Table.Briefing: China

Saxony’s Taiwan office + Power market reform

Dear reader,

A remarkable partnership was sealed this week in Taipei: Through a newly opened liaison office, the state of Saxony aims to collaborate with the Taiwanese semiconductor world leader, TSMC, in the future. To staff the new chip factory in Dresden with skilled workers, TSMC is opening its internal training centers to the people of Saxony for the first time. So, the European chip elite of tomorrow could indeed hail from East Germany.

The fact that this could happen is also thanks to the visit of German Minister of Research Bettina Stark-Watzinger, to Taiwan, writes Taiwanese journalist Wen-Yee Lee, who was present at the office opening. In March, Stark-Watzinger became the first German cabinet member to visit the democratically governed island in 26 years. This achievement is highly regarded there.

China is now taking concrete steps in its long-awaited power market reform. The most crucial element is a national spot market, which aims to improve the transfer of electricity between provinces and facilitate almost real-time trading of electricity. This means that when the weather is good, renewable energy is available at an affordable price from the grids. In times of calm or cloudiness, renewables from other provinces can be imported. So far, individual regions had been cooking their energy stew separately.

In the long run, the still-dominant coal power could slowly but surely be pushed out of the grid, as Nico Beckert reports. However, there are still several hurdles to overcome. Local cadres and state energy providers are often guided by strong vested interests and they often stand in the way of an efficient overall system. Additionally, a free electricity market would regulate prices based on supply and demand. In economically challenging times, Beijing may not be willing to relinquish control so easily.

Your
Fabian Peltsch
Image of Fabian  Peltsch

Feature

Saxony wants to learn from Taiwan

Saxony’s Science Minister Sebastian Gemkow (CDU), TSMC Vice President Lora Ho and TU Dresden Rector Ursula Staudinger.

The German state of Saxony has opened a state-funded science liaison office in Taipei, Taiwan, with the goal of fostering student exchanges between Taiwan and Saxony. This move follows the announcement by Taiwan’s largest chipmaker, TSMC, to build a chip factory in Dresden last month. 

The science liaison office will be operated by TU Dresden, which signed a trilateral cooperation agreement Tuesday with Saxony and TSMC to run a talent incubation program in Taiwan. “It is really about, on the one hand, getting more and more engineering and natural science students interested in the field of semiconductors,” said Ursula Staudinger, president of TU Dresden, at the office’s opening ceremony in Taipei. 

Education for Saxony’s chip elite of tomorrow

The new office serves as a central point for Taiwanese students seeking education in Saxony and for Saxony students looking to study in Taiwan. Through the talent incubation initiative, annually, up to 100 students from 11 Saxon universities will have the opportunity to study in Taiwan and intern at TSMC, supported by state funding. The world’s leading Taiwanese chip experts are thus training foreign students for the first time in their internal training center to become chip specialists. And, of course, the Dresden plant, in particular, should also benefit from this.

Worldwide, the chip industry is short of skilled workers. “We need tailor-made curricula in academic education that are oriented towards the needs of industry, especially in the field of microelectronics,” said Sebastian Gemkow, Saxony’s Minister for Science. “We are organizing a genuine exchange of skilled workers on the basis of university cooperation.” He has no concerns about possible cultural differences.

The collaboration between the elite institution and Saxony has also taken many Taiwanese by surprise. The visit of the German Minister of Education, Bettina Stark-Watzinger, in March likely paved the way for this partnership. It was the first time in 26 years that a German cabinet member visited Taiwan. It was considered a milestone in German-Taiwanese relations, highly appreciated by many on the island.

Taiwanese also hope to gain know-how from Germany

A TSMC delegation visited TU Dresden last week to discuss the incubation program. “We understand the importance of investing in talent development to drive innovation, and this program reflects our commitment to supporting the growth and development of the industry in Europe and beyond,” said TSMC Senior Vice President Lora Ho at a signing event in Taichung, where its training facility is also located. 

Ho added that TSMC will not require participating students to join the company after the program’s conclusion. However, she hinted that by training more students, the company increases its opportunities to attract talent in Germany. “We have to prepare for the impending shortage of skilled workers and train skilled workers worldwide,” Ho explains.

Staudinger noted that TU Dresden and TSMC are also exploring research partnerships, particularly given the university’s strengths in advanced material science and micro- and nanoelectronics. “It’s this mix of interdisciplinarily linked research for the semiconductor industry where we have a great match with the R&D department of TSMC,” she said.  

Delays at chip plant in Arizona

In addition to Saxony, more and more US states are also setting up investment offices in Taiwan. However, TSMC’s ongoing chip factory construction in Arizona has experienced delays, pushing the production start from 2024 to 2025 due to a local skilled worker shortage.

TSMC dispatched seasoned technicians from Taiwan to expedite the process. The inauguration of the Saxony Science Liaison Office coincided with a visit by Arizona Gov. Katie Hobbs, who was participating in a US Business Day event nearby. 

Addressing the labor shortage and cultural differences in Arizona, Hobbs said they have announced several initiatives to nurture the skilled workforce. “We’re continuing to make sure that we have the skilled workforce that’s needed, both on the advanced manufacturing side but also the construction side,” she said. Wen-Yee Lee, Fabian Peltsch

  • Chips
  • Semiconductor
  • Technology
  • TSMC

More opportunities for renewables through electricity market reform

The Chinese government has released new rules for establishing spot markets for electricity trading. According to Yan Qin, an energy expert at the analytics firm Refinitiv, these rules represent a “milestone in creating a unified national electricity market”. Experts believe this could help push coal-generated electricity out of the grid and pave the way for cheaper electricity from renewables. A comprehensive electricity market reform could reduce Chinese CO2 emissions by over a third by 2035, according to the International Energy Agency.

Little cross-provincial electricity trading so far

Despite 20 years of reform efforts, China still lacks a unified electricity market. This has favored coal-generated electricity. More than 20 provinces often prioritize self-sufficiency over trading electricity with neighboring provinces. Consequently, instead of importing green electricity from neighboring provinces, new coal power plants have been built.

So far, electricity trading in China relies on a mix of long-term contracts and government regulations that control prices. Most of these contracts are within provinces. Cross-provincial and short-term spot trading are still quite limited and mostly occur in pilot projects.

Spot markets are important for trading electricity nearly in real-time. The newly released plans aim to liberalize the market and promote short-term trading, according to experts. Lauri Myllyvirta, an energy expert at the Center for Research on Energy and Clean Air (CREA), notes, “A functioning electricity market could drastically reduce the need for coal-fired power plants and facilitate the integration of large amounts of variable, clean electricity generation.” Currently, vast wind and solar parks are being built in the deserts of western China to supply power to industries along the eastern and southern coasts. However, this requires a functioning national electricity market, according to analysts at the consulting firm Trivium China.

IEA: Electricity market reform reduces CO2 emissions

A nationwide spot market, in addition to long-term electricity trading, means that when wind and solar energy are abundant, cheap renewables can push coal-generated electricity out of the grid. During calm or cloudy periods, renewables can be imported from other provinces, eliminating the need to run local coal power plants. According to Myllyvirta, a functioning electricity market would make the construction of new coal power plants unnecessary. According to the International Energy Agency, comprehensive electricity market reform could reduce emissions by up to 38 percent by 2035.

However, Yan Qin also points out that these new plans are just the beginning. She states on X, “There is still a long way to go before spot markets are fully functional. I think it will take until 2030.” While the new plans make it easier to include renewables in electricity trading, more precise regulations and implementation decisions are still needed, Qin says.

Provincial interests slow reform

Currently, the provinces are responsible for organizing and reforming electricity markets. Sometimes, strong vested interests within provinces hinder the establishment of an efficient overall system, according to Myllyvirta. State-owned energy companies prefer coal from their own provinces because it preserves jobs in coal mines and power plants and promotes self-sufficiency. “The Chinese provinces are highly mercantilist and favor local production, even if it is far from cost-optimal,” says Myllyvirta.

Cross-provincial electricity trading is in the national and international interest but not necessarily in the interest of individual provinces. This is one reason why the International Energy Agency suggested in an April 2023 report that national institutions should coordinate the transformation of electricity trading more strongly. However, this would also require upgrading the national electricity grid to ensure the flow of energy.

Yet, a national electricity market would mean a complete overhaul of the existing system, according to analysts at Trivium China. “China’s energy transition will lead to seismic political-economic upheavals, creating new winners and losers in various provinces and industries.” Additionally, on a free electricity market, prices are determined by supply and demand, which removes them from the political influence of Beijing. Whether the central government can accept rising electricity prices during economic hardships is uncertain. For all these reasons, the central government is likely to continue cautiously reforming the electricity market.

News

German investments in China approach record high

According to a study, German direct investments have increased in China despite the political debate surrounding de-risking. In the first half of the year, companies invested 10.3 billion euros, according to the Institute of the German Economy (IW), as reported by Reuters on Wednesday. While this was a slight drop from the record level of twelve billion euros in the first six months of 2022, it was still the second-highest value ever.

In all the first half-years between 2010 and 2020, no more than half as much was invested in China, usually significantly less. “The urge to invest in China is still at a high level,” the study states. China’s share of all German direct investment flows abroad even rose to 16.4 percent. “The country has never been this significant relative to other countries,” says IW expert Juergen Matthes. China’s share of total foreign investments was only 11.6 percent in the first half of 2022 and 5.1 percent before the 2019 coronavirus crisis.

However, total German direct investment flows abroad fell significantly in the first half of 2023, from 104 billion euros to 63 billion euros. “Overall, the trend towards China is largely unbroken this year as well,” says Matthes. “Despite the German economy investing significantly less abroad overall, new direct investments in China remain almost as high as before.” Most of the money came from profits earned in China and then reinvested.

The share of the rest of Asia in the first half of 2023 was just under nine percent. The IW researcher described this as “comparatively high but not exceptionally so”. China’s share, on the other hand, has increased significantly. “There has been no diversification away from China; on the contrary, China’s importance relative to the rest of Asia has increased even further.” It is noteworthy that nearly a quarter of German direct investments have recently flowed to Asia. rtr/ari

  • Decoupling
  • Investments

Severe weather warnings following deadly tornado

Chinese meteorological authorities have once again issued warnings of heavy rain and wind in several regions of China. On Tuesday, a tornado in the eastern province of Jiangsu caused devastation and claimed the lives of ten people. Images on social media showed overturned cars, downed power lines and flying debris.

According to CCTV, two areas in the province were affected – Suqian and Yancheng. Five people were killed, and four were seriously injured when the tornado suddenly struck a densely populated area in Suqian, damaging more than 1,600 homes and devastating hectares of crops. The tornado then moved through Yancheng, killing five more people and injuring four others, as reported by CCTV. Weather warnings were also issued on Wednesday for the southwestern region of Chongqing, several areas in southwestern Guizhou, southern Hunan, eastern Anhui, and central Hubei. rtr

  • Climate
  • Storm

Trial against MeToo journalist begins

At the end of the week, the trial of feminist journalist Sophia Huang Xueqin will begin in the People’s Court in Guangzhou. Two years ago, Huang was detained on charges of “incitement to subvert state power”. According to her lawyer, the trial is set to take place on Friday at 9:30 a.m. Labor activist Wang Jianbing, who was arrested at the same time, will also be on trial with her.

Huang supported the #MeToo movement in China through her reporting. She exposed cases of sexual harassment in the journalism industry and at Chinese universities, among other issues. The now 34-year-old also participated in a demonstration against the proposed extradition law in Hong Kong in the summer of 2019. After her return to mainland China, her travel documents were confiscated, preventing her from starting a law degree in Hong Kong in the fall of 2019.

Huang is currently in the Guangzhou No. 1 Detention Center. A close friend of hers told Radio Free Asia that Wang had been subjected to sleep deprivation and malnutrition in detention. “She has lost weight quickly, and she hasn’t had her period for more than five months,” the friend reported. Over the past two years, Huang also reportedly suffered from calcium deficiency, low blood pressure and blood sugar. Organizations like “Reporters Without Borders” have long called for the release of the journalist. fpe

Economic experts: EU examination hampers transformation of the automotive industry

According to the expert panel on the transformation of the automotive industry, Germany needs to become as independent as possible from raw materials sourced from China. In a paper published on Wednesday, the experts called for long-term strategies that should be developed by both policymakers and companies. This entails the need for new trade agreements, resource partnerships with other countries, as well as guarantees and loans for resource projects. The experts also consider a raw materials fund, which is supported by Germany’s Minister for Economic Affairs, Robert Habeck (Green Party), to be appropriate.

Monika Schnitzer, a member of the Council of Economic Experts and the chairwoman of the expert commission, pointed out, “We won’t be able to break free from China so quickly.” Therefore, long-term effective measures are necessary. “Investment must happen now.” In doing so, Germany could reap the benefits in ten years. The expert panel also emphasized the importance of semiconductors, which constitute an increasing portion of the value chain in vehicles. The goal should be to establish resilient supply chains with manageable risks in this sector.

Clear stance on tariffs

Contrary to the European Commission’s announcement of considering tariffs on Chinese EV imports, which has drawn sharp criticism from Beijing, Schnitzer does not view this as a good idea. She believes that it would delay adjustments in the industry. “It is more important to focus on speeding up efforts to make our own products more competitive,” stated the expert.

Schnitzer argued that it is always the wrong approach to think that protective measures can save a domestic industry. Instead, the industry needs to take the initiative and find ways to improve. “In this case, it primarily concerns smaller EVs that would be kept away from our market in this way. With smaller cars, we can only put a significant number on the road by importing them.” Schnitzer even suggested that it would be better if these cars were produced in Germany and referred to BYD’s considerations of establishing production facilities in Germany. rtr/jul

  • Economy

Eskelund relies on EU Commissioner’s visit

The European Chamber of Commerce in China hopes for clear words during the upcoming visit of EU Trade Commissioner Valdis Dombrovskis. “My expectation would be that the historically high trade imbalance between Europe and China is addressed,” said Chamber President Jens Eskelund, according to DPA, during the presentation of their current position paper in Beijing on Wednesday. Dombrovskis is expected to be in Beijing from Sept. 23 to 26 and will meet with China’s Vice Premier He Lifeng, among others.

Eskelund expects that the announced EU investigation into Chinese subsidies for EV manufacturers will also be discussed. “I am sure that the Chinese side will also have a number of questions for Europe.” European Commission President Ursula von der Leyen announced the investigation in her State of the European Union address last week.

According to Eskelund, experts recognize that production capacities in China are higher than demand, and overcapacity significantly affects the automotive market. The Chamber hopes that the investigation will be used to address any imbalances or deficiencies in fair competition conditions. ari

Heads

Joerg Hoehn – bridging the gap for medium-sized sompanies

At the German Centre Beijing, Joerg Hoehn paved the way for medium-sized companies to enter China. A baker and a Cologne carnival club also played a role.

After completing his studies in International Relations and Economics in St. Gallen, a crucial question arose for Joerg Hoehn: Should he pursue a career in Brussels or with one of the European institutions like most of his peers? After all, it was an exciting time. The EU’s eastward expansion had just taken place, and the dynamics he experienced during a year of study at the College of Europe in Poland impressed him greatly. But there was also his growing enthusiasm for another country. Since a backpacking trip after high school, his interest in China had steadily grown. The German Academic Exchange Service (DAAD) offered a graduate program with language courses for non-sinologists. The decision to go to Beijing was made quickly. It marked the beginning of twelve exciting years in the People’s Republic.

Upon his arrival, he never thought he would stay so long, Hoehn says today. At the Beijing Foreign Studies University in the western Haidian district of the city, what initially attracted him was the vibrant student life and new friendships. There were also occasional corporate visits as part of the DAAD graduate program. Right at the first meeting, he visited the German Centre Beijing, a kind of incubator for German companies in China. Despite the name, it wasn’t a government institution but a creation of the Baden-Wurttemberg state bank. There are two other locations in China, in Shanghai and Taicang, which belong to the Bavarian state bank.

The idea fascinated Hoehn immediately. Located in a high-rise building in the central Chaoyang district, close to the German school and embassy, the German Centre Beijing had been offering small offices since 1999, ideal for newcomers. “When medium-sized companies come to China, they are essentially startups, often with just two or three people,” Hoehn explains. “The German Centre Beijing provides a secure base. You arrive, unpack and get started.”

A colorful mix of medium-sized companies

Hoehn recounts the diversity of companies renting space there: “It ranged from medical technology companies to light rail track builders, the biggest energy companies, but also academic institutions, the Chamber of Commerce, law firms, a truly unusual mix. I found it fascinating to learn: Why are these people in China, and what opportunities do they see here? When you talk to these small businesses, they are often really great medium-sized companies with incredible business fields and ideas that I would have never thought of.”

After starting as an assistant to the management at the German Centre Beijing, Hoehn quickly moved on to become a Business Development Manager. After three years, he switched to the Luxembourg Embassy in Beijing as an Economic Counselor but returned to the German Centre Beijing, this time as its Managing Director.

From the beginning, he was particularly concerned with how to build the best possible bridges for German newcomers, helping them settle well into their new work and living environment in China. This also included creating connections between the companies, which were spread over twelve floors and had little overlap.

On the first day, Hoehn and his team always had a surprise in store for newcomers, which brought many smiles to their faces. “On our level of the German Centre Beijing, there was a German baker. When people had just arrived and might have felt a bit lost, this was a piece of home, a small starting point. We would have coffee and maybe a piece of cake and talk about what they needed from us to get started.” This often included questions about starting a business, personnel, but also how to get a Chinese driver’s license or passport and visa issues. Regulatory issues were often unclear as well.

Promoting network building

For some companies, Hoehn later built bridges back to Germany. “We were an objective sparring partner for our clients, bridging between the worlds. We provided assessments and on-site problem-solving but also translated back to headquarters in Germany,” says Hoehn. “Sometimes tenants asked me, ‘Can we have a conversation with colleagues in Germany to explain to them how you see things here in China and what challenges and special circumstances we face in our work here?’”

Hoehn and his team created a wide range of activities to build bridges between the companies and promote networking. Technical events focused on day-to-day business questions, current developments in tax law, general market trends, or specific industry reports. But there was also a cultural program. “For example, we celebrated Chinese New Year together. A Chinese employee might be standing there with the new boss from Germany, showing them how to make Jiaozi dumplings. It was about providing space for getting to know each other, meeting the CEOs and employees of other companies in person, facilitating an exchange. Once a year, we had Feuerzangenbowle, and we also showed the movie with English subtitles.” Sometimes, they also went skiing outside of Beijing or hiking on the Great Wall.

Carnival prince in Beijing

One cultural activity, in particular, was close to Hoehn’s heart as a Rhinelander. “We founded ‘Koelsche in Peking’ (KiP). That means, once a year, we celebrated carnival at the ‘Landgraf’, a pub in Beijing. I was even included in the carnival court as a prince. Being a prince was a great experience!”

When Hoehn joined the German Centre Beijing, China was in a particularly dynamic phase. On the road to the 2008 Olympics, the country was opening up, and some German companies quickly developed and seized opportunities and niches in the Chinese market through collaboration with their Chinese partners. This continuously fascinated Hoehn.

“Many came with large German companies, for example, as suppliers in the automotive industry. China was continually opening up during that time. Suddenly, there was a middle class there with money and consumer goods became more interesting. What I found particularly interesting was the case of a communications agency that had followed a German corporation as a service provider to build branding locally. And then you realized that these companies, over time – that was around 2010 – began to talk about having Chinese customers. I found that very interesting at the time because it wasn’t common for large Chinese companies to suddenly bring in a communication agency from the West.”

After twelve years, Hoehn left China for personal reasons and became a consultant, currently working in the Education Tech sector in Berlin. His experience in China has profoundly shaped his mindset. “Seeing opportunities, seizing opportunities: That’s something I definitely took from China and still benefit from today. In China, there was always the attitude: Let’s try this out. Julia Fiedler

Executive Moves

Zhang Yuejia is the new president of Zhilian Zhaopin, also known as Zhaopin.com. The website is one of the leading recruitment platforms in China.

Rachel Cheung is a new reporter at The Wire China. Cheung will be based in Hong Kong and previously worked for the South China Morning Post and Vice.

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

Dessert

In the mountains of the northwestern Chinese province of Qinghai, the new Wide Field Survey Telescope (WFST) of the Chinese Academy of Sciences commenced its operations on Sunday. Among the first images delivered by the 2.5-meter-wide telescope was this high-resolution wide-angle portrait of our neighboring galaxy, Andromeda. The device is nicknamed “Mozi”, after the ancient Chinese philosopher who conducted optical experiments in the late 5th century BCE.

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Licenses:
    Dear reader,

    A remarkable partnership was sealed this week in Taipei: Through a newly opened liaison office, the state of Saxony aims to collaborate with the Taiwanese semiconductor world leader, TSMC, in the future. To staff the new chip factory in Dresden with skilled workers, TSMC is opening its internal training centers to the people of Saxony for the first time. So, the European chip elite of tomorrow could indeed hail from East Germany.

    The fact that this could happen is also thanks to the visit of German Minister of Research Bettina Stark-Watzinger, to Taiwan, writes Taiwanese journalist Wen-Yee Lee, who was present at the office opening. In March, Stark-Watzinger became the first German cabinet member to visit the democratically governed island in 26 years. This achievement is highly regarded there.

    China is now taking concrete steps in its long-awaited power market reform. The most crucial element is a national spot market, which aims to improve the transfer of electricity between provinces and facilitate almost real-time trading of electricity. This means that when the weather is good, renewable energy is available at an affordable price from the grids. In times of calm or cloudiness, renewables from other provinces can be imported. So far, individual regions had been cooking their energy stew separately.

    In the long run, the still-dominant coal power could slowly but surely be pushed out of the grid, as Nico Beckert reports. However, there are still several hurdles to overcome. Local cadres and state energy providers are often guided by strong vested interests and they often stand in the way of an efficient overall system. Additionally, a free electricity market would regulate prices based on supply and demand. In economically challenging times, Beijing may not be willing to relinquish control so easily.

    Your
    Fabian Peltsch
    Image of Fabian  Peltsch

    Feature

    Saxony wants to learn from Taiwan

    Saxony’s Science Minister Sebastian Gemkow (CDU), TSMC Vice President Lora Ho and TU Dresden Rector Ursula Staudinger.

    The German state of Saxony has opened a state-funded science liaison office in Taipei, Taiwan, with the goal of fostering student exchanges between Taiwan and Saxony. This move follows the announcement by Taiwan’s largest chipmaker, TSMC, to build a chip factory in Dresden last month. 

    The science liaison office will be operated by TU Dresden, which signed a trilateral cooperation agreement Tuesday with Saxony and TSMC to run a talent incubation program in Taiwan. “It is really about, on the one hand, getting more and more engineering and natural science students interested in the field of semiconductors,” said Ursula Staudinger, president of TU Dresden, at the office’s opening ceremony in Taipei. 

    Education for Saxony’s chip elite of tomorrow

    The new office serves as a central point for Taiwanese students seeking education in Saxony and for Saxony students looking to study in Taiwan. Through the talent incubation initiative, annually, up to 100 students from 11 Saxon universities will have the opportunity to study in Taiwan and intern at TSMC, supported by state funding. The world’s leading Taiwanese chip experts are thus training foreign students for the first time in their internal training center to become chip specialists. And, of course, the Dresden plant, in particular, should also benefit from this.

    Worldwide, the chip industry is short of skilled workers. “We need tailor-made curricula in academic education that are oriented towards the needs of industry, especially in the field of microelectronics,” said Sebastian Gemkow, Saxony’s Minister for Science. “We are organizing a genuine exchange of skilled workers on the basis of university cooperation.” He has no concerns about possible cultural differences.

    The collaboration between the elite institution and Saxony has also taken many Taiwanese by surprise. The visit of the German Minister of Education, Bettina Stark-Watzinger, in March likely paved the way for this partnership. It was the first time in 26 years that a German cabinet member visited Taiwan. It was considered a milestone in German-Taiwanese relations, highly appreciated by many on the island.

    Taiwanese also hope to gain know-how from Germany

    A TSMC delegation visited TU Dresden last week to discuss the incubation program. “We understand the importance of investing in talent development to drive innovation, and this program reflects our commitment to supporting the growth and development of the industry in Europe and beyond,” said TSMC Senior Vice President Lora Ho at a signing event in Taichung, where its training facility is also located. 

    Ho added that TSMC will not require participating students to join the company after the program’s conclusion. However, she hinted that by training more students, the company increases its opportunities to attract talent in Germany. “We have to prepare for the impending shortage of skilled workers and train skilled workers worldwide,” Ho explains.

    Staudinger noted that TU Dresden and TSMC are also exploring research partnerships, particularly given the university’s strengths in advanced material science and micro- and nanoelectronics. “It’s this mix of interdisciplinarily linked research for the semiconductor industry where we have a great match with the R&D department of TSMC,” she said.  

    Delays at chip plant in Arizona

    In addition to Saxony, more and more US states are also setting up investment offices in Taiwan. However, TSMC’s ongoing chip factory construction in Arizona has experienced delays, pushing the production start from 2024 to 2025 due to a local skilled worker shortage.

    TSMC dispatched seasoned technicians from Taiwan to expedite the process. The inauguration of the Saxony Science Liaison Office coincided with a visit by Arizona Gov. Katie Hobbs, who was participating in a US Business Day event nearby. 

    Addressing the labor shortage and cultural differences in Arizona, Hobbs said they have announced several initiatives to nurture the skilled workforce. “We’re continuing to make sure that we have the skilled workforce that’s needed, both on the advanced manufacturing side but also the construction side,” she said. Wen-Yee Lee, Fabian Peltsch

    • Chips
    • Semiconductor
    • Technology
    • TSMC

    More opportunities for renewables through electricity market reform

    The Chinese government has released new rules for establishing spot markets for electricity trading. According to Yan Qin, an energy expert at the analytics firm Refinitiv, these rules represent a “milestone in creating a unified national electricity market”. Experts believe this could help push coal-generated electricity out of the grid and pave the way for cheaper electricity from renewables. A comprehensive electricity market reform could reduce Chinese CO2 emissions by over a third by 2035, according to the International Energy Agency.

    Little cross-provincial electricity trading so far

    Despite 20 years of reform efforts, China still lacks a unified electricity market. This has favored coal-generated electricity. More than 20 provinces often prioritize self-sufficiency over trading electricity with neighboring provinces. Consequently, instead of importing green electricity from neighboring provinces, new coal power plants have been built.

    So far, electricity trading in China relies on a mix of long-term contracts and government regulations that control prices. Most of these contracts are within provinces. Cross-provincial and short-term spot trading are still quite limited and mostly occur in pilot projects.

    Spot markets are important for trading electricity nearly in real-time. The newly released plans aim to liberalize the market and promote short-term trading, according to experts. Lauri Myllyvirta, an energy expert at the Center for Research on Energy and Clean Air (CREA), notes, “A functioning electricity market could drastically reduce the need for coal-fired power plants and facilitate the integration of large amounts of variable, clean electricity generation.” Currently, vast wind and solar parks are being built in the deserts of western China to supply power to industries along the eastern and southern coasts. However, this requires a functioning national electricity market, according to analysts at the consulting firm Trivium China.

    IEA: Electricity market reform reduces CO2 emissions

    A nationwide spot market, in addition to long-term electricity trading, means that when wind and solar energy are abundant, cheap renewables can push coal-generated electricity out of the grid. During calm or cloudy periods, renewables can be imported from other provinces, eliminating the need to run local coal power plants. According to Myllyvirta, a functioning electricity market would make the construction of new coal power plants unnecessary. According to the International Energy Agency, comprehensive electricity market reform could reduce emissions by up to 38 percent by 2035.

    However, Yan Qin also points out that these new plans are just the beginning. She states on X, “There is still a long way to go before spot markets are fully functional. I think it will take until 2030.” While the new plans make it easier to include renewables in electricity trading, more precise regulations and implementation decisions are still needed, Qin says.

    Provincial interests slow reform

    Currently, the provinces are responsible for organizing and reforming electricity markets. Sometimes, strong vested interests within provinces hinder the establishment of an efficient overall system, according to Myllyvirta. State-owned energy companies prefer coal from their own provinces because it preserves jobs in coal mines and power plants and promotes self-sufficiency. “The Chinese provinces are highly mercantilist and favor local production, even if it is far from cost-optimal,” says Myllyvirta.

    Cross-provincial electricity trading is in the national and international interest but not necessarily in the interest of individual provinces. This is one reason why the International Energy Agency suggested in an April 2023 report that national institutions should coordinate the transformation of electricity trading more strongly. However, this would also require upgrading the national electricity grid to ensure the flow of energy.

    Yet, a national electricity market would mean a complete overhaul of the existing system, according to analysts at Trivium China. “China’s energy transition will lead to seismic political-economic upheavals, creating new winners and losers in various provinces and industries.” Additionally, on a free electricity market, prices are determined by supply and demand, which removes them from the political influence of Beijing. Whether the central government can accept rising electricity prices during economic hardships is uncertain. For all these reasons, the central government is likely to continue cautiously reforming the electricity market.

    News

    German investments in China approach record high

    According to a study, German direct investments have increased in China despite the political debate surrounding de-risking. In the first half of the year, companies invested 10.3 billion euros, according to the Institute of the German Economy (IW), as reported by Reuters on Wednesday. While this was a slight drop from the record level of twelve billion euros in the first six months of 2022, it was still the second-highest value ever.

    In all the first half-years between 2010 and 2020, no more than half as much was invested in China, usually significantly less. “The urge to invest in China is still at a high level,” the study states. China’s share of all German direct investment flows abroad even rose to 16.4 percent. “The country has never been this significant relative to other countries,” says IW expert Juergen Matthes. China’s share of total foreign investments was only 11.6 percent in the first half of 2022 and 5.1 percent before the 2019 coronavirus crisis.

    However, total German direct investment flows abroad fell significantly in the first half of 2023, from 104 billion euros to 63 billion euros. “Overall, the trend towards China is largely unbroken this year as well,” says Matthes. “Despite the German economy investing significantly less abroad overall, new direct investments in China remain almost as high as before.” Most of the money came from profits earned in China and then reinvested.

    The share of the rest of Asia in the first half of 2023 was just under nine percent. The IW researcher described this as “comparatively high but not exceptionally so”. China’s share, on the other hand, has increased significantly. “There has been no diversification away from China; on the contrary, China’s importance relative to the rest of Asia has increased even further.” It is noteworthy that nearly a quarter of German direct investments have recently flowed to Asia. rtr/ari

    • Decoupling
    • Investments

    Severe weather warnings following deadly tornado

    Chinese meteorological authorities have once again issued warnings of heavy rain and wind in several regions of China. On Tuesday, a tornado in the eastern province of Jiangsu caused devastation and claimed the lives of ten people. Images on social media showed overturned cars, downed power lines and flying debris.

    According to CCTV, two areas in the province were affected – Suqian and Yancheng. Five people were killed, and four were seriously injured when the tornado suddenly struck a densely populated area in Suqian, damaging more than 1,600 homes and devastating hectares of crops. The tornado then moved through Yancheng, killing five more people and injuring four others, as reported by CCTV. Weather warnings were also issued on Wednesday for the southwestern region of Chongqing, several areas in southwestern Guizhou, southern Hunan, eastern Anhui, and central Hubei. rtr

    • Climate
    • Storm

    Trial against MeToo journalist begins

    At the end of the week, the trial of feminist journalist Sophia Huang Xueqin will begin in the People’s Court in Guangzhou. Two years ago, Huang was detained on charges of “incitement to subvert state power”. According to her lawyer, the trial is set to take place on Friday at 9:30 a.m. Labor activist Wang Jianbing, who was arrested at the same time, will also be on trial with her.

    Huang supported the #MeToo movement in China through her reporting. She exposed cases of sexual harassment in the journalism industry and at Chinese universities, among other issues. The now 34-year-old also participated in a demonstration against the proposed extradition law in Hong Kong in the summer of 2019. After her return to mainland China, her travel documents were confiscated, preventing her from starting a law degree in Hong Kong in the fall of 2019.

    Huang is currently in the Guangzhou No. 1 Detention Center. A close friend of hers told Radio Free Asia that Wang had been subjected to sleep deprivation and malnutrition in detention. “She has lost weight quickly, and she hasn’t had her period for more than five months,” the friend reported. Over the past two years, Huang also reportedly suffered from calcium deficiency, low blood pressure and blood sugar. Organizations like “Reporters Without Borders” have long called for the release of the journalist. fpe

    Economic experts: EU examination hampers transformation of the automotive industry

    According to the expert panel on the transformation of the automotive industry, Germany needs to become as independent as possible from raw materials sourced from China. In a paper published on Wednesday, the experts called for long-term strategies that should be developed by both policymakers and companies. This entails the need for new trade agreements, resource partnerships with other countries, as well as guarantees and loans for resource projects. The experts also consider a raw materials fund, which is supported by Germany’s Minister for Economic Affairs, Robert Habeck (Green Party), to be appropriate.

    Monika Schnitzer, a member of the Council of Economic Experts and the chairwoman of the expert commission, pointed out, “We won’t be able to break free from China so quickly.” Therefore, long-term effective measures are necessary. “Investment must happen now.” In doing so, Germany could reap the benefits in ten years. The expert panel also emphasized the importance of semiconductors, which constitute an increasing portion of the value chain in vehicles. The goal should be to establish resilient supply chains with manageable risks in this sector.

    Clear stance on tariffs

    Contrary to the European Commission’s announcement of considering tariffs on Chinese EV imports, which has drawn sharp criticism from Beijing, Schnitzer does not view this as a good idea. She believes that it would delay adjustments in the industry. “It is more important to focus on speeding up efforts to make our own products more competitive,” stated the expert.

    Schnitzer argued that it is always the wrong approach to think that protective measures can save a domestic industry. Instead, the industry needs to take the initiative and find ways to improve. “In this case, it primarily concerns smaller EVs that would be kept away from our market in this way. With smaller cars, we can only put a significant number on the road by importing them.” Schnitzer even suggested that it would be better if these cars were produced in Germany and referred to BYD’s considerations of establishing production facilities in Germany. rtr/jul

    • Economy

    Eskelund relies on EU Commissioner’s visit

    The European Chamber of Commerce in China hopes for clear words during the upcoming visit of EU Trade Commissioner Valdis Dombrovskis. “My expectation would be that the historically high trade imbalance between Europe and China is addressed,” said Chamber President Jens Eskelund, according to DPA, during the presentation of their current position paper in Beijing on Wednesday. Dombrovskis is expected to be in Beijing from Sept. 23 to 26 and will meet with China’s Vice Premier He Lifeng, among others.

    Eskelund expects that the announced EU investigation into Chinese subsidies for EV manufacturers will also be discussed. “I am sure that the Chinese side will also have a number of questions for Europe.” European Commission President Ursula von der Leyen announced the investigation in her State of the European Union address last week.

    According to Eskelund, experts recognize that production capacities in China are higher than demand, and overcapacity significantly affects the automotive market. The Chamber hopes that the investigation will be used to address any imbalances or deficiencies in fair competition conditions. ari

    Heads

    Joerg Hoehn – bridging the gap for medium-sized sompanies

    At the German Centre Beijing, Joerg Hoehn paved the way for medium-sized companies to enter China. A baker and a Cologne carnival club also played a role.

    After completing his studies in International Relations and Economics in St. Gallen, a crucial question arose for Joerg Hoehn: Should he pursue a career in Brussels or with one of the European institutions like most of his peers? After all, it was an exciting time. The EU’s eastward expansion had just taken place, and the dynamics he experienced during a year of study at the College of Europe in Poland impressed him greatly. But there was also his growing enthusiasm for another country. Since a backpacking trip after high school, his interest in China had steadily grown. The German Academic Exchange Service (DAAD) offered a graduate program with language courses for non-sinologists. The decision to go to Beijing was made quickly. It marked the beginning of twelve exciting years in the People’s Republic.

    Upon his arrival, he never thought he would stay so long, Hoehn says today. At the Beijing Foreign Studies University in the western Haidian district of the city, what initially attracted him was the vibrant student life and new friendships. There were also occasional corporate visits as part of the DAAD graduate program. Right at the first meeting, he visited the German Centre Beijing, a kind of incubator for German companies in China. Despite the name, it wasn’t a government institution but a creation of the Baden-Wurttemberg state bank. There are two other locations in China, in Shanghai and Taicang, which belong to the Bavarian state bank.

    The idea fascinated Hoehn immediately. Located in a high-rise building in the central Chaoyang district, close to the German school and embassy, the German Centre Beijing had been offering small offices since 1999, ideal for newcomers. “When medium-sized companies come to China, they are essentially startups, often with just two or three people,” Hoehn explains. “The German Centre Beijing provides a secure base. You arrive, unpack and get started.”

    A colorful mix of medium-sized companies

    Hoehn recounts the diversity of companies renting space there: “It ranged from medical technology companies to light rail track builders, the biggest energy companies, but also academic institutions, the Chamber of Commerce, law firms, a truly unusual mix. I found it fascinating to learn: Why are these people in China, and what opportunities do they see here? When you talk to these small businesses, they are often really great medium-sized companies with incredible business fields and ideas that I would have never thought of.”

    After starting as an assistant to the management at the German Centre Beijing, Hoehn quickly moved on to become a Business Development Manager. After three years, he switched to the Luxembourg Embassy in Beijing as an Economic Counselor but returned to the German Centre Beijing, this time as its Managing Director.

    From the beginning, he was particularly concerned with how to build the best possible bridges for German newcomers, helping them settle well into their new work and living environment in China. This also included creating connections between the companies, which were spread over twelve floors and had little overlap.

    On the first day, Hoehn and his team always had a surprise in store for newcomers, which brought many smiles to their faces. “On our level of the German Centre Beijing, there was a German baker. When people had just arrived and might have felt a bit lost, this was a piece of home, a small starting point. We would have coffee and maybe a piece of cake and talk about what they needed from us to get started.” This often included questions about starting a business, personnel, but also how to get a Chinese driver’s license or passport and visa issues. Regulatory issues were often unclear as well.

    Promoting network building

    For some companies, Hoehn later built bridges back to Germany. “We were an objective sparring partner for our clients, bridging between the worlds. We provided assessments and on-site problem-solving but also translated back to headquarters in Germany,” says Hoehn. “Sometimes tenants asked me, ‘Can we have a conversation with colleagues in Germany to explain to them how you see things here in China and what challenges and special circumstances we face in our work here?’”

    Hoehn and his team created a wide range of activities to build bridges between the companies and promote networking. Technical events focused on day-to-day business questions, current developments in tax law, general market trends, or specific industry reports. But there was also a cultural program. “For example, we celebrated Chinese New Year together. A Chinese employee might be standing there with the new boss from Germany, showing them how to make Jiaozi dumplings. It was about providing space for getting to know each other, meeting the CEOs and employees of other companies in person, facilitating an exchange. Once a year, we had Feuerzangenbowle, and we also showed the movie with English subtitles.” Sometimes, they also went skiing outside of Beijing or hiking on the Great Wall.

    Carnival prince in Beijing

    One cultural activity, in particular, was close to Hoehn’s heart as a Rhinelander. “We founded ‘Koelsche in Peking’ (KiP). That means, once a year, we celebrated carnival at the ‘Landgraf’, a pub in Beijing. I was even included in the carnival court as a prince. Being a prince was a great experience!”

    When Hoehn joined the German Centre Beijing, China was in a particularly dynamic phase. On the road to the 2008 Olympics, the country was opening up, and some German companies quickly developed and seized opportunities and niches in the Chinese market through collaboration with their Chinese partners. This continuously fascinated Hoehn.

    “Many came with large German companies, for example, as suppliers in the automotive industry. China was continually opening up during that time. Suddenly, there was a middle class there with money and consumer goods became more interesting. What I found particularly interesting was the case of a communications agency that had followed a German corporation as a service provider to build branding locally. And then you realized that these companies, over time – that was around 2010 – began to talk about having Chinese customers. I found that very interesting at the time because it wasn’t common for large Chinese companies to suddenly bring in a communication agency from the West.”

    After twelve years, Hoehn left China for personal reasons and became a consultant, currently working in the Education Tech sector in Berlin. His experience in China has profoundly shaped his mindset. “Seeing opportunities, seizing opportunities: That’s something I definitely took from China and still benefit from today. In China, there was always the attitude: Let’s try this out. Julia Fiedler

    Executive Moves

    Zhang Yuejia is the new president of Zhilian Zhaopin, also known as Zhaopin.com. The website is one of the leading recruitment platforms in China.

    Rachel Cheung is a new reporter at The Wire China. Cheung will be based in Hong Kong and previously worked for the South China Morning Post and Vice.

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

    Dessert

    In the mountains of the northwestern Chinese province of Qinghai, the new Wide Field Survey Telescope (WFST) of the Chinese Academy of Sciences commenced its operations on Sunday. Among the first images delivered by the 2.5-meter-wide telescope was this high-resolution wide-angle portrait of our neighboring galaxy, Andromeda. The device is nicknamed “Mozi”, after the ancient Chinese philosopher who conducted optical experiments in the late 5th century BCE.

    China.Table editorial office

    CHINA.TABLE EDITORIAL OFFICE

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