slogans with which Temu now wants to conquer Europe. In other words: Money does not matter, at least not with the large volume of products offered here. In times of high inflation, that sounds tempting.

Cut-price attack on Europe

The app was also simultaneously launched in Germany, Italy, the Netherlands, France, Spain and the United Kingdom. Temu wants to compete with Amazon in Europe, or at least with its Chinese competitors Shein and Aliexpress, which also ship from China to EU countries.

Temu is owned by PDD Holdings, which operates one of China’s largest online retailers with the e-commerce platform Pinduoduo. The company generated a turnover of 17 billion euros and 4 billion euros in profit after tax in 2022. Temu, which resembles other Chinese e-commerce apps in design, does not consider itself a Chinese company, however, but a multinational one, with its headquarters previously registered in Singapore and Boston.

Just don’t be considered Chinese

As it was revealed this week, Temu has now moved its headquarters to Dublin, in tax-friendly Ireland. Another indication of the desire to expand into Western developed countries. And a sign that the company wants to avoid the criticism and complications that TikTok has had to bear as a subsidiary of a Chinese company as much as possible.

Temu has already become a surprise success in the US since its market launch in September 2022. The app has since consistently held the number one spot in the Google and Apple app store download rankings. The gross goods value of transactions processed via the platform climbed from 3 million US dollars in September to 387 million US dollars in March, according to the market research company YipitData. This was helped by Temu’s aggressive marketing strategy, which included two commercials during the half-time break of the Super Bowl – at a cost of around 14 million US dollars.

Shopping as a playful pastime

In terms of product range, Temu specializes in more and less useful everyday items and clothing. The target group is customers with small budgets, especially teenagers and young adults, who are used to shopping via apps and are particularly responsive to social media advertising such as TikTok.

In many ways, the app is designed like an entertainment platform: Gamification ranges from special offer countdowns to extra discounts for product reviews and group purchases. The goal is to keep the app user engaged by providing reward effects, even if they don’t plan to buy anything in particular.

Customer service is difficult to reach

Naturally, low costs remain the main ingredient of Temu’s formula for success. The platform argues that it only acts as a link between customer and vendor. The offers are placed directly by third-party companies; there are no costs for middlemen. The goods are usually shipped directly from China by the vendors – within an average duration of one week, according to the website. Algorithms are also said to play an important role in pricing because they supposedly coordinate supply and demand with unsold inventory in the best possible way. However, Temu does not specify exactly what this looks like and under what conditions the inventories are tapped.

However, the sophisticated algorithms and the absence of middlemen are likely to be only half the truth, as is the case with competitor Shein. The Chinese fashion and sporting goods online retailer has long been criticized for exploitative working conditions, counterfeit products, and poor environmental standards. Temu is currently facing criticism in the US for its poor customer service. Orders are reportedly lost repeatedly, and tracking down someone in charge is difficult. It is also usually impossible to trace where and under what circumstances the products on Temu are manufactured.

US agency voices security concerns

This is another reason why government authorities in the United States have stepped in. The US-China Economic and Security Review Commission (USCC), a government body established by Congress, released a report this month describing “challenges” in dealing with Chinese fast-fashion platforms. These include “exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor; and violations of intellectual property rights.”

The agency further expresses concern that companies with ties to China may share vast amounts of consumer data without authorization. An investigative report by CNN already suggests that Temu’s Chinese sister Pinduoduo is using malware to bypass users’ mobile security measures to analyze their usage patterns, access private messages, change system settings and make it harder to uninstall the app.

News

Shanghai Organisation criticizes Western ‘hegemonism’

Foreign ministers of the Shanghai Cooperation Organisation (SCO) member states criticized Western-dominated global institutions at their meeting in Goa, India. The world is facing many crises and a resurgence of the Cold War mentality, as well as unilateral protectionism and increasing hegemonism, said Chinese Foreign Minister Qin Gang. SCO members should support each other in protecting sovereignty, security and development interests, as the Chinese news agency Xinhua quoted him.

The Indian Foreign Minister, Subhrahmanyam Jaishankar, echoed the criticism of his Chinese counterpart. Crises such as the Covid pandemic and geopolitical upheavals have undermined the credibility of institutions and exposed deficiencies in addressing challenges, he said. The minister cited disrupted supply chains, especially in the energy, food and fertilizer sectors. This development particularly affects poor countries, he said. “With more than 40 percent of the world’s population within the SCO, our collective decisions will surely have a global impact,” Jaishankar said.

The China- and Russia-dominated Shanghai Cooperation Organisation sees itself as a counterweight to the USA and NATO. Its members also include Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, as well as Pakistan. Saudi Arabia joined the SCO in March. And Iran is to follow later this year. flee

Only China continues to accept construction applications for coal-fired power plants

China could soon be the last major economy to grant building permits for new coal-fired power plants. So far, India is among this group. But New Delhi plans to stop the construction of new coal-fired power plants and wants to remove a key clause to this effect from its National Electricity Policy (NEP). Construction will only continue on power plants that are already underway.

Once India implements the plan, China will be the only country to officially remain open to new applications for the construction of such power plants. In 2022, Beijing approved two new coal-fired power plants every week, four times as many as in 2021, according to a study by the Center for Energy Research and Clean Air (CREA) in Helsinki. A 2022 Energy Policy document by the Development and Reform Commission NDRC states that China will continue to build “advanced coal-fired power plants based on development needs.” On the other hand, India’s current draft NEP does not envisage any power plants beyond existing projects.

According to the International Energy Agency (IEA), China is one of the countries where entire regions depend entirely on coal mining – for example, the province of Shanxi. This makes the coal phase-out particularly difficult. To fuel its power plants, China is importing more and more coal in the meantime. According to the CREA, coal imports in the People’s Republic in the first quarter were twice as high as in the same period last year. This increase directly contradicts the claim “that relying on coal will provide energy security,” comments CREA analyst Lauri Myllyvirta.

Jennifer Morgan, Germany’s State Secretary and Special Envoy for International Climate Action at the Federal Foreign Office, recently called on China to show more climate ambition in a Bloomberg interview. Beijing is increasingly treated as an important partner in international talks, Morgan said. But it must do more to meet its climate protection commitments, she added. China aims to become carbon-neutral by 2060 and is adding more wind power and photovoltaic capacity than any other country in the world. Beijing, however, remains reluctant to make international commitments. ck

  • Climate protection
  • Kohlekraft
  • Sustainability

German minister urges caution when using TikTok

German Education Minister Bettina Stark-Watzinger (FDP) urges caution when using the smartphone app TikTok. “I don’t use the Chinese video app TikTok, for example,” she told the news portal T-Online. While she understands the appeal, she is not active there. “In other countries, control takes place via such apps, which is not legally permitted here for good reasons.”

A debate about banning the short-video app has been raging in the United States for some time, with critics accusing the Chinese owner ByteDance of trying to influence its users. Numerous European governments have also banned their civil servants from using the app on their staff phones.

Stark-Watzinger also called on Germany’s universities to evaluate their cooperation with China and minimize potential risks. Particularly in the case of some future technologies such as artificial intelligence, the minister pleaded for caution. “We have to be careful with technologies that are used for military purposes or can also be used against our values. Like in the area of artificial intelligence.” This technology could be used to control the population, she said. “We must not be naïve about China, and we must be extremely careful,” Stark-Watzinger said. flee

  • Science

Warren Buffett calls for more free trade

Major American investor Warren Buffett commented on China at a shareholders’ meeting on Sunday. The 93-year-old advocated open trade relations. The USA, in particular, should act prudently, saying there was a lot at stake for the world.

Buffett’s 99-year-old business partner Charlie Munger also criticized that anything that would heighten tensions between these two countries is “stupid, stupid, stupid.” Both sides should respond with “reciprocal kindness.” The two investors agreed that there should be more free trade with China. fin

  • Finance
  • Trade

Audi wants to avoid price battle

Audi intends to stay out of the price war in the industry. CFO Juergen Rittersberger said Friday at the presentation of the company’s first-quarter figures that no price cuts are currently planned. “We are pursuing a sustainable price strategy, we owe that to the customers.” He said that a price war would also have a massive impact on residual values. “We will not participate in price competition.”

A price war for electric cars has flared up, especially in China. EV manufacturer Tesla has recently repeatedly lowered its car prices. However, prices for new and used cars have risen consistently in recent years due to lower vehicle production. On Thursday, BMW predicted that vehicle prices would normalize: with improved chip supply, the availability of vehicles could be expected to improve, leading to more competition.

Audi plans to significantly increase its EV share by the end of the year. Rittersberger stated that he expects a double-digit share of total sales. At present, 8.2 percent of Audi vehicles have only an electric motor. The German company has announced plans to launch its last combustion engine model in 2026. Audi has announced a model initiative for the end of the year that will see the launch of more than ten new all-electric vehicles. rtr

  • Audi
  • Autoindustrie

Opinion

About the provenance research into the ‘Boxer War’

By Renata Fu-sheng Franke
Dr. Renata Franke
Renata Fu-sheng Franke is an educationalist and sinologist. Her grandfather Otto Franke is considered the founder of German sinology.

“Taken” was the name of the workshop on “Research into the Provenance of Museum Objects from the ‘Boxer War’” held at the Humboldt Forum in early March. It was a public event at the halfway point of the joint German museums’ project funded by the German Lost Art Foundation.

It became apparent during the lectures that not only a collection of objects brought to Germany by members of the dispatched German expeditionary corps has to be counted as war loot. A general suspicion also fell on acquisitions made by diplomats, missionaries, and art dealers who were in China at the time. The almost overwhelming suspicion raised at the workshop made me worry that perhaps some of my family’s older objects and book collections could also be traced back to loot from the ‘Boxer’ war, possibly also looted during the previous two opium wars. Some valuable objects from this estate went to the Asian Museum and the Berlin State Library.

It can be proved that our family collection was acquired by Chinese merchants or originated from my Chinese mother’s family. Because art and antiquities trading was and is an old practice in China, with objects not only passing through one hand but through several hands over long periods. Given this circumstance, it is hardly possible to determine whether individual objects might be stolen well over a hundred years later. Investigating this will likely involve considerable effort for most objects without certainty that a definite result will be achieved. But even if the origin of individual objects is clearly recognized as valuable ‘Boxerloot’ from the Imperial Palace, their theft must be differentiated and evaluated against the political and cultural-historical background of East-West relations at the time.

China was not colonized

The en vogue debate about the past activities of German colonialism and questions of restitution challenges us to take a position, especially since China was never – like some of the African countries – a colony at the mercy of ruthless exploitation by the Western powers. The Chinese have lost neither their entire cultural heritage nor their identity as a result of the war defeats. Also, any implicit equation with the direct or indirect looting of Jewish property by the National Socialists is entirely inappropriate. Germany lost its leased Chinese territory of Jiaozhou after the First World War and, during the Boxer War, had to return the Armillary Sphere to China, which had been stolen from Beijing and temporarily placed in front of the New Palace in Sanssouci – and possibly other objects as well.

This astronomical instrument was constructed in 1744 by German Jesuit missionaries who served the Chinese imperial family. It is worth noting that the Jesuits’ reports of a well-structured country under the first Manchu emperors caused great resonance in Europe at the time. Among the admirers was the polymath Leibniz, who corresponded with the Jesuits in China and spread their news.

In the 19th century, this appreciation of China was, with few exceptions, completely forgotten. Controversial world views and mindsets between East and West clashed instead, leading to assaults that culminated in the two ‘Opium Wars’ and the ‘Boxer’ War.

But only a fraction of the international community’s activities in China consisted of these violent conflicts, from which the Western powers emerged victorious due to their superior weaponry. In addition to mutually profitable trade relations, a cultural exchange began, as my grandfather, the doyen of German sinology, Prof. Dr. Otto Franke (1863-1946), described it.

Vibrant post-war cultural exchange

Among other things, Otto Franke notes a particular impact of the ‘Boxer’ War: As a result of the direct encounter, the previously crushing perception of China in Germany began to change.

The products of art and handicrafts aroused great enthusiasm everywhere, and the friendly manners of the broad masses of the people quickly brought about a rapprochement with the German soldiers. … After the experiences of 1900 to 1901, the circle of those in Germany who took a greater interest in Chinese culture had widened considerably. China clubs and societies for East Asian art were founded; in short, a more serious interest in East Asian, and especially Chinese intellectual life began to flourish in Germany. … In addition, in China too, the experience of the events at the turn of the century gave a strong uplift to the realization of the unsustainability of the outdated conditions in state and society.

Otto Franke

Therefore, museum provenance research should not be limited to ‘looted art’ alone. The effort required to examine a propagated moral injustice of our ancestors that is inaccurately associated with the colonial exploitation of China is not only absurd but ultimately unproductive.

Research should generally shed light on the origin of museum objects and their social contexts. In addition to purely art-historical characteristics, their meaning, use, and benefit, i.e., the cultural and everyday context, should be made more visible in exhibition methods. Instead of a false sense of self-accused guilt and a premature eagerness for restitution, which the Chinese have not asked for at all, this would far more benefit a positive cultural mediation and international understanding.

Renata Fu-sheng Franke, born in 1946, is an educationalist and sinologist who taught at Freie Universität and Universität der Künste in Berlin from 1992 to 2006. Her father, Wolfgang Franke, was employed at the German Institute in Beijing and Chinese universities from 1937 to 1950. From 1950 to 1977, Wolfgang Franke was a professor of sinology in Hamburg. Grandfather Otto Franke was an imperial interpreter in China from 1988 to 1901 and is considered one of the founders of German Sinology.

Executive Moves

Gero Greiner has been Chief Engineer AD Software Development at BMW China in Shanghai since April. He was previously Product Owner in Environment Model for Autonomous Driving, also for BMW in Munich.

Henning Janzen joined the Industrial and Commercial Bank of China in Frankfurt as a Junior AML Analyst earlier this month.

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

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    Russia is persevering. The Western alliance has not managed to bring the aggressor to its knees by halting trade, despite its economy also being urgently dependent on spare parts and intermediate goods. Circumventing the sanctions is considered a big reason. But China, with its vast and diverse economy, sees itself as Russia’s trading partner and does not even consider joining the sanctions. Felix Lee spoke with economist Gabriel Felbermayr, who sees this as a critical reason for the West’s miscalculation.

    Felbermayr generally considers it naïve to think that sanctions can bring about significant political changes. Nevertheless, he sees the punitive measures against Russia as an important signal. He says the leadership in Beijing is paying attention to whether the West is holding out despite losing prosperity. For Taiwan’s sake.

    What we are seeing instead is an expedited division of the global economy. It is splitting into a Western sphere around the USA and a Chinese-dominated sphere, between which the exchange of high-tech products is becoming increasingly difficult. However, this does not stop trade in cheap goods.

    Fabian Peltsch notes a new peak in the cheap shopping trend with the new platform Temu. It ships super-cheap goods straight from China. Superfluous junk, some say. But many young people see great bargains in the goods shipped from the Far East. They eagerly fill their shopping carts and give the new app a high turnover.

    Your
    Finn Mayer-Kuckuk
    Image of Finn  Mayer-Kuckuk

    Interview

    ‘China benefits most from Russia sanctions’

    Gabriel Felbermayr zur Abkopplung Chinas
    Gabriel Felbermayr is the Director of the Austrian Institute of Economic Research.

    Mr. Felbermayr, have the Western sanctions against Russia failed?

    No, they have not. However, something has happened that we could have expected: That they have little political impact and no devastating economic effect as long as the coalition of sanctioning countries is so small.

    Russia’s economy is even growing. What good are sanctions when a player as big as China fills the voids left by the West?

    It is not just China, but a number of countries that have stepped into the breach. Still, the costs for the Russian economy are high. The fact that Russia’s economy is growing slightly may also have to do with the high levels of activity necessary to sustain the war. The war industry is booming. Russia’s economy may be growing by half a percent now, but without war, it would probably have grown by three and a half percent. This means it has already lost three percentage points. This loss of growth is mainly attributable to the West’s sanctions. However, the idea that the West can trigger a dramatic recession has not panned out.

    So a very clear misjudgment by the West.

    Yes. We have underestimated how much Russia has prepared for these sanctions. We have had a sanctions regime against Russia since 2014. We then tightened it significantly in March 2022. However, Russia has already very successfully dealt with the first wave of sanctions by finding other suppliers and sales markets and realigning its domestic economy. The Kremlin knew that the West would react with further sanctions if Ukraine was invaded. The short-term shock for the Russian economy was lower because preparations were already underway, while in the West, only a small minority believed that war would happen.

    Which side has probably suffered more economic damage then?

    That can’t be answered clearly yet because the numbers are not all there yet. We have seen less damage in Russia. But that is also true for the West. After the war broke out a year ago, most economic research institutes had expected things to get turbulent for the German industry in 2022 and even a recession. That did not come to pass. We continued to purchase Russian gas until late summer. In addition, Russian oil continued to enter the global market and kept the international market price low accordingly. In general, when trade between two countries is interrupted, the economic costs are typically distributed roughly equally. In percentage of economic output, however, this means much greater damage for Russia than for the West. Russia has a much smaller per capita income.

    China is obviously the big profiteer.

    Yes, that is true. But so is the US. The Americans benefit from Europe’s exit from Russian gas and Europe’s entry into American liquefied gas. India has also significantly benefited because it has been able to buy oil at low prices that would otherwise have gone to Europe. The Turkish economy, in turn, has been able to profit similarly as a trans-shipment hub, as have Armenia and Kazakhstan. The list of profiteers goes well beyond China.

    Who is benefiting the most?

    In absolute terms, it is clearly China, the Chinese economy is vast, after all. In percentages, however, it is the Central Asian countries, because they are small economies and have particularly good conditions as transshipment points for evading sanctions. China can cheaply buy raw materials from Russia. That is an advantage, of course. But China would have to import raw materials anyway, so it is not an additional business. For the Central Asian countries, on the other hand, these are new business activities. On the export side, China also has no advantages because Russia, which is poorer because of the sanctions, buys fewer furniture, toys and shoes from China. So China does not benefit on the sales side.

    Europe and the US also want to reduce trade with China as tensions rise. Can increased trade with Russia compensate for this for China?

    No, because the Russian economy is too small for that. Russia accounts for 2.5 percent of global economic output. The West, on the other hand, accounts for almost half. Russia, which covers a large area, is also difficult for Chinese companies to access logistically due to its long transportation routes.

    How can the West prevent sanctions from being circumvented via other countries?

    There are already ways, so-called extraterritorial sanctions against countries that do not participate in the Western sanctions. This would make the sanctions more effective. But if Kazakhs, Armenians and Turks are also sanctioned, that means more costs for the West as well. So it’s always a very double-edged approach.

    Is there a risk of a rift in the global economy? The West on the one side, Russia, China and all the states that do not participate in the Russia sanctions on the other?

    Yes, we are talking about fragmentation. We no longer have a single global economy, but at least three. There are the states ostracized by the West – Russia, Iran, North Korea, and possibly China in the future. Then there is the bloc of economic heavyweights like India, Brazil and South Africa, which the West accuses of opportunistically thinking only of their own benefit. These states no longer want the West to tell them who they can and cannot trade with, but see themselves as their own centers of power. And then there is the so-called West.

    Can a conclusion be drawn as to whether sanctions are generally right or wrong?

    That sanctions lead to political changes in the sanctioned country is naïve in my view. Putin has probably factored in the costs of an attack on Ukraine and the consequences. But that does not mean that the sanctions are wrong. The West had to react and demonstrate its strength. The Russia sanctions are not only about Russia, but also about a united stance of the West towards China on the Taiwan issue. The leadership in Beijing is very closely observing whether the West can hold out, even if it means inflation and loss of livelihood. The fact that the Western coalition is holding together is, therefore, of high strategic value.

    Gabriel Felbermayr (46) is the Director of the Austrian Institute of Economic Research and is, among other things, a member of the Scientific Advisory Board of the German Federal Ministry of Economic Affairs and Climate Action. Until September 2021, he was President of the Kiel Institute for the World Economy (IfW). Among other things, Felbermayer has conducted extensive studies on the effects of the sanctions regime against Russia and examines the dependencies of the German economy on China.

    • Geopolitics
    • Russland
    • Sanctions

    Feature

    Temu: Cheap shopping app with Chinese characteristics

    Apple-like smartwatch for 18 Euros? Temu ships straight from China.

    A humidifier in the shape of a smoke-spewing dragon for 1.61 euros? Donald Trump socks with glued-on ankle toupee for 2.48 euros? A cleaning brush specifically designed for Apple AirPods for 88 cents? On Temu, the app from the Chinese e-commerce provider Pinduoduo offers just about everything you’ll never need – but at prices that make you wonder if you should grab it after all.

    The company launched in Germany last week with huge discounts and digital lucky wheels. The app offers users up to 90 percent off in the first few weeks. “Shop Like a Billionaire” is one of the slogans with which Temu now wants to conquer Europe. In other words: Money does not matter, at least not with the large volume of products offered here. In times of high inflation, that sounds tempting.

    Cut-price attack on Europe

    The app was also simultaneously launched in Germany, Italy, the Netherlands, France, Spain and the United Kingdom. Temu wants to compete with Amazon in Europe, or at least with its Chinese competitors Shein and Aliexpress, which also ship from China to EU countries.

    Temu is owned by PDD Holdings, which operates one of China’s largest online retailers with the e-commerce platform Pinduoduo. The company generated a turnover of 17 billion euros and 4 billion euros in profit after tax in 2022. Temu, which resembles other Chinese e-commerce apps in design, does not consider itself a Chinese company, however, but a multinational one, with its headquarters previously registered in Singapore and Boston.

    Just don’t be considered Chinese

    As it was revealed this week, Temu has now moved its headquarters to Dublin, in tax-friendly Ireland. Another indication of the desire to expand into Western developed countries. And a sign that the company wants to avoid the criticism and complications that TikTok has had to bear as a subsidiary of a Chinese company as much as possible.

    Temu has already become a surprise success in the US since its market launch in September 2022. The app has since consistently held the number one spot in the Google and Apple app store download rankings. The gross goods value of transactions processed via the platform climbed from 3 million US dollars in September to 387 million US dollars in March, according to the market research company YipitData. This was helped by Temu’s aggressive marketing strategy, which included two commercials during the half-time break of the Super Bowl – at a cost of around 14 million US dollars.

    Shopping as a playful pastime

    In terms of product range, Temu specializes in more and less useful everyday items and clothing. The target group is customers with small budgets, especially teenagers and young adults, who are used to shopping via apps and are particularly responsive to social media advertising such as TikTok.

    In many ways, the app is designed like an entertainment platform: Gamification ranges from special offer countdowns to extra discounts for product reviews and group purchases. The goal is to keep the app user engaged by providing reward effects, even if they don’t plan to buy anything in particular.

    Customer service is difficult to reach

    Naturally, low costs remain the main ingredient of Temu’s formula for success. The platform argues that it only acts as a link between customer and vendor. The offers are placed directly by third-party companies; there are no costs for middlemen. The goods are usually shipped directly from China by the vendors – within an average duration of one week, according to the website. Algorithms are also said to play an important role in pricing because they supposedly coordinate supply and demand with unsold inventory in the best possible way. However, Temu does not specify exactly what this looks like and under what conditions the inventories are tapped.

    However, the sophisticated algorithms and the absence of middlemen are likely to be only half the truth, as is the case with competitor Shein. The Chinese fashion and sporting goods online retailer has long been criticized for exploitative working conditions, counterfeit products, and poor environmental standards. Temu is currently facing criticism in the US for its poor customer service. Orders are reportedly lost repeatedly, and tracking down someone in charge is difficult. It is also usually impossible to trace where and under what circumstances the products on Temu are manufactured.

    US agency voices security concerns

    This is another reason why government authorities in the United States have stepped in. The US-China Economic and Security Review Commission (USCC), a government body established by Congress, released a report this month describing “challenges” in dealing with Chinese fast-fashion platforms. These include “exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor; and violations of intellectual property rights.”

    The agency further expresses concern that companies with ties to China may share vast amounts of consumer data without authorization. An investigative report by CNN already suggests that Temu’s Chinese sister Pinduoduo is using malware to bypass users’ mobile security measures to analyze their usage patterns, access private messages, change system settings and make it harder to uninstall the app.

    News

    Shanghai Organisation criticizes Western ‘hegemonism’

    Foreign ministers of the Shanghai Cooperation Organisation (SCO) member states criticized Western-dominated global institutions at their meeting in Goa, India. The world is facing many crises and a resurgence of the Cold War mentality, as well as unilateral protectionism and increasing hegemonism, said Chinese Foreign Minister Qin Gang. SCO members should support each other in protecting sovereignty, security and development interests, as the Chinese news agency Xinhua quoted him.

    The Indian Foreign Minister, Subhrahmanyam Jaishankar, echoed the criticism of his Chinese counterpart. Crises such as the Covid pandemic and geopolitical upheavals have undermined the credibility of institutions and exposed deficiencies in addressing challenges, he said. The minister cited disrupted supply chains, especially in the energy, food and fertilizer sectors. This development particularly affects poor countries, he said. “With more than 40 percent of the world’s population within the SCO, our collective decisions will surely have a global impact,” Jaishankar said.

    The China- and Russia-dominated Shanghai Cooperation Organisation sees itself as a counterweight to the USA and NATO. Its members also include Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, as well as Pakistan. Saudi Arabia joined the SCO in March. And Iran is to follow later this year. flee

    Only China continues to accept construction applications for coal-fired power plants

    China could soon be the last major economy to grant building permits for new coal-fired power plants. So far, India is among this group. But New Delhi plans to stop the construction of new coal-fired power plants and wants to remove a key clause to this effect from its National Electricity Policy (NEP). Construction will only continue on power plants that are already underway.

    Once India implements the plan, China will be the only country to officially remain open to new applications for the construction of such power plants. In 2022, Beijing approved two new coal-fired power plants every week, four times as many as in 2021, according to a study by the Center for Energy Research and Clean Air (CREA) in Helsinki. A 2022 Energy Policy document by the Development and Reform Commission NDRC states that China will continue to build “advanced coal-fired power plants based on development needs.” On the other hand, India’s current draft NEP does not envisage any power plants beyond existing projects.

    According to the International Energy Agency (IEA), China is one of the countries where entire regions depend entirely on coal mining – for example, the province of Shanxi. This makes the coal phase-out particularly difficult. To fuel its power plants, China is importing more and more coal in the meantime. According to the CREA, coal imports in the People’s Republic in the first quarter were twice as high as in the same period last year. This increase directly contradicts the claim “that relying on coal will provide energy security,” comments CREA analyst Lauri Myllyvirta.

    Jennifer Morgan, Germany’s State Secretary and Special Envoy for International Climate Action at the Federal Foreign Office, recently called on China to show more climate ambition in a Bloomberg interview. Beijing is increasingly treated as an important partner in international talks, Morgan said. But it must do more to meet its climate protection commitments, she added. China aims to become carbon-neutral by 2060 and is adding more wind power and photovoltaic capacity than any other country in the world. Beijing, however, remains reluctant to make international commitments. ck

    • Climate protection
    • Kohlekraft
    • Sustainability

    German minister urges caution when using TikTok

    German Education Minister Bettina Stark-Watzinger (FDP) urges caution when using the smartphone app TikTok. “I don’t use the Chinese video app TikTok, for example,” she told the news portal T-Online. While she understands the appeal, she is not active there. “In other countries, control takes place via such apps, which is not legally permitted here for good reasons.”

    A debate about banning the short-video app has been raging in the United States for some time, with critics accusing the Chinese owner ByteDance of trying to influence its users. Numerous European governments have also banned their civil servants from using the app on their staff phones.

    Stark-Watzinger also called on Germany’s universities to evaluate their cooperation with China and minimize potential risks. Particularly in the case of some future technologies such as artificial intelligence, the minister pleaded for caution. “We have to be careful with technologies that are used for military purposes or can also be used against our values. Like in the area of artificial intelligence.” This technology could be used to control the population, she said. “We must not be naïve about China, and we must be extremely careful,” Stark-Watzinger said. flee

    • Science

    Warren Buffett calls for more free trade

    Major American investor Warren Buffett commented on China at a shareholders’ meeting on Sunday. The 93-year-old advocated open trade relations. The USA, in particular, should act prudently, saying there was a lot at stake for the world.

    Buffett’s 99-year-old business partner Charlie Munger also criticized that anything that would heighten tensions between these two countries is “stupid, stupid, stupid.” Both sides should respond with “reciprocal kindness.” The two investors agreed that there should be more free trade with China. fin

    • Finance
    • Trade

    Audi wants to avoid price battle

    Audi intends to stay out of the price war in the industry. CFO Juergen Rittersberger said Friday at the presentation of the company’s first-quarter figures that no price cuts are currently planned. “We are pursuing a sustainable price strategy, we owe that to the customers.” He said that a price war would also have a massive impact on residual values. “We will not participate in price competition.”

    A price war for electric cars has flared up, especially in China. EV manufacturer Tesla has recently repeatedly lowered its car prices. However, prices for new and used cars have risen consistently in recent years due to lower vehicle production. On Thursday, BMW predicted that vehicle prices would normalize: with improved chip supply, the availability of vehicles could be expected to improve, leading to more competition.

    Audi plans to significantly increase its EV share by the end of the year. Rittersberger stated that he expects a double-digit share of total sales. At present, 8.2 percent of Audi vehicles have only an electric motor. The German company has announced plans to launch its last combustion engine model in 2026. Audi has announced a model initiative for the end of the year that will see the launch of more than ten new all-electric vehicles. rtr

    • Audi
    • Autoindustrie

    Opinion

    About the provenance research into the ‘Boxer War’

    By Renata Fu-sheng Franke
    Dr. Renata Franke
    Renata Fu-sheng Franke is an educationalist and sinologist. Her grandfather Otto Franke is considered the founder of German sinology.

    “Taken” was the name of the workshop on “Research into the Provenance of Museum Objects from the ‘Boxer War’” held at the Humboldt Forum in early March. It was a public event at the halfway point of the joint German museums’ project funded by the German Lost Art Foundation.

    It became apparent during the lectures that not only a collection of objects brought to Germany by members of the dispatched German expeditionary corps has to be counted as war loot. A general suspicion also fell on acquisitions made by diplomats, missionaries, and art dealers who were in China at the time. The almost overwhelming suspicion raised at the workshop made me worry that perhaps some of my family’s older objects and book collections could also be traced back to loot from the ‘Boxer’ war, possibly also looted during the previous two opium wars. Some valuable objects from this estate went to the Asian Museum and the Berlin State Library.

    It can be proved that our family collection was acquired by Chinese merchants or originated from my Chinese mother’s family. Because art and antiquities trading was and is an old practice in China, with objects not only passing through one hand but through several hands over long periods. Given this circumstance, it is hardly possible to determine whether individual objects might be stolen well over a hundred years later. Investigating this will likely involve considerable effort for most objects without certainty that a definite result will be achieved. But even if the origin of individual objects is clearly recognized as valuable ‘Boxerloot’ from the Imperial Palace, their theft must be differentiated and evaluated against the political and cultural-historical background of East-West relations at the time.

    China was not colonized

    The en vogue debate about the past activities of German colonialism and questions of restitution challenges us to take a position, especially since China was never – like some of the African countries – a colony at the mercy of ruthless exploitation by the Western powers. The Chinese have lost neither their entire cultural heritage nor their identity as a result of the war defeats. Also, any implicit equation with the direct or indirect looting of Jewish property by the National Socialists is entirely inappropriate. Germany lost its leased Chinese territory of Jiaozhou after the First World War and, during the Boxer War, had to return the Armillary Sphere to China, which had been stolen from Beijing and temporarily placed in front of the New Palace in Sanssouci – and possibly other objects as well.

    This astronomical instrument was constructed in 1744 by German Jesuit missionaries who served the Chinese imperial family. It is worth noting that the Jesuits’ reports of a well-structured country under the first Manchu emperors caused great resonance in Europe at the time. Among the admirers was the polymath Leibniz, who corresponded with the Jesuits in China and spread their news.

    In the 19th century, this appreciation of China was, with few exceptions, completely forgotten. Controversial world views and mindsets between East and West clashed instead, leading to assaults that culminated in the two ‘Opium Wars’ and the ‘Boxer’ War.

    But only a fraction of the international community’s activities in China consisted of these violent conflicts, from which the Western powers emerged victorious due to their superior weaponry. In addition to mutually profitable trade relations, a cultural exchange began, as my grandfather, the doyen of German sinology, Prof. Dr. Otto Franke (1863-1946), described it.

    Vibrant post-war cultural exchange

    Among other things, Otto Franke notes a particular impact of the ‘Boxer’ War: As a result of the direct encounter, the previously crushing perception of China in Germany began to change.

    The products of art and handicrafts aroused great enthusiasm everywhere, and the friendly manners of the broad masses of the people quickly brought about a rapprochement with the German soldiers. … After the experiences of 1900 to 1901, the circle of those in Germany who took a greater interest in Chinese culture had widened considerably. China clubs and societies for East Asian art were founded; in short, a more serious interest in East Asian, and especially Chinese intellectual life began to flourish in Germany. … In addition, in China too, the experience of the events at the turn of the century gave a strong uplift to the realization of the unsustainability of the outdated conditions in state and society.

    Otto Franke

    Therefore, museum provenance research should not be limited to ‘looted art’ alone. The effort required to examine a propagated moral injustice of our ancestors that is inaccurately associated with the colonial exploitation of China is not only absurd but ultimately unproductive.

    Research should generally shed light on the origin of museum objects and their social contexts. In addition to purely art-historical characteristics, their meaning, use, and benefit, i.e., the cultural and everyday context, should be made more visible in exhibition methods. Instead of a false sense of self-accused guilt and a premature eagerness for restitution, which the Chinese have not asked for at all, this would far more benefit a positive cultural mediation and international understanding.

    Renata Fu-sheng Franke, born in 1946, is an educationalist and sinologist who taught at Freie Universität and Universität der Künste in Berlin from 1992 to 2006. Her father, Wolfgang Franke, was employed at the German Institute in Beijing and Chinese universities from 1937 to 1950. From 1950 to 1977, Wolfgang Franke was a professor of sinology in Hamburg. Grandfather Otto Franke was an imperial interpreter in China from 1988 to 1901 and is considered one of the founders of German Sinology.

    Executive Moves

    Gero Greiner has been Chief Engineer AD Software Development at BMW China in Shanghai since April. He was previously Product Owner in Environment Model for Autonomous Driving, also for BMW in Munich.

    Henning Janzen joined the Industrial and Commercial Bank of China in Frankfurt as a Junior AML Analyst earlier this month.

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

    China.Table editorial office

    CHINA.TABLE EDITORIAL OFFICE

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