Table.Briefing: China

Reactions to von der Leyen + Taiwan strategy

Dear reader,

For every action, there is an equal and opposite reaction. The unequivocal announcement by EU Commission President Ursula von der Leyen has prompted a firm response from Beijing. The announced investigations into China’s EV would negatively affect economic and trade relations between the People’s Republic and the EU. This was not surprising.

What is surprising, however, is what Felix Lee writes: The entire plan could backfire. A review could equally affect foreign manufacturers in the People’s Republic. Moreover, government subsidies are anything but the sole reason for the success of the Chinese EV industry.

Beijing has presented a new plan for unification with Taiwan. The document with the somewhat unwieldy title “Building a Demonstration Zone for Integrated Cross-Straits Development” states that unification should happen peacefully at best. Michael Radunski explains which levers the Chinese government intends to use to achieve this and which incentives it plans to offer.

However, he also notes that Beijing’s plan should be taken with a grain of salt: 68 Chinese aircraft and ten ships have been spotted in the waters around Taiwan between Wednesday and Thursday morning alone.

Your
Carolyn Braun
Image of Carolyn  Braun

Feature

Europe’s EV plans could backfire

Even the former Swedish flagship brand Volvo could face punitive tariffs in the EU.

The reactions from Beijing followed quickly. The Chinese Ministry of Commerce warned that the EU Commission’s investigation of the Chinese EV market would have negative consequences for the economy and impact trade relations between China and the EU as a whole. It said it was “highly concerned” and “strongly dissatisfied” with the European Union’s plans. “The Chinese side believes that the EU’s proposed investigative measures are to protect its own industry in the name of ‘fair competition.’” It went on to say that this “naked protectionist behavior” would hit the global automotive supply chain hard.

Frank words in response to an equally frank announcement from the other side: In her State of the Union address on Wednesday, EU Commission President Ursula von der Leyen announced a competition investigation into market distortions caused by Chinese EV subsidies. The world markets are currently “flooded with cheaper Chinese electric cars,” von der Leyen raged in her speech. “This is distorting our market.”

Europe’s industry is also subsidized

Yet the answer to the question of to what extent the leadership in Beijing is creating unfair competition with excessive subsidies for the domestic EV industry and how appropriate anti-dumping duties would be is anything but clear.

  • Yes, China produces EVs cheaper than the rest of the world. According to the EU Commission, they are usually one-fifth cheaper than European-made cars.
  • Yes, this is also due to decades of government support for the industry via incentives and subsidies. Not least with the help of the state, companies like CATL or BYD managed to become the largest manufacturers of EV batteries.
  • And yes, the Chinese government is ensuring low energy costs in its own country and helping with start-up funding.

However, Germany and the EU have also invested much money into setting up domestic battery cell production for electric cars. In 2019, the EU Commission itself approved aid of 3.2 billion euros for the production of EV batteries in Europe. From the German side, five companies are involved in this Europe-wide alliance, including BASF, BMW and battery manufacturer Varta.

The support from the Chinese government has indeed helped companies such as CATL or BYD to become industry heavyweights; BYD displaced Volkswagen as the best-selling brand in China for the first time this year. But this success cannot be explained by subsidies alone.

Chinese EV manufacturers are more adaptable

One fundamental reason for their success: The competition from the Far East is made up of tech companies, or in BYD’s case, battery manufacturers. They understand that building EVs is much cheaper than manufacturing vehicles with internal combustion engines. The effort is lower, and much less workforce is required. This means they don’t have a huge apparatus in tow like the traditional carmakers, who still haven’t abandoned building diesel and gasoline engines.

The German carmakers’ biggest competitors from the People’s Republic are by no means traditional Chinese carmakers; they are struggling with similar problems as VW or Mercedes. Instead, the Chinese EV competitors are modern software or battery companies that can adapt quickly to new market trends and bring new models to market much more cheaply than VW or BMW.

Could the EU plan backfire?

According to Reuters, the EU Commission plans to focus its investigations not only on raw material and battery prices, but also on preferential loans and the alleged provision of land at excessively low prices. According to estimates by consulting firm AlixPartners, China disbursed state subsidies amounting to 57 billion dollars for electric and hybrid vehicles between 2016 and 2022.

The best-known example is the government support to stimulate the purchase of EVs, which is paid to the manufacturers. This started in 2009 and was actually scaled back gradually until the end of last year. After demand for EVs subsequently collapsed, the Chinese government announced a new tax package worth the equivalent of 72 billion dollars in June, which is intended to run for four years.

But it’s not just that government incentives for EV purchases have also been granted in Europe: The investigation would also affect foreign car manufacturers in China. For example, the US-based EV company Tesla operates its largest production facility in Shanghai. The US company assembled over 700,000 vehicles in the People’s Republic in 2022. That corresponds to half of its total production. According to the US think tank Center for Strategic and International Studies, 40 percent of EV exports between January and April this year came from Tesla.

BMW, Volvo and Renault would also be affected

However, the EU Commission’s investigations would also affect BMW, Renault and the former Swedish brand Volvo, which the Chinese Geely Group acquired. These companies also produce in China and export vehicles to Europe. However, the EU Commission certainly does not have its sights on them, but rather on the Chinese newcomers such as MG Motors, BYD, NIO and Xpeng, all of which have begun to expand into Europe. Ten days ago, the International Motor Show (IAA) in Munich provided a first glimpse. The former showcase of the German carmakers has turned into a showroom for Chinese EV manufacturers.

China’s trade minister called for “dialogue and consultation” and urged the EU to “create a fair, non-discriminatory and predictable market environment for the joint development of the China-EU electric vehicle industry.” This will likely prove difficult, given the interdependencies on both sides.

  • Autoindustrie
  • Technologie

China’s peace plan for Taiwan

Chinese military exercises around Taiwan: A Taiwanese marine on board the frigate Tian Dan observes the Chinese frigate Xuzhou with binoculars on 19 August.

According to the Chinese Communist Party, it is its unwavering historical task, the common aspiration of all the sons and daughters of China, and the inevitable necessity. In other words, the solution to the Taiwan question. Beijing sees only one way to achieve this: Taiwan must be united with the mainland. Preferably peacefully.

On Thursday, China’s State Council unveiled its plan for how exactly this will be done. The document, called “Building a Demonstration Zone for Integrated Cross-Straits Development” (建设两岸融合发展示范区), was already approved on Tuesday, but only officially unveiled on Thursday.

China and Taiwan – ‘one family’

Right at the beginning, the document outlines the plan as an “overall strategy of the Party to solve the Taiwan question in the new era.” Under Xi Jinping’s leadership, the concept of “两岸一家亲” (Both sides of the Taiwan Strait are one family) is to be put into practice.

The document sounds like a peaceful invitation to Taiwan to participate in China’s economic and political rise. There is repeated talk of progress, innovation, exchange, respect and cooperation. But Beijing itself raises doubts about the credibility of the “peace plan”: According to Taiwanese authorities, a Chinese aircraft carrier and about two dozen Chinese warships were spotted in waters around Taiwan this week.

Fujian as a demonstration zone

The directive, jointly issued by the Central Committee of the Communist Party of China and the State Council, promises to make the province of Fujian a “demonstration zone” for integrated development with Taiwan and the “first home” for Taiwanese residents and businesses settling in China.

Beijing’s reason to focus on Fujian is apparent. With its 40 million citizens, the Chinese province is located directly across from Taiwan’s coast. Both geographically and culturally, Fujian is the closest to Taiwan. Many Taiwanese are descendants of Fujianese immigrants, who continue to significantly influence Taiwanese life today.

Courting Taiwan’s people and businesses

Accordingly, Beijing deliberately courts the people of Taiwan in the first six items. Taiwanese workers and their families are encouraged to settle in Fujian. Social welfare programs will be improved to facilitate living and working in the province for Taiwanese. They will be allowed to buy real estate and are equally entitled to enroll their children in public schools.

Moreover, Taiwanese companies are promised an improved environment for doing business in Fujian and deepened industrial and capital cooperation. Taiwan’s companies will be encouraged to list on Chinese stock exchanges.

Special role for Kinmen and Matsu

The islands of Kinmen and Matsu play a special role in Beijing’s plans. They belong to Taiwan, but the islands are much closer to Fujian than Taiwan. For example, the distance between Kinmen and the Chinese mainland is only two kilometers. Accordingly, the islands already had the strongest connections to the mainland in the past. Therefore, Beijing’s new peace plan announces to accelerate their integration further.

Several infrastructure projects will be considered between Kinmen and Xiamen, including connecting the two cities via a bridge. In addition, the electricity and gas supply from Xiamen to Kinmen will be made possible. Similar integration measures are also planned for the cities of Fuzhou and Matsu.

With its plans for possible energy supplies, of all things, Beijing touches on a particularly sensitive point. Taiwan is hugely dependent on foreign imports. In the event of a Chinese blockade, Taiwan would face considerable energy problems. Accordingly, energy supply is considered a neuralgic point of Taiwan’s national security.

Kinmen as an ‘island of peace’

And indeed, Kinmen has its own plans to improve ties with mainland China. Ko Wen-je (柯文哲), the former mayor of Taipei and a candidate in the upcoming presidential election, recently proposed building a bridge to Xiamen. This would improve economic relations between the island and China. But Ko’s plans go further: The bridge could be the beginning of a far-reaching détente between China and Taiwan. Ko wishes to transform Kinmen into a demilitarized zone and thus into an “island of peace.”

Although some opposition members support the proposal, the ruling Democratic Progressive Party (DPP) strongly rejects it. Taiwan’s Mainland Affairs Council called the proposal “a Trojan horse with enormous risks to national security.”

Rejection from Taiwan

Beijing’s plans for a complete integration of Taiwan are also met with firm rejection in Taipei. It calls it a “one-sided” plan. Equal treatment and economic incentives only serve as a pretext to “accept the leadership of the Communist Party,” according to Taiwan’s Mainland Affairs Council.

“China should think about how it can take care of its bad debts, but not how it can conduct united front work against Taiwan,” said Wang Ting-yu, a deputy of the ruling Democracy Party, in a video message.

Xi: never committed to not use force

And it seems Beijing’s supposed peace plan should indeed be taken with a grain of salt. After all, China’s extended hand can quickly turn into a fist. A glance at the waters around Taiwan is enough to realize this. Between Wednesday and Thursday morning alone, 68 Chinese aircraft and ten ships have been sighted, as the Taiwanese Ministry of Defense announced on Thursday.

The Chinese Communist Party and its General Secretary Xi Jinping never tire of emphasizing that they are striving for a peaceful unification of the People’s Republic with Taiwan. But there is also no doubt about the alternative. At the last CP Party Congress in October, Xi said: “Reunification of the motherland must be achieved and will be achieved. But will never commit to abandoning the use of force.”

  • Geopolitics
  • Military
  • Taiwan
  • Taiwan-Wahlen

Events

Sept. 18, 2023; 2:30 p.m.
China International Investment Promotion Agency, Conference (in Frankfurt): Bozhou City Investment and Cooperation Conference More

Sept. 19, 2023; 10 a.m.
China-Kompetenzzentrum Duesseldorf, Seminar (in Duesseldorf, in Chinese): Successful Business in Germany – Healthy and Safe Work in Germany More

Sept. 19, 2023; 2:30 p.m. CEST (8:30 p.m. CST)
Fairbank Center for Chinese Studies, Urban China Series: Cross-Border Competition and Governance in the Greater Bay Area of Guangdong, Hong Kong, and Macau More

Sept. 19, 2023; 3 p.m.
Swiss Chinese Chamber of Commerce, Strategy Workshop (in Zurich): Swiss business in China – reviewing your China Strategy? More

Sept. 19, 2023; 10 p.m. CEST (Sept. 10, 2 a.m. CST)
Fairbank Center for Chinese Studies, Modern China Lecture Series: When Folding Chairs Became Bestsellers: The Revolutionary Roots of China’s Furniture Exports More

Sept. 20, 2023; 5:15 a.m. CEST (11:15 a.m. CST)
EU SME Centre, Workshop (in Shanghai and online): From the Ground Up: Industrial Building Design, Maintenance, and Digitalisation More

Sept. 20, 2023; 9 a.m. CEST (3 p.m. CST)
stars – for Leaders of the Next Generation, Webinar: Stock Taking and Prospects of Sino-Swiss relations in a re-asserting Europe and post-Covid China More

Sept. 20, 2023; 9 a.m. CEST
Urgewald, Conference: New kid on the block: AIIB after 7 years of operation More

Sept. 21, 2023; 9 a.m. CEST (3 p.m. CST)
Dezan Shira & Associates, Seminar (online and in Shenzhen): IIT Clarity for Expats in China: Benefits Extension and Accessing the GBA IIT Subsidies in 2023 More

Sept. 21, 2023; 10 a.m.
China International Investment Promotion Agency, Logistics Forum (in Duisburg): The New Silk Road Logistics Forum More

Sept. 21, 2023; 11 a.m. CEST (5 p.m. CST)
Kiel Institute for the World Economy, Global China Conversations: Global Gateway and the Belt and Road: A Sustainable Alternative? More

Sept. 21, 2023; 5:30 p.m. CST
EU SME Centre, Conference (in Jinan): 2023 Sino-German (European) SME Communication & Cooperation Conference (SMEC) More

News

Foreign policy positions published ahead of UN assembly

Shortly ahead of next week’s United Nations General Assembly, China has published an official document setting out its position on important issues of international politics. In addition to many familiar phrases, such as that of the “community of common destiny for mankind,” it contains quite relevant positions:

  • Ukraine: Ukraine: The Chinese government confirms in the document its fundamentally pro-Russian stance; there is no sign of turning away from Moscow. China supports “a political settlement of the Ukraine crisis”; the word “war” is not used. Europe alone is named as the culprit. The legitimate “security interests” of all parties are to be taken into account (thus also those of Russia); sanctions are counterproductive. Also known, however, is China’s condemnation of nuclear threats.
  • Afghanistan: Afghanistan: Here, China demonstrates clear acceptance of the Taliban. The international community should respect the country’s independence and recognize an “Afghan-led” government organization without reservations.
  • BRI: BRI: China will push “better cost-effectiveness” at this year’s Belt and Road Forum.
  • Climate cooperation: criticism of the West. China opposes “attempts to politicize, instrumentalize and weaponize energy issues.”
  • Human rights: The most important human rights are “happiness” and “aspirations for a better life.” Democratic rights are also mentioned. But: Each country should implement human rights in its own way.
  • New areas for global governance: the deep sea, the poles, space, the Internet, and AI are also targets of global governance.
  • Security Council: The UN Security Council is to be opened up to developing countries. What is left unsaid: This could increase China’s influence.

China political scientist Moritz Rudolf, currently at Yale, sees the document primarily as criticism of the US. With formulations such as the “use of unilateral sanctions,” the accusation of hypocrisy and the like, the document attempts to pick up on the mood of the Global South toward the United States. fin

  • Geopolitics
  • United Nations

Taiwan reprimands Elon Musk

Taiwan has criticized Tesla founder Elon Musk for once again interfering in strained relations with China. “Taiwan is not part of the People’s Republic of China and certainly not for sale,” Taiwan’s Foreign Minister Joseph Wu told Elon Musk Thursday on X, formerly Twitter.

Earlier, Musk made the following comments about the tense situation in the Taiwan Strait. “Their [Beijing’s] policy has been to reunite Taiwan with China. From their standpoint, maybe it is analogous to Hawaii or something like that, like an integral part of China that is arbitrarily not part of China mostly because … the US Pacific Fleet has stopped any sort of reunification effort by force,” Musk said at an event. The statements were published in a video on YouTube.

Wu urged Musk to ask Beijing to open its short messaging service to the Chinese instead. The People’s Republic has blocked X for years, as well as other major Western social media such as Facebook.

This is not the first time Musk has angered the government in Taipei. Last October, he suggested that the government in Beijing gain some control over Taiwan to ease tensions in the region. Musk has also already angered Ukraine with similarly ill-advised statements. rtr

Banks are to strengthen yuan

According to insiders, China’s authorities are asking the country’s largest banks to help in the fight against yuan weakness. To this end, credit institutions should not immediately balance their foreign exchange positions, but keep them open for a while. This was reported by Reuters news agency on Thursday, citing people familiar with the matter.

This step would mean that part of the large dollar purchases by companies would be picked up by the banks and remain in their books for a while. This is expected to help ease devaluation pressure on the yuan. According to insiders, the instruction stems from a meeting the central bank held with some commercial banks earlier this week. At that meeting, the financial institutions were also told that companies wishing to make transactions of 50 million US dollars or more must obtain approval from the central bank.

The yuan has lost more than five percent against the US dollar so far this year, making it one of the worst-performing currencies in Asia. “The source of the weakness in renminbi is very simply that interest rates in China are low, that activity in China is slow, therefore the rate of return of marginal capital invested in China is not as great as elsewhere, and therefore that impacts capital flows,” said Sid Mathur, an analyst at bank BNP Paribas. rtr

The UK is target of espionage

Chinese spies allegedly tried to recruit British officials in critical political, defense and business positions in order to gain access to national secrets. The British government stated this in response to a parliamentary report published in July.

The Intelligence and Security Committee stated in its report that Beijing successfully infiltrated every sector of the British economy. Ministers had been too slow to counter this threat. China was engaged in a “whole of state” assault on the UK, and the government’s approach has been “completely inadequate” and dominated by short-term economic interests, the committee concluded after its four-year probe. Prime Minister Rishi Sunak told Parliament that he accepted the report and recognized that the government needed to improve in this regard.

Seven times more investigations than in 2018

Just last weekend, the arrest of a parliamentary researcher caused a stir. He is accused of spying for China. The young scientist denies being a spy, but his arrests have led to calls from British MPs for a stricter stance. The Chinese Foreign Ministry described the espionage allegations as “completely unfounded.”

Britain’s domestic intelligence agency MI5 claims to be currently conducting seven times as many investigations into Chinese activities as it did in 2018, and the government has also set up a dedicated unit to protect elections from foreign interference. Last year, MI5 warned members of Parliament that a suspected Chinese spy was “involved in political interference activities” in Britain.

According to a newspaper report this week, MI5 also warned the ruling party that two potential candidates in legislative positions were Chinese spies. The government stated that it regularly screens officials and has set up software to help detect, for example, fake profiles on social media. rtr

Opinion

A divo (or diva) of his time

The legend Mei Lanfang (1894-1961): The life of the bisexual actor reflects the zeitgeist of multiple eras.

More than sixty years after he passed away, the legendary Mei Lanfang (1894 – 1961) is still a cultural icon and a top symbol for Peking Opera. The life of the bisexual actor, who also played female roles on stage, was as interesting as it was complicated. His life story reflected the zeitgeist of different periods in which he lived and some difficult decisions people in those times had to make.

When Mei started his career in Peking Opera, all women were played by men. Men and women acting together were considered indecent, even though performance artists, Peking Opera players included, had a social status already almost as low as prostitutes.

In fact, many young male Peking Opera actors playing female roles were indeed involved in prostitution. In a way similar to that of Geisha, they entertained guests (all males, of course) in their well-decorated homes. These boys earned much more from this than from performing in theater. Sexual service was not necessary, but could be part of it.

Unlike in Christian cultures, sexual intercourse between men was never considered a sin in Chinese history. As long as a man met his family obligation and married a woman, or multiple – having concubines was once allowed – he was free to have “fun.” There were exceptions, however, such as during the strict communist rule between the 1960s and the early 1980s, when same-sex intercourse could be punishable by death. By contrast, during the Ming (1368-1644) and Qing (1644-1911) dynasties, sex with young boys even became something fashionable among social elites.

Life in the turbulent Shanghai of the 1920s

Mei made his stage debut at the age of ten in Beijing. In addition to performance, he also did what his peers did before getting married for the first time at the age of 16. When Mei achieved diva or “divo” status in the 1920s, an era roughly comparable to Berlin in the 1920s was dawning in some major Chinese cities such as Shanghai and Beijing. China was still weak, and the majority of its city’s residents still lived in dire poverty. But a new republic was being built on the ruins of the imperial past, and Western things – from factories to futures exchanges, from films to nightclubs, from communist thoughts and feminist ideas – rushed in. Traditional and modern things competed with each other. Money flows, decadence, mafia and uprisings co-existed. Radical intellectuals, who longed for China’s rapid modernization, condemned “medieval” things like Peking Opera as cultural trash. But this did not diminish its popularity. On the contrary, thanks to some thoughtful foreign tours by Mei and his troupe, it even earned acclaim from artists and audiences in the Western world.

Mei’s shining career was interrupted by the Japanese invasion of China in 1937. He withdrew from the stage and politely, tactfully refused invitations from both the Japanese occupiers and the puppet government to give shows. This won him accolades afterward because this was not something that all the Peking Opera stars had done during the difficult times.

Life choices in turbulent years 

In 1927, Mei married for the third time under the arrangement of his boyfriend Feng. Feng, a banker, was Mei’s lifelong supporter and not-so-openly boyfriend. His third spouse, Meng Xiaodong (孟小冬1908 – 1977), was a beloved Peking Opera singer who played male roles and was famous for her rich, low voice and sharply cool looks. However, feeling not being fairly treated, Meng openly divorced Mei in 1933.

Meng happened to be bisexual, too. Under recommendation from her girlfriend Yao Yulan, the third concubine of the Shanghai mafia boss Du Yuesheng (杜月笙, 1888 – 1951), Meng became Du’s fourth concubine. Meng went to Hong Kong with Du in 1949 when the Communists won the civil war on the mainland. 

Mei stayed and rose to become an important figure in artist circles. Initially, he tried to stay away from politics and the Communist Party, but later realized that this was not possible if he wanted to keep his social status. In 1959, he joined the Communist Party with the then-Chinese premier Zhou Enlai (1898 – 1976), being his official endorser. Mei passed away in 1961, believed to be lucky to leave the world five years before the Cultural Revolution broke out. When he died, the dark clouds were already gathering. They would eventually develop into violent storms, which saw Peking Opera mutilated, all traditional pieces banned, and almost all Peking Opera stars persecuted, tortured, or even pressured to commit suicide.

Meanwhile, Mei’s old sweetheart, Meng Xiaodong, stayed in Hong Kong. She refused several invitations from Premier Zhou to move back to China. She actually moved a bit further to Taiwan. In 1964, and died there from illness more than a decade later.  

Executive Moves

Chen Jiachang was appointed vice minister of science and technology, Hu Weilie was appointed vice minister of justice.

In addition, the State Council of the People’s Republic announced a number of removals from office. Liu Zhao was removed from the post of vice minister of public security. Xu Hongcai was removed from the post of vice minister of finance. Xiang Dong will no longer serve as deputy director of the State Council Research Office. Yu Bing will no longer hold the position of deputy director of the National Energy Administration.

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

Dessert

Chilies first reached China in the 16th century. Sailors brought them from Southeast Asia. The Portuguese and Dutch had brought them there. The Chinese sailors imported the red pods allegedly not only for their taste, but also for their beauty. In Gaotai (Gansu), farmers have been growing these nightshade plants for 300 years. Here they turn chilies that shrivel away drying in the sun.

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    For every action, there is an equal and opposite reaction. The unequivocal announcement by EU Commission President Ursula von der Leyen has prompted a firm response from Beijing. The announced investigations into China’s EV would negatively affect economic and trade relations between the People’s Republic and the EU. This was not surprising.

    What is surprising, however, is what Felix Lee writes: The entire plan could backfire. A review could equally affect foreign manufacturers in the People’s Republic. Moreover, government subsidies are anything but the sole reason for the success of the Chinese EV industry.

    Beijing has presented a new plan for unification with Taiwan. The document with the somewhat unwieldy title “Building a Demonstration Zone for Integrated Cross-Straits Development” states that unification should happen peacefully at best. Michael Radunski explains which levers the Chinese government intends to use to achieve this and which incentives it plans to offer.

    However, he also notes that Beijing’s plan should be taken with a grain of salt: 68 Chinese aircraft and ten ships have been spotted in the waters around Taiwan between Wednesday and Thursday morning alone.

    Your
    Carolyn Braun
    Image of Carolyn  Braun

    Feature

    Europe’s EV plans could backfire

    Even the former Swedish flagship brand Volvo could face punitive tariffs in the EU.

    The reactions from Beijing followed quickly. The Chinese Ministry of Commerce warned that the EU Commission’s investigation of the Chinese EV market would have negative consequences for the economy and impact trade relations between China and the EU as a whole. It said it was “highly concerned” and “strongly dissatisfied” with the European Union’s plans. “The Chinese side believes that the EU’s proposed investigative measures are to protect its own industry in the name of ‘fair competition.’” It went on to say that this “naked protectionist behavior” would hit the global automotive supply chain hard.

    Frank words in response to an equally frank announcement from the other side: In her State of the Union address on Wednesday, EU Commission President Ursula von der Leyen announced a competition investigation into market distortions caused by Chinese EV subsidies. The world markets are currently “flooded with cheaper Chinese electric cars,” von der Leyen raged in her speech. “This is distorting our market.”

    Europe’s industry is also subsidized

    Yet the answer to the question of to what extent the leadership in Beijing is creating unfair competition with excessive subsidies for the domestic EV industry and how appropriate anti-dumping duties would be is anything but clear.

    • Yes, China produces EVs cheaper than the rest of the world. According to the EU Commission, they are usually one-fifth cheaper than European-made cars.
    • Yes, this is also due to decades of government support for the industry via incentives and subsidies. Not least with the help of the state, companies like CATL or BYD managed to become the largest manufacturers of EV batteries.
    • And yes, the Chinese government is ensuring low energy costs in its own country and helping with start-up funding.

    However, Germany and the EU have also invested much money into setting up domestic battery cell production for electric cars. In 2019, the EU Commission itself approved aid of 3.2 billion euros for the production of EV batteries in Europe. From the German side, five companies are involved in this Europe-wide alliance, including BASF, BMW and battery manufacturer Varta.

    The support from the Chinese government has indeed helped companies such as CATL or BYD to become industry heavyweights; BYD displaced Volkswagen as the best-selling brand in China for the first time this year. But this success cannot be explained by subsidies alone.

    Chinese EV manufacturers are more adaptable

    One fundamental reason for their success: The competition from the Far East is made up of tech companies, or in BYD’s case, battery manufacturers. They understand that building EVs is much cheaper than manufacturing vehicles with internal combustion engines. The effort is lower, and much less workforce is required. This means they don’t have a huge apparatus in tow like the traditional carmakers, who still haven’t abandoned building diesel and gasoline engines.

    The German carmakers’ biggest competitors from the People’s Republic are by no means traditional Chinese carmakers; they are struggling with similar problems as VW or Mercedes. Instead, the Chinese EV competitors are modern software or battery companies that can adapt quickly to new market trends and bring new models to market much more cheaply than VW or BMW.

    Could the EU plan backfire?

    According to Reuters, the EU Commission plans to focus its investigations not only on raw material and battery prices, but also on preferential loans and the alleged provision of land at excessively low prices. According to estimates by consulting firm AlixPartners, China disbursed state subsidies amounting to 57 billion dollars for electric and hybrid vehicles between 2016 and 2022.

    The best-known example is the government support to stimulate the purchase of EVs, which is paid to the manufacturers. This started in 2009 and was actually scaled back gradually until the end of last year. After demand for EVs subsequently collapsed, the Chinese government announced a new tax package worth the equivalent of 72 billion dollars in June, which is intended to run for four years.

    But it’s not just that government incentives for EV purchases have also been granted in Europe: The investigation would also affect foreign car manufacturers in China. For example, the US-based EV company Tesla operates its largest production facility in Shanghai. The US company assembled over 700,000 vehicles in the People’s Republic in 2022. That corresponds to half of its total production. According to the US think tank Center for Strategic and International Studies, 40 percent of EV exports between January and April this year came from Tesla.

    BMW, Volvo and Renault would also be affected

    However, the EU Commission’s investigations would also affect BMW, Renault and the former Swedish brand Volvo, which the Chinese Geely Group acquired. These companies also produce in China and export vehicles to Europe. However, the EU Commission certainly does not have its sights on them, but rather on the Chinese newcomers such as MG Motors, BYD, NIO and Xpeng, all of which have begun to expand into Europe. Ten days ago, the International Motor Show (IAA) in Munich provided a first glimpse. The former showcase of the German carmakers has turned into a showroom for Chinese EV manufacturers.

    China’s trade minister called for “dialogue and consultation” and urged the EU to “create a fair, non-discriminatory and predictable market environment for the joint development of the China-EU electric vehicle industry.” This will likely prove difficult, given the interdependencies on both sides.

    • Autoindustrie
    • Technologie

    China’s peace plan for Taiwan

    Chinese military exercises around Taiwan: A Taiwanese marine on board the frigate Tian Dan observes the Chinese frigate Xuzhou with binoculars on 19 August.

    According to the Chinese Communist Party, it is its unwavering historical task, the common aspiration of all the sons and daughters of China, and the inevitable necessity. In other words, the solution to the Taiwan question. Beijing sees only one way to achieve this: Taiwan must be united with the mainland. Preferably peacefully.

    On Thursday, China’s State Council unveiled its plan for how exactly this will be done. The document, called “Building a Demonstration Zone for Integrated Cross-Straits Development” (建设两岸融合发展示范区), was already approved on Tuesday, but only officially unveiled on Thursday.

    China and Taiwan – ‘one family’

    Right at the beginning, the document outlines the plan as an “overall strategy of the Party to solve the Taiwan question in the new era.” Under Xi Jinping’s leadership, the concept of “两岸一家亲” (Both sides of the Taiwan Strait are one family) is to be put into practice.

    The document sounds like a peaceful invitation to Taiwan to participate in China’s economic and political rise. There is repeated talk of progress, innovation, exchange, respect and cooperation. But Beijing itself raises doubts about the credibility of the “peace plan”: According to Taiwanese authorities, a Chinese aircraft carrier and about two dozen Chinese warships were spotted in waters around Taiwan this week.

    Fujian as a demonstration zone

    The directive, jointly issued by the Central Committee of the Communist Party of China and the State Council, promises to make the province of Fujian a “demonstration zone” for integrated development with Taiwan and the “first home” for Taiwanese residents and businesses settling in China.

    Beijing’s reason to focus on Fujian is apparent. With its 40 million citizens, the Chinese province is located directly across from Taiwan’s coast. Both geographically and culturally, Fujian is the closest to Taiwan. Many Taiwanese are descendants of Fujianese immigrants, who continue to significantly influence Taiwanese life today.

    Courting Taiwan’s people and businesses

    Accordingly, Beijing deliberately courts the people of Taiwan in the first six items. Taiwanese workers and their families are encouraged to settle in Fujian. Social welfare programs will be improved to facilitate living and working in the province for Taiwanese. They will be allowed to buy real estate and are equally entitled to enroll their children in public schools.

    Moreover, Taiwanese companies are promised an improved environment for doing business in Fujian and deepened industrial and capital cooperation. Taiwan’s companies will be encouraged to list on Chinese stock exchanges.

    Special role for Kinmen and Matsu

    The islands of Kinmen and Matsu play a special role in Beijing’s plans. They belong to Taiwan, but the islands are much closer to Fujian than Taiwan. For example, the distance between Kinmen and the Chinese mainland is only two kilometers. Accordingly, the islands already had the strongest connections to the mainland in the past. Therefore, Beijing’s new peace plan announces to accelerate their integration further.

    Several infrastructure projects will be considered between Kinmen and Xiamen, including connecting the two cities via a bridge. In addition, the electricity and gas supply from Xiamen to Kinmen will be made possible. Similar integration measures are also planned for the cities of Fuzhou and Matsu.

    With its plans for possible energy supplies, of all things, Beijing touches on a particularly sensitive point. Taiwan is hugely dependent on foreign imports. In the event of a Chinese blockade, Taiwan would face considerable energy problems. Accordingly, energy supply is considered a neuralgic point of Taiwan’s national security.

    Kinmen as an ‘island of peace’

    And indeed, Kinmen has its own plans to improve ties with mainland China. Ko Wen-je (柯文哲), the former mayor of Taipei and a candidate in the upcoming presidential election, recently proposed building a bridge to Xiamen. This would improve economic relations between the island and China. But Ko’s plans go further: The bridge could be the beginning of a far-reaching détente between China and Taiwan. Ko wishes to transform Kinmen into a demilitarized zone and thus into an “island of peace.”

    Although some opposition members support the proposal, the ruling Democratic Progressive Party (DPP) strongly rejects it. Taiwan’s Mainland Affairs Council called the proposal “a Trojan horse with enormous risks to national security.”

    Rejection from Taiwan

    Beijing’s plans for a complete integration of Taiwan are also met with firm rejection in Taipei. It calls it a “one-sided” plan. Equal treatment and economic incentives only serve as a pretext to “accept the leadership of the Communist Party,” according to Taiwan’s Mainland Affairs Council.

    “China should think about how it can take care of its bad debts, but not how it can conduct united front work against Taiwan,” said Wang Ting-yu, a deputy of the ruling Democracy Party, in a video message.

    Xi: never committed to not use force

    And it seems Beijing’s supposed peace plan should indeed be taken with a grain of salt. After all, China’s extended hand can quickly turn into a fist. A glance at the waters around Taiwan is enough to realize this. Between Wednesday and Thursday morning alone, 68 Chinese aircraft and ten ships have been sighted, as the Taiwanese Ministry of Defense announced on Thursday.

    The Chinese Communist Party and its General Secretary Xi Jinping never tire of emphasizing that they are striving for a peaceful unification of the People’s Republic with Taiwan. But there is also no doubt about the alternative. At the last CP Party Congress in October, Xi said: “Reunification of the motherland must be achieved and will be achieved. But will never commit to abandoning the use of force.”

    • Geopolitics
    • Military
    • Taiwan
    • Taiwan-Wahlen

    Events

    Sept. 18, 2023; 2:30 p.m.
    China International Investment Promotion Agency, Conference (in Frankfurt): Bozhou City Investment and Cooperation Conference More

    Sept. 19, 2023; 10 a.m.
    China-Kompetenzzentrum Duesseldorf, Seminar (in Duesseldorf, in Chinese): Successful Business in Germany – Healthy and Safe Work in Germany More

    Sept. 19, 2023; 2:30 p.m. CEST (8:30 p.m. CST)
    Fairbank Center for Chinese Studies, Urban China Series: Cross-Border Competition and Governance in the Greater Bay Area of Guangdong, Hong Kong, and Macau More

    Sept. 19, 2023; 3 p.m.
    Swiss Chinese Chamber of Commerce, Strategy Workshop (in Zurich): Swiss business in China – reviewing your China Strategy? More

    Sept. 19, 2023; 10 p.m. CEST (Sept. 10, 2 a.m. CST)
    Fairbank Center for Chinese Studies, Modern China Lecture Series: When Folding Chairs Became Bestsellers: The Revolutionary Roots of China’s Furniture Exports More

    Sept. 20, 2023; 5:15 a.m. CEST (11:15 a.m. CST)
    EU SME Centre, Workshop (in Shanghai and online): From the Ground Up: Industrial Building Design, Maintenance, and Digitalisation More

    Sept. 20, 2023; 9 a.m. CEST (3 p.m. CST)
    stars – for Leaders of the Next Generation, Webinar: Stock Taking and Prospects of Sino-Swiss relations in a re-asserting Europe and post-Covid China More

    Sept. 20, 2023; 9 a.m. CEST
    Urgewald, Conference: New kid on the block: AIIB after 7 years of operation More

    Sept. 21, 2023; 9 a.m. CEST (3 p.m. CST)
    Dezan Shira & Associates, Seminar (online and in Shenzhen): IIT Clarity for Expats in China: Benefits Extension and Accessing the GBA IIT Subsidies in 2023 More

    Sept. 21, 2023; 10 a.m.
    China International Investment Promotion Agency, Logistics Forum (in Duisburg): The New Silk Road Logistics Forum More

    Sept. 21, 2023; 11 a.m. CEST (5 p.m. CST)
    Kiel Institute for the World Economy, Global China Conversations: Global Gateway and the Belt and Road: A Sustainable Alternative? More

    Sept. 21, 2023; 5:30 p.m. CST
    EU SME Centre, Conference (in Jinan): 2023 Sino-German (European) SME Communication & Cooperation Conference (SMEC) More

    News

    Foreign policy positions published ahead of UN assembly

    Shortly ahead of next week’s United Nations General Assembly, China has published an official document setting out its position on important issues of international politics. In addition to many familiar phrases, such as that of the “community of common destiny for mankind,” it contains quite relevant positions:

    • Ukraine: Ukraine: The Chinese government confirms in the document its fundamentally pro-Russian stance; there is no sign of turning away from Moscow. China supports “a political settlement of the Ukraine crisis”; the word “war” is not used. Europe alone is named as the culprit. The legitimate “security interests” of all parties are to be taken into account (thus also those of Russia); sanctions are counterproductive. Also known, however, is China’s condemnation of nuclear threats.
    • Afghanistan: Afghanistan: Here, China demonstrates clear acceptance of the Taliban. The international community should respect the country’s independence and recognize an “Afghan-led” government organization without reservations.
    • BRI: BRI: China will push “better cost-effectiveness” at this year’s Belt and Road Forum.
    • Climate cooperation: criticism of the West. China opposes “attempts to politicize, instrumentalize and weaponize energy issues.”
    • Human rights: The most important human rights are “happiness” and “aspirations for a better life.” Democratic rights are also mentioned. But: Each country should implement human rights in its own way.
    • New areas for global governance: the deep sea, the poles, space, the Internet, and AI are also targets of global governance.
    • Security Council: The UN Security Council is to be opened up to developing countries. What is left unsaid: This could increase China’s influence.

    China political scientist Moritz Rudolf, currently at Yale, sees the document primarily as criticism of the US. With formulations such as the “use of unilateral sanctions,” the accusation of hypocrisy and the like, the document attempts to pick up on the mood of the Global South toward the United States. fin

    • Geopolitics
    • United Nations

    Taiwan reprimands Elon Musk

    Taiwan has criticized Tesla founder Elon Musk for once again interfering in strained relations with China. “Taiwan is not part of the People’s Republic of China and certainly not for sale,” Taiwan’s Foreign Minister Joseph Wu told Elon Musk Thursday on X, formerly Twitter.

    Earlier, Musk made the following comments about the tense situation in the Taiwan Strait. “Their [Beijing’s] policy has been to reunite Taiwan with China. From their standpoint, maybe it is analogous to Hawaii or something like that, like an integral part of China that is arbitrarily not part of China mostly because … the US Pacific Fleet has stopped any sort of reunification effort by force,” Musk said at an event. The statements were published in a video on YouTube.

    Wu urged Musk to ask Beijing to open its short messaging service to the Chinese instead. The People’s Republic has blocked X for years, as well as other major Western social media such as Facebook.

    This is not the first time Musk has angered the government in Taipei. Last October, he suggested that the government in Beijing gain some control over Taiwan to ease tensions in the region. Musk has also already angered Ukraine with similarly ill-advised statements. rtr

    Banks are to strengthen yuan

    According to insiders, China’s authorities are asking the country’s largest banks to help in the fight against yuan weakness. To this end, credit institutions should not immediately balance their foreign exchange positions, but keep them open for a while. This was reported by Reuters news agency on Thursday, citing people familiar with the matter.

    This step would mean that part of the large dollar purchases by companies would be picked up by the banks and remain in their books for a while. This is expected to help ease devaluation pressure on the yuan. According to insiders, the instruction stems from a meeting the central bank held with some commercial banks earlier this week. At that meeting, the financial institutions were also told that companies wishing to make transactions of 50 million US dollars or more must obtain approval from the central bank.

    The yuan has lost more than five percent against the US dollar so far this year, making it one of the worst-performing currencies in Asia. “The source of the weakness in renminbi is very simply that interest rates in China are low, that activity in China is slow, therefore the rate of return of marginal capital invested in China is not as great as elsewhere, and therefore that impacts capital flows,” said Sid Mathur, an analyst at bank BNP Paribas. rtr

    The UK is target of espionage

    Chinese spies allegedly tried to recruit British officials in critical political, defense and business positions in order to gain access to national secrets. The British government stated this in response to a parliamentary report published in July.

    The Intelligence and Security Committee stated in its report that Beijing successfully infiltrated every sector of the British economy. Ministers had been too slow to counter this threat. China was engaged in a “whole of state” assault on the UK, and the government’s approach has been “completely inadequate” and dominated by short-term economic interests, the committee concluded after its four-year probe. Prime Minister Rishi Sunak told Parliament that he accepted the report and recognized that the government needed to improve in this regard.

    Seven times more investigations than in 2018

    Just last weekend, the arrest of a parliamentary researcher caused a stir. He is accused of spying for China. The young scientist denies being a spy, but his arrests have led to calls from British MPs for a stricter stance. The Chinese Foreign Ministry described the espionage allegations as “completely unfounded.”

    Britain’s domestic intelligence agency MI5 claims to be currently conducting seven times as many investigations into Chinese activities as it did in 2018, and the government has also set up a dedicated unit to protect elections from foreign interference. Last year, MI5 warned members of Parliament that a suspected Chinese spy was “involved in political interference activities” in Britain.

    According to a newspaper report this week, MI5 also warned the ruling party that two potential candidates in legislative positions were Chinese spies. The government stated that it regularly screens officials and has set up software to help detect, for example, fake profiles on social media. rtr

    Opinion

    A divo (or diva) of his time

    The legend Mei Lanfang (1894-1961): The life of the bisexual actor reflects the zeitgeist of multiple eras.

    More than sixty years after he passed away, the legendary Mei Lanfang (1894 – 1961) is still a cultural icon and a top symbol for Peking Opera. The life of the bisexual actor, who also played female roles on stage, was as interesting as it was complicated. His life story reflected the zeitgeist of different periods in which he lived and some difficult decisions people in those times had to make.

    When Mei started his career in Peking Opera, all women were played by men. Men and women acting together were considered indecent, even though performance artists, Peking Opera players included, had a social status already almost as low as prostitutes.

    In fact, many young male Peking Opera actors playing female roles were indeed involved in prostitution. In a way similar to that of Geisha, they entertained guests (all males, of course) in their well-decorated homes. These boys earned much more from this than from performing in theater. Sexual service was not necessary, but could be part of it.

    Unlike in Christian cultures, sexual intercourse between men was never considered a sin in Chinese history. As long as a man met his family obligation and married a woman, or multiple – having concubines was once allowed – he was free to have “fun.” There were exceptions, however, such as during the strict communist rule between the 1960s and the early 1980s, when same-sex intercourse could be punishable by death. By contrast, during the Ming (1368-1644) and Qing (1644-1911) dynasties, sex with young boys even became something fashionable among social elites.

    Life in the turbulent Shanghai of the 1920s

    Mei made his stage debut at the age of ten in Beijing. In addition to performance, he also did what his peers did before getting married for the first time at the age of 16. When Mei achieved diva or “divo” status in the 1920s, an era roughly comparable to Berlin in the 1920s was dawning in some major Chinese cities such as Shanghai and Beijing. China was still weak, and the majority of its city’s residents still lived in dire poverty. But a new republic was being built on the ruins of the imperial past, and Western things – from factories to futures exchanges, from films to nightclubs, from communist thoughts and feminist ideas – rushed in. Traditional and modern things competed with each other. Money flows, decadence, mafia and uprisings co-existed. Radical intellectuals, who longed for China’s rapid modernization, condemned “medieval” things like Peking Opera as cultural trash. But this did not diminish its popularity. On the contrary, thanks to some thoughtful foreign tours by Mei and his troupe, it even earned acclaim from artists and audiences in the Western world.

    Mei’s shining career was interrupted by the Japanese invasion of China in 1937. He withdrew from the stage and politely, tactfully refused invitations from both the Japanese occupiers and the puppet government to give shows. This won him accolades afterward because this was not something that all the Peking Opera stars had done during the difficult times.

    Life choices in turbulent years 

    In 1927, Mei married for the third time under the arrangement of his boyfriend Feng. Feng, a banker, was Mei’s lifelong supporter and not-so-openly boyfriend. His third spouse, Meng Xiaodong (孟小冬1908 – 1977), was a beloved Peking Opera singer who played male roles and was famous for her rich, low voice and sharply cool looks. However, feeling not being fairly treated, Meng openly divorced Mei in 1933.

    Meng happened to be bisexual, too. Under recommendation from her girlfriend Yao Yulan, the third concubine of the Shanghai mafia boss Du Yuesheng (杜月笙, 1888 – 1951), Meng became Du’s fourth concubine. Meng went to Hong Kong with Du in 1949 when the Communists won the civil war on the mainland. 

    Mei stayed and rose to become an important figure in artist circles. Initially, he tried to stay away from politics and the Communist Party, but later realized that this was not possible if he wanted to keep his social status. In 1959, he joined the Communist Party with the then-Chinese premier Zhou Enlai (1898 – 1976), being his official endorser. Mei passed away in 1961, believed to be lucky to leave the world five years before the Cultural Revolution broke out. When he died, the dark clouds were already gathering. They would eventually develop into violent storms, which saw Peking Opera mutilated, all traditional pieces banned, and almost all Peking Opera stars persecuted, tortured, or even pressured to commit suicide.

    Meanwhile, Mei’s old sweetheart, Meng Xiaodong, stayed in Hong Kong. She refused several invitations from Premier Zhou to move back to China. She actually moved a bit further to Taiwan. In 1964, and died there from illness more than a decade later.  

    Executive Moves

    Chen Jiachang was appointed vice minister of science and technology, Hu Weilie was appointed vice minister of justice.

    In addition, the State Council of the People’s Republic announced a number of removals from office. Liu Zhao was removed from the post of vice minister of public security. Xu Hongcai was removed from the post of vice minister of finance. Xiang Dong will no longer serve as deputy director of the State Council Research Office. Yu Bing will no longer hold the position of deputy director of the National Energy Administration.

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

    Dessert

    Chilies first reached China in the 16th century. Sailors brought them from Southeast Asia. The Portuguese and Dutch had brought them there. The Chinese sailors imported the red pods allegedly not only for their taste, but also for their beauty. In Gaotai (Gansu), farmers have been growing these nightshade plants for 300 years. Here they turn chilies that shrivel away drying in the sun.

    China.Table editorial office

    CHINA.TABLE EDITORIAL OFFICE

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