The Greens have decided: Annalena Baerbock will lead them into the Bundestag election campaign as their candidate for chancellor. If she’s successful it will have consequences for Germany’s relations with China – at least if you believe Baerbock’s statements so far, for she demands a hard line towards the People’s Republic. She sees a systemic rivalry with Beijing that goes far beyond economic policy issues. “It is a substantive issue of democracy, human rights, rule of law, and greening.” Trade is a powerful lever for defending and strengthening human rights and democratic values.
How would a Chancellor Baerbock look at the car show in Shanghai? Frank Sieren reports directly from the exhibition halls and shows how much the German carmakers are aligning their product range with the wishes of Chinese customers.
Baerbock’s distrust would probably also prevail when it comes to the second main topic: Huawei’s role in the planned expansion of the German IT security law. The Chinese network supplier is considered technically adept and comparatively inexpensive. But its trustworthiness is not particularly good, as Marcel Grzanna shows in his report.
Meanwhile, Ning Wang presents the e-cigarette boom in China: Companies like Relx were able to amass billions of US dollars within just under three years. But this could now come to an end: Beijing’s authorities want to put an end to the wild goings-on. At least from a health point of view, even a green chancellor could probably find something to like about this rigid approach.
I wish you many new insights while reading.
Almost unnoticed, the e-cigarette industry has grown strongly in China. Hardly anyone embodies this boom as much as Kate Wang. In 2018, the young Chinese woman began selling e-cigarettes and so-called vaping products – pens for vapor inhalation of liquids containing nicotine – in China’s cities. Barely three years later, Kate Wang is one of China’s richest women, with a personal fortune of around $10 billion. The company she founded, Relx, is one of the two major top dogs in the industry. Only Smoore International is slightly more successful as the world’s largest e-cigarette manufacturer. Its founder Chen Zhiping has amassed a fortune of around $16 billion in a short time.
According to the World Health Organization (WHO), there are more than 300 million smokers in China – more than in any other country in the world. They account for around one-third of all smokers worldwide. Meanwhile, every second man in the People’s Republic smokes, lung cancer is the most common type of cancer. The Tobacco Atlas calculates that 1.9 million people die each year in China as a result of smoking.
Kate Wang is also a smoker. But whenever she came home from work in the evening and took her baby in her arms, the young mother felt a deep sense of shame: The smell of unhealthy cigarette smoke was omnipresent. Added to this was concern for the health of her father, who had been smoking two packs of conventional cigarettes a day for years. And so Wang looked for an alternative to ordinary tobacco cigarettes – and finally found it in e-cigarettes.
According to Shanghai-based China Insights Consultancy, Wang has managed to capture more than 60 percent of China’s e-cigarette market in less than three years with Relx. Relx’s sales rose 147 percent to $585 million last year. That compares with sales of $19 million in its first year of operation in 2018.
The largely unregulated market for e-cigarettes and vaping products in China is also fuelling expectations of good business in the future. In its stock market brochure, consultancy Frost & Sullivan for market leader Smoore International forecast that between 2020 and 2024, global sales of e-cigarettes will grow by an average of 25 percent each year – for more than conventional cigarettes, where the analysts anticipate growth of 5.2 percent.
However, on March 22, China’s regulators announced that tobacco industry regulations could apply to e-cigarettes and vaping products in the future. Relx’s share price plummeted by 48 percent, and Wang’s fortune shrank by almost half overnight to $5 billion US.
The details of the draft amendments to the Tobacco Monopoly Act, which would also extend the jurisdiction of the State Tobacco Monopoly Administration (STMA) to e-cigarettes, have not even been finalized yet. Moreover, implementation could drag on for a long time. But the mere prospect of stricter regulation does not bode well for industry insiders: Ao Weinuo, head of the Electronic Cigarette Industry Committee, believes the bill would place e-cigarettes under the regulatory control of the STMA in the future, much like conventional cigarettes, where it both sells and regulates tobacco as a monopoly.
Charlie Chen, head of consumer research at Beijing-based investment firm China Renaissance, is somewhat more optimistic. “In the traditional tobacco industry, cigarette sales volume, and prices are set by China Tobacco. If this were to be applied to e-cigarettes, the entire value of e-cigarette companies will be lost as a result. But that is a very unlikely scenario,” Chen told business magazine Forbes.
Whatever the law ends up being, Relx faces a growing risk that its e-cigarette business in China may not bring in the same revenue in the future. Previously, the figures had risen by an average of 30 percent annually since 2016, according to industry calculations. Should strict regulation now follow, both prices and volume would be dictated by the state – and Relx would inevitably lose enormous value.
Once before, Chinese regulators cracked down on e-cigarettes and vaping in the country: They banned the online sale of e-cigarettes at the end of 2019. This was done to protect minors, in particular. At Relx, online sales accounted for about 15 to 20 percent of its total business at the time. However, since company founder Wang had focused more on trade in traditional shops from the beginning and therefore had a broad network of 5,000 shops in more than 250 cities, the company was able to cope well with the new law. Whether it will succeed again this time remains to be seen.
It is unclear whether the new regulations will also affect the taxation of e-cigarettes. Currently, the 13 percent tax rate is significantly lower than the 80 percent for regular tobacco cigarettes. Revenue from the tobacco industry is extremely welcome in the state coffers; last year, it amounted to ¥1.2 trillion ($184 billion) for regular cigarettes alone.
Until now, many e-cigarette manufacturers have avoided higher taxation by calling themselves technology companies and, therefore, not subject to closer scrutiny, according to a report by Shanghai-based state financial broker Everbright Securities. However, if a license is required to manufacture and produce e-cigarettes in the future, that would automatically bring more stringent scrutiny.
Here, too, company founder Wang is showing her foresight – and her willingness to cooperate: Since the last campaign against the e-cigarette industry, she has been anticipating that the e-cigarette and vaping industry could be subject to tougher controls, so Relx has been investigating the health risks of e-cigarettes in its own laboratory in Shenzhen since last year. It plans to release a study on the matter soon, it said. Relx has also announced that it will provide feedback to the regulator on the new draft amendments by April 22nd.
But not only domestic sales would be affected by a new regulation. Markets abroad would also feel the consequences, after all, China is also the world’s largest exporter of e-cigarettes. According to the Chinese Electronic Cigarette Trade Association, China’s factories produce about 90 percent of the world’s e-cigarettes. Almost the entire production is exported.
Relx is also moving abroad. A little over a year ago, a former scientist from the e-cigarette manufacturer Juul in the US was recruited and tasked with submitting an application to the Food and Drug Administration for the international branch of Relx to produce its e-cigarettes for the US market. That’s because, due to sanctions imposed by the former Trump administration, manufacturing in the US would be a way to avoid the high import tariffs. The company chose the New York Stock Exchange for its IPO a good two months ago.
But a look at its US competitor Juul shows what problems await Relx abroad as well. Juul was considered a promising start-up when it entered the market in 2015. To rejuvenate its dusty image, US tobacco company Altria secured about a 35 percent stake in Juul in 2018 for about $13 billion. But a wave of health lawsuits from users meant that Altria has since had to write down the value for Juul to $4.6 billion. Currently, the company is trying to make a comeback – with its own e-cigarette version that does not rely on liquids containing nicotine.
But it’s not just in the US that Relx won’t be able to avoid the health issue. The long-term health effects of e-cigarettes are also increasingly being investigated on the domestic market. Many studies have not yet been completed, but several studies have already linked cardiovascular and respiratory diseases to e-cigarettes. As a result, they are already banned in more than 40 countries.
The planned expansion of the IT Security Act is a good example of how much the political and economic rise of the People’s Republic of China is already preoccupying German politics these days. The legislative process has already been dragging on for more than two years. One good reason for the stalemate is the issue of Huawei. The Chinese network supplier is considered to be technically highly experienced and comparatively cheap to buy on the global market. But is it also trustworthy?
Or is Huawei a stooge of the Chinese state that comes across as a harmless tech service provider but is actually spying on rivals for its country’s intelligence services and gaining control over their critical infrastructure? An answer to this question has been debated for years in many countries around the world. Company founder Ren Zhengfei, who decades ago conducted IT research for China’s People’s Liberation Army, repeatedly points to his company’s independence. China’s laws, however, require every company in the country to cooperate with the security authorities if they see the need to do so.
The US, UK, Japan, Australia, and New Zealand have already decided to exclude Huawei components when building their 5G networks. Canada is likely to follow suit. And perhaps other countries will follow. Advocates of exclusion are getting new fodder from the Netherlands these days. The daily De Volkskrant reported on possible espionage activities by the Chinese manufacturer. The revelation refers to a report by the consulting firm CapGemini from 2010, which was however never published. Huawei had the ability to tap phone calls through local network operator KPN, including those of former Dutch Prime Minister Jan Peter Balkenende, the report said. The company vehemently denies the allegation, especially since there is no 100 percent proof. For Huawei, however, it’s another blow to the bow. Critics of the manufacturer will feel vindicated in their stance.
Meanwhile, German politicians are still looking for the happy medium. The latest, revised draft of the IT Security Act explicitly addresses the political challenge in paragraph 9b. Paragraph 5 now defines when a manufacturer of critical components, which includes Huawei as well as Ericsson, Nokia, or Cisco, is not trustworthy. The problem, however, is that this definition is based on a guarantee declaration by the manufacturer. With the warranty statement, the company enters into obligations and assurances. But wouldn’t a company that wants to spy simply fib a little at this point?
“For two years, there have been discussions and arguments about how the lack of trust in Huawei could be balanced by appropriate legislation. The IT Security Act now provides the leverage to be able to exclude Huawei. Nevertheless, it remains too fuzzy to provide a purely fact-based assessment of whether or not there is actually a risk. In the end, it’s still a question of trust,” says cybersecurity expert Timo Kob, founder of the security service provider HiSolutions.
Basically, the law serves to strengthen the supervisory function of the Federal Cyber Security Authority (BSI) over digital systems. As a federal authority in the portfolio of the Federal Ministry of the Interior (BMI), the BSI is given the authority to prohibit the use of critical components by operators of critical infrastructures. However, numerous different interests from ministries involved dragged out the process for years. The German Foreign Office (AA), for example, seems to be more concerned about Huawei’s trustworthiness than the BMI. Nevertheless, the AA will not be granted veto rights if manufacturers are required to declare the first-time use of technical components in the future. Although it must be consulted in an advisory capacity, the decision to approve a component remains with the BMI. Only when it comes to components that have already been installed does the AA have a say in the decision.
The explicit political assessment of a provider is the reason why the IT security law is often referred to as the “Lex Huawei”. The company itself, on the other hand, does not feel discriminated against at all. “We do not have the impression that this law is directed exclusively against Huawei. The conditions also apply to all others who compete with us. The decisive factor is that in the end, through a technological review of the components, an overall even higher level of security for mobile networks is achieved,” says company spokesman Patrick Berger in an interview with China.Table. The company does not want to make a final judgment until the law has been finally formulated.
Berger is aware of the geopolitical background of the IT security law. Nevertheless, he believes that a purely technical examination of all components should be sufficient to assess whether or not there is a threat to the national security of a state. The spokesman also points to the experience with Huawei in Germany over the past decade. “Products from Huawei are already an extensive part of even the 3G and 4G networks in Germany. Nevertheless, there has never been any discussion about security, partly because our components have not given any cause for this,” says Berger. The fact that the 5G network is now being discussed much more intensively is also the result of political developments in recent years.
The Chaos Computer Club even considers the security debate about Huawei to be “ridiculous”. In an analysis from early March, the authors write: “An untrusted vendor could in principle provide vulnerabilities that could be capable of compromising the availability, integrity, or confidentiality of a communications network.” However, the association argues that exploiting intended vulnerabilities would not go undetected and would result in corresponding drastic consequences that would be counterproductive for Huawei.
Among some German experts on China, an astonishing presumption and naïvety can be observed in dealing with China. The consequences of German and European foreign policy, especially the imposition of sanctions, are not sufficiently anticipated and publicly debated. Germany needs a paradigm shift in its dealings with China that takes appropriate account of China’s influence in global politics and develops smart, rather than confrontational, strategies to give Europe more opportunities to exert influence in global politics again.
China responded to the sanctions imposed by the EU on March 22nd, 2021, against four political officials and one institution in Xinjiang with countermeasures that hit Europe and Germany much harder. In addition to several politicians, academic institutions in Europe are also affected, including the Mercator Institute for China Studies (MERICS). Among experts who have worked in China for many years, it is well known that MERICS analyses are influenced or overshadowed by confrontational foreign and security policy theses. The sanctions hit hard many young scholars who joined MERICS after their successful graduation and often produced high-quality analyses but may have been a little naïve about the institute’s confrontational China stance. Without entries into China, the institute’s future seems compromised. Young scholars and business-related experts, in particular, are more likely to refrain from working with MERICS.
The question now arises as to the meaning and effect of politically motivated sanctions. Many analyses are available, most of which come to the conclusion that the effects of sanctions are generally misjudged and, above all, must be viewed in a differentiated manner. In his research, the US economist Gary C. Hufbauer concludes that, if at all, only very extensive sanctions have an effect, that the balance of power plays a significant role, and that the sanctioning states must act in a united manner. These conditions are not met in the case of the EU sanctions against China.
The sanctions are not expected to trigger a process that will improve relations with China and thus open up opportunities for influence. Developments in Hong Kong have shown that sympathies with violent protests – there was extensive vandalism in Hong Kong – have the opposite effect. The government in Beijing only initiated drastic changes to the status of Hong Kong after the violent escalation of the protests, which now means major restrictions on freedoms. In the Global South, China’s decolonization policy toward Britain and Western partners resonates more than many suspected. Undifferentiated support for the protests has also led to mainland youth changing their minds about developments in Hong Kong and now overwhelmingly backing their own government in Beijing.
The EU’s sanctions are being imposed in order to divert attention from Europe’s fears of decline and to show allegiance to the US. In his China.Table article “China bashing is booming”, Eberhard Sandschneider put the imposition of sanctions against China in geopolitical terms: “the US talks about values, but it means geopolitical influence.” He also comes to the accurate conclusion that China cannot be managed from the outside. China-bashing is booming at a time when the EU’s global political standing is pretty tattered and the EU’s and the UK’s global policy space is at a low point.
Andreas Fulda, an academic working in Nottingham, now calls for a paradigm shift in German foreign policy in a reply to Eberhard Sandschneider (China.Table reported). By this he means a tougher stance towards China and refers to the party’s internal Document No. 9: “Under the conditions of “Document No. 9″ there can be no open-ended intercultural dialogue with China”. Among other things, Document No. 9 limits freedoms in academic teaching – for example, the term “civil society” has been placed on the index. The document is an expression of China’s re-ideologization, which can be deplored and criticized for making dialogues difficult. However, there are still Chinese scholars who participate in international conferences on issues of civil society engagement and also publish on them. My habilitation thesis, which has been translated into Chinese and has the term civil society in its title, has not disappeared from libraries either. However, it is absurd to want to make an internal party document the yardstick for German foreign policy.
Calls for a tougher stance against China are currently experiencing an upswing. The Economist clarified in an article on 11.02.2021 why the accusation of genocide should not apply to the situation in Xinjiang: “to confront evil, the first step is to describe it accurately”. There is no solid evidence to support this intemperate accusation. All Chinese statistics on the population development of the Uyghurs in recent years would have to be falsified. The assessment that China could be dealt with by sanctions appears to be completely detached from the global political framework. The sanctions have already led to China stepping up its diplomatic offensives. Regarding Xinjiang, China has reacted with an invitation to diplomats, which 30 diplomats from 21 states accepted.
China will continue to rise scientifically, economically, and in terms of global politics. Next year, China’s contribution to the growth of the global economy is expected to exceed 60 percent. Even in Latin America South America, China has emerged as the largest trading partner. As recently as 2000, only two percent of exports from South American countries went to China. In 2018, it was already 22.1 percent. China’s foreign trade has recently increased strongly again. 30.6 percent in exports and 38.1 percent in imports. German industry, in particular, is benefiting from this.
China will continue to expand its influence in the United Nations and the Group of Twenty (G20), instrumentalizing this influence but proactively not pursuing an aggressive foreign policy outside Asia. Overall, China’s commitment to multilateralism could be seen as a starting point for an open perspective on solving global problems. China is deeply integrated in the international exchange of goods, services, and scientific knowledge. In the context of the trade conflict with the United States, China continues to emphasize its commitment to multilateralism and the largely free trade of goods.
China’s active role in the UN underpins its commitment to strengthening global governance. However, this provokes the USA and, to some extent, European states, which see their own influence being pushed back. US criticism of the World Health Organization’s (WHO) alleged dependence on China brought the critical debate to a head and, under President Trump, led to a halt in US payments to the WHO.
China also plays a formative role within the framework of the G20, the most important industrialized and emerging countries. The G20 summit in Hangzhou in 2016 contributed significantly to the upgrading of the group. In Hangzhou, China promoted the topic of sustainable finance, which has since received a major boost, especially at the EU level.
China is pursuing a two-track strategy in terms of foreign policy and foreign trade: On one hand, it is involved in existing international organizations, and on the other, it is (co-)founding new organizations and initiatives in which China has a leading role.
On its way to greater global influence, China will encounter a great deal of criticism and strong opposition from Western states, especially from the US, but also from the EU, Australia, and Canada. Bilateral confrontations with states in Africa and Latin America are unlikely to escalate, partly because the US is losing influence there. China will largely be able to compensate for the confrontations on the part of the USA and other states. Rather, if the confrontation with China continues, the EU runs the risk of suffering considerable economic damage and also of losing global political influence. The EU would be well advised to impress China with a resolute economic policy strategy in the direction of sustainability and climate neutrality, and to live up to its own expectations here.
Berthold Kuhn is a political scientist at the FU Berlin and consultant for international cooperation.
China’s former premier Wen Jiabao has offered gentle criticism of Xi Jinping in an essay – ostensibly a tribute to his late mother. His text was shared hundreds of thousands of times in China and promptly censored.
The Greens have decided: Annalena Baerbock will lead them into the Bundestag election campaign as their candidate for chancellor. If she’s successful it will have consequences for Germany’s relations with China – at least if you believe Baerbock’s statements so far, for she demands a hard line towards the People’s Republic. She sees a systemic rivalry with Beijing that goes far beyond economic policy issues. “It is a substantive issue of democracy, human rights, rule of law, and greening.” Trade is a powerful lever for defending and strengthening human rights and democratic values.
How would a Chancellor Baerbock look at the car show in Shanghai? Frank Sieren reports directly from the exhibition halls and shows how much the German carmakers are aligning their product range with the wishes of Chinese customers.
Baerbock’s distrust would probably also prevail when it comes to the second main topic: Huawei’s role in the planned expansion of the German IT security law. The Chinese network supplier is considered technically adept and comparatively inexpensive. But its trustworthiness is not particularly good, as Marcel Grzanna shows in his report.
Meanwhile, Ning Wang presents the e-cigarette boom in China: Companies like Relx were able to amass billions of US dollars within just under three years. But this could now come to an end: Beijing’s authorities want to put an end to the wild goings-on. At least from a health point of view, even a green chancellor could probably find something to like about this rigid approach.
I wish you many new insights while reading.
Almost unnoticed, the e-cigarette industry has grown strongly in China. Hardly anyone embodies this boom as much as Kate Wang. In 2018, the young Chinese woman began selling e-cigarettes and so-called vaping products – pens for vapor inhalation of liquids containing nicotine – in China’s cities. Barely three years later, Kate Wang is one of China’s richest women, with a personal fortune of around $10 billion. The company she founded, Relx, is one of the two major top dogs in the industry. Only Smoore International is slightly more successful as the world’s largest e-cigarette manufacturer. Its founder Chen Zhiping has amassed a fortune of around $16 billion in a short time.
According to the World Health Organization (WHO), there are more than 300 million smokers in China – more than in any other country in the world. They account for around one-third of all smokers worldwide. Meanwhile, every second man in the People’s Republic smokes, lung cancer is the most common type of cancer. The Tobacco Atlas calculates that 1.9 million people die each year in China as a result of smoking.
Kate Wang is also a smoker. But whenever she came home from work in the evening and took her baby in her arms, the young mother felt a deep sense of shame: The smell of unhealthy cigarette smoke was omnipresent. Added to this was concern for the health of her father, who had been smoking two packs of conventional cigarettes a day for years. And so Wang looked for an alternative to ordinary tobacco cigarettes – and finally found it in e-cigarettes.
According to Shanghai-based China Insights Consultancy, Wang has managed to capture more than 60 percent of China’s e-cigarette market in less than three years with Relx. Relx’s sales rose 147 percent to $585 million last year. That compares with sales of $19 million in its first year of operation in 2018.
The largely unregulated market for e-cigarettes and vaping products in China is also fuelling expectations of good business in the future. In its stock market brochure, consultancy Frost & Sullivan for market leader Smoore International forecast that between 2020 and 2024, global sales of e-cigarettes will grow by an average of 25 percent each year – for more than conventional cigarettes, where the analysts anticipate growth of 5.2 percent.
However, on March 22, China’s regulators announced that tobacco industry regulations could apply to e-cigarettes and vaping products in the future. Relx’s share price plummeted by 48 percent, and Wang’s fortune shrank by almost half overnight to $5 billion US.
The details of the draft amendments to the Tobacco Monopoly Act, which would also extend the jurisdiction of the State Tobacco Monopoly Administration (STMA) to e-cigarettes, have not even been finalized yet. Moreover, implementation could drag on for a long time. But the mere prospect of stricter regulation does not bode well for industry insiders: Ao Weinuo, head of the Electronic Cigarette Industry Committee, believes the bill would place e-cigarettes under the regulatory control of the STMA in the future, much like conventional cigarettes, where it both sells and regulates tobacco as a monopoly.
Charlie Chen, head of consumer research at Beijing-based investment firm China Renaissance, is somewhat more optimistic. “In the traditional tobacco industry, cigarette sales volume, and prices are set by China Tobacco. If this were to be applied to e-cigarettes, the entire value of e-cigarette companies will be lost as a result. But that is a very unlikely scenario,” Chen told business magazine Forbes.
Whatever the law ends up being, Relx faces a growing risk that its e-cigarette business in China may not bring in the same revenue in the future. Previously, the figures had risen by an average of 30 percent annually since 2016, according to industry calculations. Should strict regulation now follow, both prices and volume would be dictated by the state – and Relx would inevitably lose enormous value.
Once before, Chinese regulators cracked down on e-cigarettes and vaping in the country: They banned the online sale of e-cigarettes at the end of 2019. This was done to protect minors, in particular. At Relx, online sales accounted for about 15 to 20 percent of its total business at the time. However, since company founder Wang had focused more on trade in traditional shops from the beginning and therefore had a broad network of 5,000 shops in more than 250 cities, the company was able to cope well with the new law. Whether it will succeed again this time remains to be seen.
It is unclear whether the new regulations will also affect the taxation of e-cigarettes. Currently, the 13 percent tax rate is significantly lower than the 80 percent for regular tobacco cigarettes. Revenue from the tobacco industry is extremely welcome in the state coffers; last year, it amounted to ¥1.2 trillion ($184 billion) for regular cigarettes alone.
Until now, many e-cigarette manufacturers have avoided higher taxation by calling themselves technology companies and, therefore, not subject to closer scrutiny, according to a report by Shanghai-based state financial broker Everbright Securities. However, if a license is required to manufacture and produce e-cigarettes in the future, that would automatically bring more stringent scrutiny.
Here, too, company founder Wang is showing her foresight – and her willingness to cooperate: Since the last campaign against the e-cigarette industry, she has been anticipating that the e-cigarette and vaping industry could be subject to tougher controls, so Relx has been investigating the health risks of e-cigarettes in its own laboratory in Shenzhen since last year. It plans to release a study on the matter soon, it said. Relx has also announced that it will provide feedback to the regulator on the new draft amendments by April 22nd.
But not only domestic sales would be affected by a new regulation. Markets abroad would also feel the consequences, after all, China is also the world’s largest exporter of e-cigarettes. According to the Chinese Electronic Cigarette Trade Association, China’s factories produce about 90 percent of the world’s e-cigarettes. Almost the entire production is exported.
Relx is also moving abroad. A little over a year ago, a former scientist from the e-cigarette manufacturer Juul in the US was recruited and tasked with submitting an application to the Food and Drug Administration for the international branch of Relx to produce its e-cigarettes for the US market. That’s because, due to sanctions imposed by the former Trump administration, manufacturing in the US would be a way to avoid the high import tariffs. The company chose the New York Stock Exchange for its IPO a good two months ago.
But a look at its US competitor Juul shows what problems await Relx abroad as well. Juul was considered a promising start-up when it entered the market in 2015. To rejuvenate its dusty image, US tobacco company Altria secured about a 35 percent stake in Juul in 2018 for about $13 billion. But a wave of health lawsuits from users meant that Altria has since had to write down the value for Juul to $4.6 billion. Currently, the company is trying to make a comeback – with its own e-cigarette version that does not rely on liquids containing nicotine.
But it’s not just in the US that Relx won’t be able to avoid the health issue. The long-term health effects of e-cigarettes are also increasingly being investigated on the domestic market. Many studies have not yet been completed, but several studies have already linked cardiovascular and respiratory diseases to e-cigarettes. As a result, they are already banned in more than 40 countries.
The planned expansion of the IT Security Act is a good example of how much the political and economic rise of the People’s Republic of China is already preoccupying German politics these days. The legislative process has already been dragging on for more than two years. One good reason for the stalemate is the issue of Huawei. The Chinese network supplier is considered to be technically highly experienced and comparatively cheap to buy on the global market. But is it also trustworthy?
Or is Huawei a stooge of the Chinese state that comes across as a harmless tech service provider but is actually spying on rivals for its country’s intelligence services and gaining control over their critical infrastructure? An answer to this question has been debated for years in many countries around the world. Company founder Ren Zhengfei, who decades ago conducted IT research for China’s People’s Liberation Army, repeatedly points to his company’s independence. China’s laws, however, require every company in the country to cooperate with the security authorities if they see the need to do so.
The US, UK, Japan, Australia, and New Zealand have already decided to exclude Huawei components when building their 5G networks. Canada is likely to follow suit. And perhaps other countries will follow. Advocates of exclusion are getting new fodder from the Netherlands these days. The daily De Volkskrant reported on possible espionage activities by the Chinese manufacturer. The revelation refers to a report by the consulting firm CapGemini from 2010, which was however never published. Huawei had the ability to tap phone calls through local network operator KPN, including those of former Dutch Prime Minister Jan Peter Balkenende, the report said. The company vehemently denies the allegation, especially since there is no 100 percent proof. For Huawei, however, it’s another blow to the bow. Critics of the manufacturer will feel vindicated in their stance.
Meanwhile, German politicians are still looking for the happy medium. The latest, revised draft of the IT Security Act explicitly addresses the political challenge in paragraph 9b. Paragraph 5 now defines when a manufacturer of critical components, which includes Huawei as well as Ericsson, Nokia, or Cisco, is not trustworthy. The problem, however, is that this definition is based on a guarantee declaration by the manufacturer. With the warranty statement, the company enters into obligations and assurances. But wouldn’t a company that wants to spy simply fib a little at this point?
“For two years, there have been discussions and arguments about how the lack of trust in Huawei could be balanced by appropriate legislation. The IT Security Act now provides the leverage to be able to exclude Huawei. Nevertheless, it remains too fuzzy to provide a purely fact-based assessment of whether or not there is actually a risk. In the end, it’s still a question of trust,” says cybersecurity expert Timo Kob, founder of the security service provider HiSolutions.
Basically, the law serves to strengthen the supervisory function of the Federal Cyber Security Authority (BSI) over digital systems. As a federal authority in the portfolio of the Federal Ministry of the Interior (BMI), the BSI is given the authority to prohibit the use of critical components by operators of critical infrastructures. However, numerous different interests from ministries involved dragged out the process for years. The German Foreign Office (AA), for example, seems to be more concerned about Huawei’s trustworthiness than the BMI. Nevertheless, the AA will not be granted veto rights if manufacturers are required to declare the first-time use of technical components in the future. Although it must be consulted in an advisory capacity, the decision to approve a component remains with the BMI. Only when it comes to components that have already been installed does the AA have a say in the decision.
The explicit political assessment of a provider is the reason why the IT security law is often referred to as the “Lex Huawei”. The company itself, on the other hand, does not feel discriminated against at all. “We do not have the impression that this law is directed exclusively against Huawei. The conditions also apply to all others who compete with us. The decisive factor is that in the end, through a technological review of the components, an overall even higher level of security for mobile networks is achieved,” says company spokesman Patrick Berger in an interview with China.Table. The company does not want to make a final judgment until the law has been finally formulated.
Berger is aware of the geopolitical background of the IT security law. Nevertheless, he believes that a purely technical examination of all components should be sufficient to assess whether or not there is a threat to the national security of a state. The spokesman also points to the experience with Huawei in Germany over the past decade. “Products from Huawei are already an extensive part of even the 3G and 4G networks in Germany. Nevertheless, there has never been any discussion about security, partly because our components have not given any cause for this,” says Berger. The fact that the 5G network is now being discussed much more intensively is also the result of political developments in recent years.
The Chaos Computer Club even considers the security debate about Huawei to be “ridiculous”. In an analysis from early March, the authors write: “An untrusted vendor could in principle provide vulnerabilities that could be capable of compromising the availability, integrity, or confidentiality of a communications network.” However, the association argues that exploiting intended vulnerabilities would not go undetected and would result in corresponding drastic consequences that would be counterproductive for Huawei.
Among some German experts on China, an astonishing presumption and naïvety can be observed in dealing with China. The consequences of German and European foreign policy, especially the imposition of sanctions, are not sufficiently anticipated and publicly debated. Germany needs a paradigm shift in its dealings with China that takes appropriate account of China’s influence in global politics and develops smart, rather than confrontational, strategies to give Europe more opportunities to exert influence in global politics again.
China responded to the sanctions imposed by the EU on March 22nd, 2021, against four political officials and one institution in Xinjiang with countermeasures that hit Europe and Germany much harder. In addition to several politicians, academic institutions in Europe are also affected, including the Mercator Institute for China Studies (MERICS). Among experts who have worked in China for many years, it is well known that MERICS analyses are influenced or overshadowed by confrontational foreign and security policy theses. The sanctions hit hard many young scholars who joined MERICS after their successful graduation and often produced high-quality analyses but may have been a little naïve about the institute’s confrontational China stance. Without entries into China, the institute’s future seems compromised. Young scholars and business-related experts, in particular, are more likely to refrain from working with MERICS.
The question now arises as to the meaning and effect of politically motivated sanctions. Many analyses are available, most of which come to the conclusion that the effects of sanctions are generally misjudged and, above all, must be viewed in a differentiated manner. In his research, the US economist Gary C. Hufbauer concludes that, if at all, only very extensive sanctions have an effect, that the balance of power plays a significant role, and that the sanctioning states must act in a united manner. These conditions are not met in the case of the EU sanctions against China.
The sanctions are not expected to trigger a process that will improve relations with China and thus open up opportunities for influence. Developments in Hong Kong have shown that sympathies with violent protests – there was extensive vandalism in Hong Kong – have the opposite effect. The government in Beijing only initiated drastic changes to the status of Hong Kong after the violent escalation of the protests, which now means major restrictions on freedoms. In the Global South, China’s decolonization policy toward Britain and Western partners resonates more than many suspected. Undifferentiated support for the protests has also led to mainland youth changing their minds about developments in Hong Kong and now overwhelmingly backing their own government in Beijing.
The EU’s sanctions are being imposed in order to divert attention from Europe’s fears of decline and to show allegiance to the US. In his China.Table article “China bashing is booming”, Eberhard Sandschneider put the imposition of sanctions against China in geopolitical terms: “the US talks about values, but it means geopolitical influence.” He also comes to the accurate conclusion that China cannot be managed from the outside. China-bashing is booming at a time when the EU’s global political standing is pretty tattered and the EU’s and the UK’s global policy space is at a low point.
Andreas Fulda, an academic working in Nottingham, now calls for a paradigm shift in German foreign policy in a reply to Eberhard Sandschneider (China.Table reported). By this he means a tougher stance towards China and refers to the party’s internal Document No. 9: “Under the conditions of “Document No. 9″ there can be no open-ended intercultural dialogue with China”. Among other things, Document No. 9 limits freedoms in academic teaching – for example, the term “civil society” has been placed on the index. The document is an expression of China’s re-ideologization, which can be deplored and criticized for making dialogues difficult. However, there are still Chinese scholars who participate in international conferences on issues of civil society engagement and also publish on them. My habilitation thesis, which has been translated into Chinese and has the term civil society in its title, has not disappeared from libraries either. However, it is absurd to want to make an internal party document the yardstick for German foreign policy.
Calls for a tougher stance against China are currently experiencing an upswing. The Economist clarified in an article on 11.02.2021 why the accusation of genocide should not apply to the situation in Xinjiang: “to confront evil, the first step is to describe it accurately”. There is no solid evidence to support this intemperate accusation. All Chinese statistics on the population development of the Uyghurs in recent years would have to be falsified. The assessment that China could be dealt with by sanctions appears to be completely detached from the global political framework. The sanctions have already led to China stepping up its diplomatic offensives. Regarding Xinjiang, China has reacted with an invitation to diplomats, which 30 diplomats from 21 states accepted.
China will continue to rise scientifically, economically, and in terms of global politics. Next year, China’s contribution to the growth of the global economy is expected to exceed 60 percent. Even in Latin America South America, China has emerged as the largest trading partner. As recently as 2000, only two percent of exports from South American countries went to China. In 2018, it was already 22.1 percent. China’s foreign trade has recently increased strongly again. 30.6 percent in exports and 38.1 percent in imports. German industry, in particular, is benefiting from this.
China will continue to expand its influence in the United Nations and the Group of Twenty (G20), instrumentalizing this influence but proactively not pursuing an aggressive foreign policy outside Asia. Overall, China’s commitment to multilateralism could be seen as a starting point for an open perspective on solving global problems. China is deeply integrated in the international exchange of goods, services, and scientific knowledge. In the context of the trade conflict with the United States, China continues to emphasize its commitment to multilateralism and the largely free trade of goods.
China’s active role in the UN underpins its commitment to strengthening global governance. However, this provokes the USA and, to some extent, European states, which see their own influence being pushed back. US criticism of the World Health Organization’s (WHO) alleged dependence on China brought the critical debate to a head and, under President Trump, led to a halt in US payments to the WHO.
China also plays a formative role within the framework of the G20, the most important industrialized and emerging countries. The G20 summit in Hangzhou in 2016 contributed significantly to the upgrading of the group. In Hangzhou, China promoted the topic of sustainable finance, which has since received a major boost, especially at the EU level.
China is pursuing a two-track strategy in terms of foreign policy and foreign trade: On one hand, it is involved in existing international organizations, and on the other, it is (co-)founding new organizations and initiatives in which China has a leading role.
On its way to greater global influence, China will encounter a great deal of criticism and strong opposition from Western states, especially from the US, but also from the EU, Australia, and Canada. Bilateral confrontations with states in Africa and Latin America are unlikely to escalate, partly because the US is losing influence there. China will largely be able to compensate for the confrontations on the part of the USA and other states. Rather, if the confrontation with China continues, the EU runs the risk of suffering considerable economic damage and also of losing global political influence. The EU would be well advised to impress China with a resolute economic policy strategy in the direction of sustainability and climate neutrality, and to live up to its own expectations here.
Berthold Kuhn is a political scientist at the FU Berlin and consultant for international cooperation.
China’s former premier Wen Jiabao has offered gentle criticism of Xi Jinping in an essay – ostensibly a tribute to his late mother. His text was shared hundreds of thousands of times in China and promptly censored.
