What benefits Germany more: Publicly lecturing a country like China – or pursuing its own interests in the smartest possible way without outright upsetting the other side? In an interview with China.Table, Nicole Hoffmeister-Kraut, Minister of Economic Affairs of the German state of Baden-Wurttemberg, criticizes Foreign Minister Annalena Baerbock’s value-oriented foreign policy for lacking direction. She would also like to see more economic policy represented in foreign relations.
In contrast, Hoffmeister-Kraut supports her party colleague Ursula von der Leyen: Despite criticism from the industry, she considers an investigation into EV dumping prices the right thing to do. At the same time, a politically motivated trade conflict with China strikes her as a horror scenario. No wonder, considering that she is the minister for economic affairs of a country of China’s exporters.
The debate about interference in parliaments by Chinese secret services has reached Germany. Following the arrest of MPs’ staff on suspicion of espionage in the UK, attention is now turning to a German member of the EU Parliament. Maximilian Krah of the right-wing German AfD party seems to be deeply implicated, reports Marcel Grzanna. Espionage experts warn: Such cooperation with the United Front often starts with a seemingly harmless cooperation proposal.
You are the Minister of Economic Affairs in a very strong automotive region. What do you think of the EU’s plan to consider protective tariffs on Chinese EV dumping prices?
The issue is that subsidies have flowed into a certain industry, leading to a distortion of competition. The result is that their products could be offered cheaper on the world market. At least that is the assumption. We will have to wait and see whether this assumption is confirmed.
What is your assumption?
We have known for a long time that there is no level playing field in competition with China, that China gives advantages to its own companies. We now have to wait and see the results of this analysis. Ursula von der Leyen is a smart woman who knows what she is doing.
The industry fears retaliation from China. For its part, Beijing can impose trade sanctions against the EU, which would then affect our car industry.
It stands to reason that China would react with its own trade measures. If this resulted in a trade conflict, that would, of course, be fatal. We cannot engage in a trade war with China, neither Germany nor the European Union.
What would such a trade conflict mean for your federal state?
China is a vital trading partner for Baden-Wurttemberg companies, as it is for all of Germany. We still have the United States as our largest export market, but China comes in a close second; in terms of imports, it is even in first place. Over the years, an international division of labor has developed in which China plays a decisive role. Certain dependencies have also emerged in the process.
So, we can’t afford an open confrontation?
It is always difficult for us when trade barriers are erected. It’s like a boomerang. We would also immediately feel the effects. A trade conflict like the one between the US and China would shatter important structures and probably massively weaken our export-oriented economy in large parts.
China’s car manufacturers have developed a remarkably strong technical capability. Is the new competition causing concern in Germany’s southwest?
The whole thing should be seen ambivalently. The strong connection to China can also be seen as an advantage. Baden-Wurttemberg’s supplier industry is integrated into the Chinese networks and thus continues to play a leading role.
Nevertheless, how do you think China has suddenly become the master in some areas and Germany the student?
China is forced to maintain growth for the sake of political and social stability, and this includes a strategy of rapid technological advancement. They have achieved this successfully in the automotive sector, especially in electromobility. Despite the mix of state and private capital, China has allowed the necessary entrepreneurial spirit. One example is BYD, a company I informed myself about on site. A medium-sized battery manufacturer has grown into a corporation with global market ambitions. With state support, of course.
But China has become increasingly dominant, and the risks are increasing.
The order of the day is indeed de-risking. But this does not only apply to China. We need to reduce unilateral dependencies globally. And, of course, we must be vigilant and clearly demand equal rules for all. Economic relations should be a give-and-take. De-risking only works by diversifying our trade relations. The EU Commission is mainly tasked here to step up the pace when it comes to signing trade agreements – for example, in the protracted negotiations with the Mercosur states.
According to industry representatives, the condescending behavior of the government in Berlin also contributes to the bad sentiment toward several countries. Is Germany’s value-oriented foreign policy effective?
I firmly believe that we will not get far with lecturing in foreign policy. That leads to anger in those countries. Foreign trade informs me that this will gradually lead to Germany’s isolation. Many countries with which we maintain economic relations hold different values, have different systems, and a different culture. They may also be in a completely different phase of development. India still has slums and shocking poverty. But who are we, as an economy with a high standard of living, to believe that we can lecture India? And that’s why I fundamentally dislike this approach.
Standing up for human rights has always been a concern of your party as well.
Of course, foreign policy must address issues such as human rights. But what is decisive is what we exemplify in Germany or Europe. I think the due diligence law for the supply chain is the right approach. But it cannot result in other countries cutting themselves off from us. If Germany thinks it must educate the world, it will not be appreciated or accepted. On the contrary, it leads to resentment. Nor does it improve the situation in these countries. They shut themselves off and look for other partners.
Is Germany not also representing its own interests in the world by insisting on human rights issues?
A foreign policy focused solely on values could lose sight of the interests of German companies. This is what I hear from companies. German foreign economic policy could do well with more pragmatism and a balanced orientation towards different target dimensions.
What would an interest-driven foreign economic policy toward China look like?
We must take a clear stance where necessary. And say: this far and no further. When we now see that Chinese companies are bringing electric cars to market at prices that are not really competitive, there is a need for action. Although it is said that we also subsidize in Europe, in Germany. But we subsidized the buyers to generate demand and create a market. Unlike China, we have not favored national manufacturers.
Whereas that is now changing with semiconductors.
Yes, we support key technology fields, for example, through IPCEI projects (Important Projects of Common European Interest, editor’s note). Projects in Baden-Wurttemberg do not focus on individual, national companies, but on the development of competitive structures. And this continues to happen under market economy aspects.
Are you rethinking your position on subsidies, given the current situation? In the Chinese model, state economic subsidies are in the DNA. And we are competing with China.
A reorientation is already underway, without us changing the fundamental framework. We have set up battery and hydrogen programs as well as microelectronics programs. The EU and Germany are deliberately promoting certain technologies to make us resilient. At the end of the day, however, they must become long-term business models that can stand up to competition.
Are they now also attracting all kinds of factories to Baden-Wurttemberg?
Sadly, no. The EU’s state aid rules set tight limits. I see this critically. How is Europe supposed to compete with the US and China if it primarily supports structurally weak regions in technology-intensive settlement projects, but all but eliminates its strong and innovative locations from the race? In any case, the new chip factories are mainly built in structurally weak regions. We only have access to innovation programs under more difficult conditions. We support companies in research and development, for example, in battery technology or quantum computing. Baden-Wurttemberg is strong in this area and, with a research and development rate of 5.8 percent, holds a leading position worldwide.
So the fundamental systemic difference remains on our side despite increasing subsidies.
China generally provides subsidies. This also has considerable disadvantages, because it comes at the expense of efficiency. The country still has ailing state-owned companies that do not function and yet continue to exist. The real estate sector, which has supported growth so far, is also in big trouble. That is why a tipping point now seems to have been reached. Entrepreneurs like Alibaba’s Jack Ma no longer live in China, and deep cracks are showing in the real estate sector and the financial system.
Nicole Hoffmeister-Kraut (CDU) has been Baden-Wurttemberg’s Minister for Economic Affairs since 2016 and holds a Ph.D. in business administration.
Jian G. is said to have made Maximilian Krah, a member of the German right-wing AfD party and a top candidate in the European elections, a significant figure in China. Krah’s Chinese-German employee, who is now a German citizen, has allegedly ensured over the years that the AfD politician was honored in China and offered prominent platforms as a speaker. For example, under the auspices of the “Silk Road Think Tank Association” (SRTA), which establishes contacts abroad on behalf of the International Liaison Department of the Communist Party of China (IDCPC).
The case, extensively covered by the news portal t-online, seems to confirm the concerns of the Federal Office for the Protection of the Constitution (BfV). Krah reportedly maintained close connections to China and received financial support. Krah is also said to have initiated a German-Chinese lobbying network.
In late July, the BfV had warned about the IDCPC because it “effectively operates like an intelligence service of the People’s Republic of China and can therefore be attributed to the Chinese intelligence service.” The BfV explicitly formulated: “In dealing with IDCPC members, avoid any actions that could be classified as offenses under Section 99 of the German Criminal Code (StGB).” This refers to activities for the intelligence service of a foreign power.
Krah once studied in China and, according to his own statements, continued to maintain contacts to China after returning to Germany. “Thus, at first glance, he appears to fit the standard narrative of the recruitment of foreign informants,” says Ralph Weber from the University of Basel. In his research, the political scientist deals with China’s influence on the politics of other countries through the United Front of the Communist Party (UFW) or the Ministry of State Security (MSS).
The BfV also says that the modus operandi of intelligence services is always similar. “They first identify who has interesting opportunities or knowledge and points of contact for the establishment of intelligence cooperation. Then, psychologically trained intelligence officers approach the target individuals as part of an initially harmless contact, such as during an exhibition or a conference.”
Krah and G. both deny any conflicts of interest. In recent years, however, Krah has repeatedly attracted attention by justifying repressive Chinese policies in Xinjiang or Hong Kong or by referring to Taiwan as part of Chinese territory. His employee, on the other hand, worked as a businessman in various industries in Germany before his employment in the politician’s office.
Chinese espionage is certainly not new in Germany. However, until now, its perception has been more focused on being a tool for the theft of intellectual property. For example, in 2018, the case of the Cologne-based chemical company Lanxess made headlines. Chinese-born employees were alleged to have passed on trade secrets to China for years. Just yesterday, the Financial Times reported that Belgian security services were scrutinizing the European logistics division of the Chinese online trading platform Alibaba.
Belgian authorities at the freight airport in Liège are investigating “possible espionage and/or interference activities” by Chinese companies, including Alibaba. The State Security Service (VSSE) is alarmed because Chinese legislation forces Chinese companies to share their data with authorities and intelligence agencies.
However, the political dimension of Chinese espionage is now increasingly coming to the forefront. Just a few weeks ago, the arrest of an alleged Chinese spy from the British Parliament caused a stir.
There is currently no charge, nor are there any details circulating about the British citizen’s cooperation with an intelligence service of the People’s Republic. However, the case in the UK is part of a series of incidents in which suspicions revolve around the idea that Chinese interests are being introduced into the political decision-making processes of a target country through recruited intermediaries.
“All of these cases show that parliaments in Western democracies are a focus of Chinese intelligence activities. It would be naive to believe that Beijing would not also try to establish spies in and around the German parliament,” says United Front expert Weber.
He urges vigilance. United Front organizations, which strive worldwide to improve the image of the Communist Party and stifle political dissent, would sometimes also serve as cover for the Ministry of State Security. Nevertheless, it is important that Western societies do not succumb to hysteria and reflexively suspect Chinese espionage everywhere. Otherwise, says Weber, the Communist Party benefits from every accusation that turns out to be false.
Australia and New Zealand have long been dealing intensively with Chinese espionage. As part of the political West, both countries have been targets of intelligence activities by the People’s Republic for years. The General Secretary of the Labor Party in the Australian state of New South Wales, Sam Dastyari, resigned from his post after warning a Chinese-born major donor to his party about investigations by the Australian intelligence service.
In New Zealand, a Chinese-born member of the House of Representatives had to resign because of a warning from the intelligence service. The parliamentarian, Jian Yang, was a member of the Communist Party before moving from the People’s Republic and had worked for more than a decade for the People’s Liberation Army. He had kept these details secret for years. Meanwhile, he had worked intensively on New Zealand’s China strategy.
A new Netflix series starring Nicole Kidman will start in January: “Expats” is about the lives of Western foreigners in Hong Kong. The series is directed by Lulu Wang and based on a book by Janice Y. K. Lee.
What benefits Germany more: Publicly lecturing a country like China – or pursuing its own interests in the smartest possible way without outright upsetting the other side? In an interview with China.Table, Nicole Hoffmeister-Kraut, Minister of Economic Affairs of the German state of Baden-Wurttemberg, criticizes Foreign Minister Annalena Baerbock’s value-oriented foreign policy for lacking direction. She would also like to see more economic policy represented in foreign relations.
In contrast, Hoffmeister-Kraut supports her party colleague Ursula von der Leyen: Despite criticism from the industry, she considers an investigation into EV dumping prices the right thing to do. At the same time, a politically motivated trade conflict with China strikes her as a horror scenario. No wonder, considering that she is the minister for economic affairs of a country of China’s exporters.
The debate about interference in parliaments by Chinese secret services has reached Germany. Following the arrest of MPs’ staff on suspicion of espionage in the UK, attention is now turning to a German member of the EU Parliament. Maximilian Krah of the right-wing German AfD party seems to be deeply implicated, reports Marcel Grzanna. Espionage experts warn: Such cooperation with the United Front often starts with a seemingly harmless cooperation proposal.
You are the Minister of Economic Affairs in a very strong automotive region. What do you think of the EU’s plan to consider protective tariffs on Chinese EV dumping prices?
The issue is that subsidies have flowed into a certain industry, leading to a distortion of competition. The result is that their products could be offered cheaper on the world market. At least that is the assumption. We will have to wait and see whether this assumption is confirmed.
What is your assumption?
We have known for a long time that there is no level playing field in competition with China, that China gives advantages to its own companies. We now have to wait and see the results of this analysis. Ursula von der Leyen is a smart woman who knows what she is doing.
The industry fears retaliation from China. For its part, Beijing can impose trade sanctions against the EU, which would then affect our car industry.
It stands to reason that China would react with its own trade measures. If this resulted in a trade conflict, that would, of course, be fatal. We cannot engage in a trade war with China, neither Germany nor the European Union.
What would such a trade conflict mean for your federal state?
China is a vital trading partner for Baden-Wurttemberg companies, as it is for all of Germany. We still have the United States as our largest export market, but China comes in a close second; in terms of imports, it is even in first place. Over the years, an international division of labor has developed in which China plays a decisive role. Certain dependencies have also emerged in the process.
So, we can’t afford an open confrontation?
It is always difficult for us when trade barriers are erected. It’s like a boomerang. We would also immediately feel the effects. A trade conflict like the one between the US and China would shatter important structures and probably massively weaken our export-oriented economy in large parts.
China’s car manufacturers have developed a remarkably strong technical capability. Is the new competition causing concern in Germany’s southwest?
The whole thing should be seen ambivalently. The strong connection to China can also be seen as an advantage. Baden-Wurttemberg’s supplier industry is integrated into the Chinese networks and thus continues to play a leading role.
Nevertheless, how do you think China has suddenly become the master in some areas and Germany the student?
China is forced to maintain growth for the sake of political and social stability, and this includes a strategy of rapid technological advancement. They have achieved this successfully in the automotive sector, especially in electromobility. Despite the mix of state and private capital, China has allowed the necessary entrepreneurial spirit. One example is BYD, a company I informed myself about on site. A medium-sized battery manufacturer has grown into a corporation with global market ambitions. With state support, of course.
But China has become increasingly dominant, and the risks are increasing.
The order of the day is indeed de-risking. But this does not only apply to China. We need to reduce unilateral dependencies globally. And, of course, we must be vigilant and clearly demand equal rules for all. Economic relations should be a give-and-take. De-risking only works by diversifying our trade relations. The EU Commission is mainly tasked here to step up the pace when it comes to signing trade agreements – for example, in the protracted negotiations with the Mercosur states.
According to industry representatives, the condescending behavior of the government in Berlin also contributes to the bad sentiment toward several countries. Is Germany’s value-oriented foreign policy effective?
I firmly believe that we will not get far with lecturing in foreign policy. That leads to anger in those countries. Foreign trade informs me that this will gradually lead to Germany’s isolation. Many countries with which we maintain economic relations hold different values, have different systems, and a different culture. They may also be in a completely different phase of development. India still has slums and shocking poverty. But who are we, as an economy with a high standard of living, to believe that we can lecture India? And that’s why I fundamentally dislike this approach.
Standing up for human rights has always been a concern of your party as well.
Of course, foreign policy must address issues such as human rights. But what is decisive is what we exemplify in Germany or Europe. I think the due diligence law for the supply chain is the right approach. But it cannot result in other countries cutting themselves off from us. If Germany thinks it must educate the world, it will not be appreciated or accepted. On the contrary, it leads to resentment. Nor does it improve the situation in these countries. They shut themselves off and look for other partners.
Is Germany not also representing its own interests in the world by insisting on human rights issues?
A foreign policy focused solely on values could lose sight of the interests of German companies. This is what I hear from companies. German foreign economic policy could do well with more pragmatism and a balanced orientation towards different target dimensions.
What would an interest-driven foreign economic policy toward China look like?
We must take a clear stance where necessary. And say: this far and no further. When we now see that Chinese companies are bringing electric cars to market at prices that are not really competitive, there is a need for action. Although it is said that we also subsidize in Europe, in Germany. But we subsidized the buyers to generate demand and create a market. Unlike China, we have not favored national manufacturers.
Whereas that is now changing with semiconductors.
Yes, we support key technology fields, for example, through IPCEI projects (Important Projects of Common European Interest, editor’s note). Projects in Baden-Wurttemberg do not focus on individual, national companies, but on the development of competitive structures. And this continues to happen under market economy aspects.
Are you rethinking your position on subsidies, given the current situation? In the Chinese model, state economic subsidies are in the DNA. And we are competing with China.
A reorientation is already underway, without us changing the fundamental framework. We have set up battery and hydrogen programs as well as microelectronics programs. The EU and Germany are deliberately promoting certain technologies to make us resilient. At the end of the day, however, they must become long-term business models that can stand up to competition.
Are they now also attracting all kinds of factories to Baden-Wurttemberg?
Sadly, no. The EU’s state aid rules set tight limits. I see this critically. How is Europe supposed to compete with the US and China if it primarily supports structurally weak regions in technology-intensive settlement projects, but all but eliminates its strong and innovative locations from the race? In any case, the new chip factories are mainly built in structurally weak regions. We only have access to innovation programs under more difficult conditions. We support companies in research and development, for example, in battery technology or quantum computing. Baden-Wurttemberg is strong in this area and, with a research and development rate of 5.8 percent, holds a leading position worldwide.
So the fundamental systemic difference remains on our side despite increasing subsidies.
China generally provides subsidies. This also has considerable disadvantages, because it comes at the expense of efficiency. The country still has ailing state-owned companies that do not function and yet continue to exist. The real estate sector, which has supported growth so far, is also in big trouble. That is why a tipping point now seems to have been reached. Entrepreneurs like Alibaba’s Jack Ma no longer live in China, and deep cracks are showing in the real estate sector and the financial system.
Nicole Hoffmeister-Kraut (CDU) has been Baden-Wurttemberg’s Minister for Economic Affairs since 2016 and holds a Ph.D. in business administration.
Jian G. is said to have made Maximilian Krah, a member of the German right-wing AfD party and a top candidate in the European elections, a significant figure in China. Krah’s Chinese-German employee, who is now a German citizen, has allegedly ensured over the years that the AfD politician was honored in China and offered prominent platforms as a speaker. For example, under the auspices of the “Silk Road Think Tank Association” (SRTA), which establishes contacts abroad on behalf of the International Liaison Department of the Communist Party of China (IDCPC).
The case, extensively covered by the news portal t-online, seems to confirm the concerns of the Federal Office for the Protection of the Constitution (BfV). Krah reportedly maintained close connections to China and received financial support. Krah is also said to have initiated a German-Chinese lobbying network.
In late July, the BfV had warned about the IDCPC because it “effectively operates like an intelligence service of the People’s Republic of China and can therefore be attributed to the Chinese intelligence service.” The BfV explicitly formulated: “In dealing with IDCPC members, avoid any actions that could be classified as offenses under Section 99 of the German Criminal Code (StGB).” This refers to activities for the intelligence service of a foreign power.
Krah once studied in China and, according to his own statements, continued to maintain contacts to China after returning to Germany. “Thus, at first glance, he appears to fit the standard narrative of the recruitment of foreign informants,” says Ralph Weber from the University of Basel. In his research, the political scientist deals with China’s influence on the politics of other countries through the United Front of the Communist Party (UFW) or the Ministry of State Security (MSS).
The BfV also says that the modus operandi of intelligence services is always similar. “They first identify who has interesting opportunities or knowledge and points of contact for the establishment of intelligence cooperation. Then, psychologically trained intelligence officers approach the target individuals as part of an initially harmless contact, such as during an exhibition or a conference.”
Krah and G. both deny any conflicts of interest. In recent years, however, Krah has repeatedly attracted attention by justifying repressive Chinese policies in Xinjiang or Hong Kong or by referring to Taiwan as part of Chinese territory. His employee, on the other hand, worked as a businessman in various industries in Germany before his employment in the politician’s office.
Chinese espionage is certainly not new in Germany. However, until now, its perception has been more focused on being a tool for the theft of intellectual property. For example, in 2018, the case of the Cologne-based chemical company Lanxess made headlines. Chinese-born employees were alleged to have passed on trade secrets to China for years. Just yesterday, the Financial Times reported that Belgian security services were scrutinizing the European logistics division of the Chinese online trading platform Alibaba.
Belgian authorities at the freight airport in Liège are investigating “possible espionage and/or interference activities” by Chinese companies, including Alibaba. The State Security Service (VSSE) is alarmed because Chinese legislation forces Chinese companies to share their data with authorities and intelligence agencies.
However, the political dimension of Chinese espionage is now increasingly coming to the forefront. Just a few weeks ago, the arrest of an alleged Chinese spy from the British Parliament caused a stir.
There is currently no charge, nor are there any details circulating about the British citizen’s cooperation with an intelligence service of the People’s Republic. However, the case in the UK is part of a series of incidents in which suspicions revolve around the idea that Chinese interests are being introduced into the political decision-making processes of a target country through recruited intermediaries.
“All of these cases show that parliaments in Western democracies are a focus of Chinese intelligence activities. It would be naive to believe that Beijing would not also try to establish spies in and around the German parliament,” says United Front expert Weber.
He urges vigilance. United Front organizations, which strive worldwide to improve the image of the Communist Party and stifle political dissent, would sometimes also serve as cover for the Ministry of State Security. Nevertheless, it is important that Western societies do not succumb to hysteria and reflexively suspect Chinese espionage everywhere. Otherwise, says Weber, the Communist Party benefits from every accusation that turns out to be false.
Australia and New Zealand have long been dealing intensively with Chinese espionage. As part of the political West, both countries have been targets of intelligence activities by the People’s Republic for years. The General Secretary of the Labor Party in the Australian state of New South Wales, Sam Dastyari, resigned from his post after warning a Chinese-born major donor to his party about investigations by the Australian intelligence service.
In New Zealand, a Chinese-born member of the House of Representatives had to resign because of a warning from the intelligence service. The parliamentarian, Jian Yang, was a member of the Communist Party before moving from the People’s Republic and had worked for more than a decade for the People’s Liberation Army. He had kept these details secret for years. Meanwhile, he had worked intensively on New Zealand’s China strategy.
A new Netflix series starring Nicole Kidman will start in January: “Expats” is about the lives of Western foreigners in Hong Kong. The series is directed by Lulu Wang and based on a book by Janice Y. K. Lee.
