Deceiving supplier boom + Subsidy control

Dear reader,

Even if Germany’s car manufacturers are having an increasingly hard time in China, companies that supply the country’s successful EV manufacturers, among others, are still experiencing a boom. Or does it? This does not have to last, analyzes Christian Domke-Seidel. He doubts how much the profits generated in the People’s Republic are actually of use to Germany. Moreover, five of the world’s largest automotive suppliers now come from China – the People’s Republic is thus turning into a competitor.

In an effort to be more competitive on the international market, the EU wants to introduce stricter subsidy controls for non-European companies. The regulation also targets Beijing in particular: The Commission is supposed to be empowered to intervene if companies subsidized by the Chinese government acquire European companies or use predatory pricing to win public contracts.

But the new rules will also apply to European companies that are active outside the EU. They are now fighting back – and Till Hoppe sums up with how much success.

Your
Carolyn Braun

Premature euphoria among German suppliers

Car suppliers are still profiting in China: Robert-Bosch AG’s booth at the Shanghai auto show in April attracted many visitors.

By

Christian Domke Seidel

Europe, in general, and Germany, in particular, rely on their export strength. Accordingly, European companies have benefited greatly from China’s ascent to the second-largest economic power. But in recent years, the economic success story has started to stall. The Federation of German Industries (BDI) declared a “systemic competition” in January 2019. And the EU spoke of a triad of “partner, competitor and rival” when talking about China. Besides geopolitical disagreements and differing values and understandings of democracy, economic considerations also play a role. The big profits have failed to materialize. The problems of German car manufacturers in China could also befall suppliers in the medium term.

Making the competition big

German car manufacturers are confronted with a daunting task in China. In compliance with political requirements, they revealed their know-how, founded joint ventures and relocated R&D activities to China. This is documented in the recent study “Gewinn deutscher Investoren in China” (Profits of German Investors in China). The Bertelsmann Foundation, the German Economic Institute (IW), the Mercator Institute for China Studies (MERICS) and the BDI participated in the study. The study reveals that German car companies themselves enabled the rise of equal Chinese competitors within a very short time, which now also “reduces the competitiveness of companies in Germany vis-à-vis Chinese competitors.”

In hardly any other sector is this as visible as in the automotive industry. It provided around 30 percent of German direct investment in China in 2020 (90 billion euros). To put this in perspective, the chemical industry comes in second with just 9 percent. Sales in China are falling simultaneously (especially in electric mobility), while competitors from the People’s Republic are now also present on the German market.

Suppliers rake in record revenues

Unlike German car manufacturers, the reports from their suppliers are generally positive. Last year, Bosch generated revenue of 18.7 billion euros in the People’s Republic (about 20 percent of its overall sales). The company is aiming for annual growth in China above the market trend, a company spokesperson told Table.Media. The prospects for this are promising. After all, Bosch supplies China’s major EV manufacturers, whose products currently experience a boom.

With so much momentum on the market, innovations are essential, which is why Bosch is setting up a new research center – at a cost of around 1 billion euros. This is also necessary because the Communist Party prioritizes local manufacturers with industrial policy measures such as “Made in China 2025” and “Dual Circulation.” “In China, we develop and produce primarily for China: More than 80 percent of our Chinese value added stays in the country,” the spokesperson added.

Is economic history repeating itself?

There are first signs that suppliers could also experience difficulties. China is now the tenth-largest supplier of automotive parts to Germany. In 2020, the People’s Republic pushed the United Kingdom out of the top ten. Just ten years ago, China exported as many motor vehicle parts as it had to import. Now the country exports 1.7 times that amount, and five Chinese companies now rank among the world’s largest automotive suppliers, according to calculations by Germany Trade and Invest. These numbers show that new competitors are wooing customers on the global market.

A survey by the management consultancy KPMG last year on the activities of German companies in China also only partially shares the euphoria of German suppliers. It noted the preferential treatment of domestic manufacturers and a lack of transparency. “China’s companies are becoming ever more innovative. Meanwhile 49 percent of respondents believe that their Chinese competitors will become innovation leaders in their sector in the next five years,” says KPMG. In the previous year, this figure was still at 41 percent.

“Our long-standing local-for-local principle is a key success factor,” said the Bosch press spokesperson. And Germany as a business location would also benefit from said success. But experts doubt the benefit of profits generated in China for Germany. The same goes for the output of the research and development centers. The study “Gewinne deutscher Investoren in China” (Profits of German Investors in China) puts it diplomatically: Whether German companies “profit just as much from Chinese technologies in return and, if so, are able to bring the researched knowledge out of China at all, is unclear due to the still lacking reciprocity in many areas.”

EU: Stricter subsidy control causes trouble

By

Till Hoppe

Basically, everyone agreed: Berlin, Paris, the EU Commission and German industry supported introducing stricter subsidy controls for non-European companies. During its EU Council presidency, the French government ensured that the regulation on foreign subsidies was hurriedly passed last year. The new rules will enter into force on July 12 – but considerable anger is mounting.

The industry fears being swamped by reporting obligations. “The Commission must ensure that the implementation does not overburden companies,” warns Nadine Rossmann, a Federation of German Industries consultant. The first draft of the implementing regulation was “simply not feasible for multinational companies.” In the meantime, however, the Commission signals to make significant amendments.

European companies particularly affected

A spokesperson merely said that the Commission was currently evaluating stakeholder feedback and aimed to adopt the rules before July 12. The Brussels-based authority presented its draft implementing regulation in February and held a public consultation. The regulation and the accompanying questionnaire set out which financial contributions from foreign governments companies must disclose to the Commission when bidding for public contracts in the EU or acquiring a company.

The Foreign Subsidies Regulation is primarily aimed at China: The Commission will be able to intervene if massively subsidized Chinese companies acquire European businesses or use predatory pricing to win public contracts. In order to be WTO-compatible, however, the rules also apply to European companies active outside the EU. “German and European companies were not in the focus of the legislator, but are now particularly affected if they strive for diligent implementation,” says Sarah Blazek, partner at the law firm Noerr.

Commission revises draft

The first draft of the Commission’s implementing regulation startled not only the industry, but also the German government. Germany’s Economy Minister Robert Habeck is said to have personally urged Brussels to avoid unnecessary bureaucratic costs for the industry. The Commission has now presented a substantially revised draft.

The fundamental problem is that the Foreign Subsidies Regulation only generally mentions “financial contributions” from foreign governments, which companies must disclose if they plan a takeover or participate in a public tender. In this broad sense, this would mean that companies must also declare electricity supply or lease contracts concluded at market conditions in third countries, says Nadine Rossmann from the BDI. In government-related sectors like health care, companies would even have to disclose virtually every business transaction, says Sarah Blazek of the law firm Noerr, and that for the past three years. So far, companies usually do not record such benefits separately.

Focus on problematic subsidies

Therefore, Habeck and the BDI are urging the Commission to focus its implementation on potentially problematic subsidies and introduce higher thresholds. In the meantime, the Commission seems willing to focus the reporting obligation on certain areas also considered particularly problematic in EU state aid law. These include, for example, aid to struggling companies, unlimited loan guarantees or direct aid in the event of a takeover (Article 5 of the Regulation).

Moreover, companies should not have to list each financial contribution individually, says BDI representative Rossmann: “An aggregated list by country and type of contribution would be more appropriate.”

Such concessions by the Commission would stem the flood of information, which the authority could hardly process given the limited staff at the Directorate-General for Competition. This would possibly create some loopholes, says Blazek. “But the Commission can always dig deeper if it sees indications of distortions of competition.” And Rossmann argues: “It is more expedient to allow the new instrument to get started first instead of unnecessarily accumulating huge amounts of information.”

Hackers spy on critical US infrastructure

A state-backed Chinese hacker group allegedly spied on critical US infrastructure. According to Western intelligence services and Microsoft, the attackers, called “Volt Typhoon,” are believed to have targeted telecommunications networks and transport hubs, among other things. The US software company assumes with “medium probability” that the attackers are a group considered to be Chinese and close to the state.

The attack, which, according to the National Security Agency, the Five Eyes partner services from the UK, New Zealand, Australia, Canada and the FBI also helped uncover, is a particular political issue for two reasons: The New York Times reports that the attacks were first discovered when the controversy over the Chinese high-altitude balloons shot down over US airspace began. Additional political brisance lies in the fact that the Mariana Islands island of Guam, among others, is said to have been at the center of the attacks. Guam is the most important US military base in the northern Pacific and, for example, stations long-range bombers. These would play an essential role in the event of escalation with China. A disruption of the infrastructure would potentially have a massive impact on US capabilities in the region.

Access via security systems

The extensive report on the attack scenario published by Microsoft describes how the attackers operated. The comprehensive information on the attack scenario posted by Microsoft describes how the attackers proceeded. Devices such as routers, intended for use in homes or small offices, reportedly played a special role in the attack. Of all things, the group gained access via security systems: Fortinet’s Fortiguard is actually supposed to keep internet traffic clean from blackmail software attacks. But it is precisely this solution that Volt Typhoon exploited to gain access to local networks and spy on them using so-called “living-off-the-land commands,” writes Microsoft. The hackers are said to have been particularly interested in local web browser applications, such as intranet programs. The NSA has published a recommendation on how to deal with these attacks.

China denies and accuses the USA

According to a Reuters report, a spokeswoman for the Chinese Foreign Ministry dismissed the reports as disinformation by the Five Eyes intelligence services. The fact that a “certain company” (Microsoft) was involved would prove that the US was using additional channels beyond the intelligence services for disinformation. The spokesperson referred to a report on alleged NSA attacks on Chinese institutions last year, which the US should explain first. She accused the NSA of being the largest hacker organization in the world. fst/rtr

Von der Leyen: China strives for total control

In her speech at the European Trade Union Confederation Congress in Berlin, Ursula von der Leyen criticized the Chinese government. Without mentioning the country directly, she said that a party was seeking “total control” over the economy and the population.

The statement was made as part of a comparison: While other regions of the world are only concerned with profit, the EU has a social market economy in which “workers and society must also reap the benefits.” In the Commission President’s view, the principle of social partnership, in which trade unions and employers negotiate with each other, is central to this. red

Flying cars ready in 2025

In two to three years, flying cars will be market-ready in China. This means manufacturers will meet the Chinese government’s schedule. At a technology trade exhibition in Macau earlier this month, Guo Liang, CEO of Chinese flying car developer Aerofugia, told the Japanese newspaper Nikkei that he expects the market launch in 2025 or 2026: “The revolution will surpass the electrification of cars.” Flying cars would become a more affordable method of transportation than helicopters.

Flight cars, which differ from so-called air cabs by their road capability, combine features of helicopters, drones and small aircraft. According to the Vertical Flight Society, some 800 flying car concepts currently exist worldwide. A Morgan Stanley forecast predicts that the global market for flying cars will reach 1 trillion US dollars in 2040, rising to 9 trillion by 2050. Based on the estimates, China will hold a market share of 23 percent in 2050, behind the US with 27 percent.

Last August, China announced a timetable for flying cars in civil aviation. This envisages researching applications for autonomous short-haul passenger aircraft by 2025. Chinese companies now appear to have conducted enough test flights to position themselves at the international forefront: “Globally, we have conducted over 35,000 test flights in 12 countries, and believe we are at the forefront,” He Tianxing, Vice President of aircraft manufacturer EHang, told Nikkei. cyb

Eskelund becomes new EU Chamber president

The EU Chamber of Commerce in China has elected a successor for Joerg Wuttke. The new chamber president is Jens Eskelund from Denmark. He is the chief representative of the shipping company Maersk for China and Northeast Asia. His term of office will be two years.

Eskelund is already well acclimated: He served as the Chamber’s Vice President from 2019 to 2021 and from October 2022 to May 2023. He has also been involved in the working groups related to his sector. He has also served as Chairman of the Danish Chamber of Commerce in China. Eskelund is a native of Aarhus. He has lived in Beijing since 1998.

Bruno Weill, Miguel Montoya and Stefan Bernhart have been elected Vice Presidents, Xiaobo Zhang has been confirmed as Treasurer. The regional chapters also elected their chairmen: Carlo D’Andrea for Shanghai, Klaus Zenkel for South China and Massimo Bagnasco for Southwest China. fin

Layoffs at Lenovo and Alibaba

In the first quarter, the world’s largest PC manufacturer Lenovo Group laid off about five percent of its workforce. The company made the announcement at its earnings press conference on Wednesday. Shortly after, Alibaba Group announced plans to part with seven percent of employees in its cloud business, Nikkei Asia reported on Wednesday. With the slowdown in the Chinese and global economies, demand in the tech sector has fallen.

Chairman and Chief Executive of Lenovo, Yang Yuanqing stressed that this would be a one-time measure. “the restructuring is already finished. We don’t have any further action” to be taken this year.

According to Yang, the restructuring is expected to reduce annual costs by an estimated 794 million euros. In February, he stated that he expected the PC industry to return to growth in the second half of the year from the current weak demand and surplus inventories. cyb

China’s neighbors: It’s complicated

The relationship between China and Japan is somewhat comparable to that between Germany and France: historically and culturally intertwined, fraught with conflicts and wars, and their current relationship heavily influenced by the Second World War.

The big difference is that while Germany and France have overcome the acrimony and formed a close alliance, China and Japan have not. At least China is not ready to let go of the history of Japanese atrocities committed between 1937-1945.

If the two Koreas are also drawn into the picture, the relationship between the four also resembles, to a considerable extent, relationships within post-war Europe: harrowing historical memories and the division of the East and the West, perfectly symbolized by a divided Korean Peninsula.

However, when the world basked in lasting peace and spread of democratic liberalism around the turn of the century, particularly with the European Union emerging as a new power, there was a fantasy about China, Japan, and South Korea coming closer and eventually forming something similar.

With blessing from respective governments, scholars of the three countries worked together to write history textbooks on East Asia because different history narratives have been a daunting obstacle for rapprochement. Two versions were published in 2005 and 2013, with a newer version being promised. But with the development of current affairs, this effort, and the dream of an East Asian Community, is now shelved indefinitely.

In whatever way the China-Japan-South Korean triad relationship develops, North Korea has always been left out as a pariah. But it asserts its existence by implicit nuclear threat. This, together with the reshuffling of international relations triggered by the Ukrainian War, has prompted South Korean President Yoon Suk Yeol to make up his mind this year and put behind history and consolidate ties between his country and Japan. This was a boost to Team US and indicated South Korea has given up hope of getting China’s help in dealing with North Korea.

Since an analysis of the relationship between the four countries is complicated, the focus here will be on how China sees the other three countries.

North Korea

Contempt is the only word needed to describe Chinese people’s real feelings toward North Korea.

The two countries have a similar past under Mao Zedong and Kim Il-sung, the grandfather of its current leader Kim Jong-un. They jointly fought the US-led UN army in the Korean War (1950-1953). Today, they still have the United States as the same adversary.

The Chinese believe the Kim regime would not have survived without China’s intervention. A mocking tone can be heard whenever North Korea is mentioned in conversations today. Kim Jong-un is often referred to as Fat Kim III (金三胖) because, like his father and grandfather, he forms the overweight part of the Kim dynasty.

In fact, North Korea fared better than China until the collapse of the Soviet Union, which provided North Korea with generous financial support for decades. Around the same time, China started to emerge from dire poverty and gradually became an economic powerhouse. So the Chinese public’s disrespect for North Korea is also based on the bitter memory of their own past, an interesting psychological phenomenon.

Even Xi Jinping seemed to have disdain for North Korea. He cold-shouldered Kim during his first years as president. Then he made a 180-degree turnabout when his global ambitions bumped into the hard wall of the United States and realized North Korea could be a hand card to play. But the contempt is still there, in the hearts of Chinese politicians and both words and hearts of ordinary Chinese. And the North Koreans hate China in return.

South Korea

The country’s successful transition from a dictatorship to a working democracy, from which China could draw lessons, is unknown to the vast majority in China. Most Chinese see it as a rich little brother of the United States. However, ties between China and South Korea did have their good days.

K-Pop captured China’s youth ten years before it came to Europe. South Korean film stars and soap operas have many fans in China. China represented the next big economic opportunity for South Korean companies and its youth. Chinese was a popular foreign language for students, and Korean companies expanded their operations in China. In Beijing’s Wangjing (望京) area, South Koreans represented a quarter of its 300,000 population around 2010.

For the Chinese, South Korea became another country economically dependent on China. Things went sour abruptly in 2017 when South Korea installed a missile battery employing the US THAAD system to fend off the threat posed by North Korea.

South Korean cultural exports were banned in China. Many South Korean companies also felt the chill and began to move their investments to places like Southeast Asia. The number of South Koreans in China has been sharply dwindling.

However, the feeling of Chinese cultural superiority has not changed. Even today, many Chinese still see China as the progenitor of Japanese and Korean cultures, neglecting that Korea and Japan have long since developed their own cultural identities.

Japan

Another little brother of the United States, according to the Chinese.

However, this little brother changed the course of China. Had Japan not invaded, Chiang Kai-shek’s army could most likely have wiped out the Communists in the 1930s. Mao Zedong even directly expressed its thankfulness for this, which was, of course, not widely publicized. Sino-Japanese ties warmed up in the 1980s after China opened up and tried to attract Western foreign investments.

But the relations went bumpy again in the 1990s, and Japan has since never left the top two positions on the most disliked country rankings for the Chinese. The United States has the other top position. They take turns to be the number one and two.

The key reason is still the cruel deeds committed by Japan’s imperial army during the Second World War and the Japanese Government’s what is to be their inadequate acknowledgment of them. Japan being a staunch US ally only adds to China’s hostility towards Japan.

On China’s heavily censored television screens, fighting the “Japanese devils” during 1937-1945 has always been a safe theme for TV dramas. Calls for boycotting Japanese products were often heard until the 2010s, some, with tacit government approval, turned into violent demonstrations. Japan is such an easy tool for the Chinese Government whenever it wants to tap into nationalistic sentiment.

However, just as the US always stays a top choice for the Chinese when they seek to leave China, Japan is also one of the major destinations for the rich and skilled professionals in the current emigration wave.

A rare sight of the mega-metropolis of Chongqing: Under this idyllic layer of clouds live 32 million people. The incredible size of the world’s most populated city is the result of a territorial reform in 1997. It increased the administrative area to 82,403 square kilometers – almost the size of Austria. 6.9 million people live in the city center alone.

CHINA.TABLE EDITORIAL OFFICE

Amelie
Richter

Marcel
Grzanna

Fabian
Peltsch

Julia
Fiedler

Angela
Köckritz

Jörn
Petring

Dear reader,

Even if Germany’s car manufacturers are having an increasingly hard time in China, companies that supply the country’s successful EV manufacturers, among others, are still experiencing a boom. Or does it? This does not have to last, analyzes Christian Domke-Seidel. He doubts how much the profits generated in the People’s Republic are actually of use to Germany. Moreover, five of the world’s largest automotive suppliers now come from China – the People’s Republic is thus turning into a competitor.

In an effort to be more competitive on the international market, the EU wants to introduce stricter subsidy controls for non-European companies. The regulation also targets Beijing in particular: The Commission is supposed to be empowered to intervene if companies subsidized by the Chinese government acquire European companies or use predatory pricing to win public contracts.

But the new rules will also apply to European companies that are active outside the EU. They are now fighting back – and Till Hoppe sums up with how much success.

Your
Carolyn Braun

Premature euphoria among German suppliers

By

Christian Domke Seidel

Europe, in general, and Germany, in particular, rely on their export strength. Accordingly, European companies have benefited greatly from China’s ascent to the second-largest economic power. But in recent years, the economic success story has started to stall. The Federation of German Industries (BDI) declared a “systemic competition” in January 2019. And the EU spoke of a triad of “partner, competitor and rival” when talking about China. Besides geopolitical disagreements and differing values and understandings of democracy, economic considerations also play a role. The big profits have failed to materialize. The problems of German car manufacturers in China could also befall suppliers in the medium term.

Making the competition big

German car manufacturers are confronted with a daunting task in China. In compliance with political requirements, they revealed their know-how, founded joint ventures and relocated R&D activities to China. This is documented in the recent study “Gewinn deutscher Investoren in China” (Profits of German Investors in China). The Bertelsmann Foundation, the German Economic Institute (IW), the Mercator Institute for China Studies (MERICS) and the BDI participated in the study. The study reveals that German car companies themselves enabled the rise of equal Chinese competitors within a very short time, which now also “reduces the competitiveness of companies in Germany vis-à-vis Chinese competitors.”

In hardly any other sector is this as visible as in the automotive industry. It provided around 30 percent of German direct investment in China in 2020 (90 billion euros). To put this in perspective, the chemical industry comes in second with just 9 percent. Sales in China are falling simultaneously (especially in electric mobility), while competitors from the People’s Republic are now also present on the German market.

Suppliers rake in record revenues

Unlike German car manufacturers, the reports from their suppliers are generally positive. Last year, Bosch generated revenue of 18.7 billion euros in the People’s Republic (about 20 percent of its overall sales). The company is aiming for annual growth in China above the market trend, a company spokesperson told Table.Media. The prospects for this are promising. After all, Bosch supplies China’s major EV manufacturers, whose products currently experience a boom.

With so much momentum on the market, innovations are essential, which is why Bosch is setting up a new research center – at a cost of around 1 billion euros. This is also necessary because the Communist Party prioritizes local manufacturers with industrial policy measures such as “Made in China 2025” and “Dual Circulation.” “In China, we develop and produce primarily for China: More than 80 percent of our Chinese value added stays in the country,” the spokesperson added.

Is economic history repeating itself?

There are first signs that suppliers could also experience difficulties. China is now the tenth-largest supplier of automotive parts to Germany. In 2020, the People’s Republic pushed the United Kingdom out of the top ten. Just ten years ago, China exported as many motor vehicle parts as it had to import. Now the country exports 1.7 times that amount, and five Chinese companies now rank among the world’s largest automotive suppliers, according to calculations by Germany Trade and Invest. These numbers show that new competitors are wooing customers on the global market.

A survey by the management consultancy KPMG last year on the activities of German companies in China also only partially shares the euphoria of German suppliers. It noted the preferential treatment of domestic manufacturers and a lack of transparency. “China’s companies are becoming ever more innovative. Meanwhile 49 percent of respondents believe that their Chinese competitors will become innovation leaders in their sector in the next five years,” says KPMG. In the previous year, this figure was still at 41 percent.

“Our long-standing local-for-local principle is a key success factor,” said the Bosch press spokesperson. And Germany as a business location would also benefit from said success. But experts doubt the benefit of profits generated in China for Germany. The same goes for the output of the research and development centers. The study “Gewinne deutscher Investoren in China” (Profits of German Investors in China) puts it diplomatically: Whether German companies “profit just as much from Chinese technologies in return and, if so, are able to bring the researched knowledge out of China at all, is unclear due to the still lacking reciprocity in many areas.”

EU: Stricter subsidy control causes trouble

By

Till Hoppe

Basically, everyone agreed: Berlin, Paris, the EU Commission and German industry supported introducing stricter subsidy controls for non-European companies. During its EU Council presidency, the French government ensured that the regulation on foreign subsidies was hurriedly passed last year. The new rules will enter into force on July 12 – but considerable anger is mounting.

The industry fears being swamped by reporting obligations. “The Commission must ensure that the implementation does not overburden companies,” warns Nadine Rossmann, a Federation of German Industries consultant. The first draft of the implementing regulation was “simply not feasible for multinational companies.” In the meantime, however, the Commission signals to make significant amendments.

European companies particularly affected

A spokesperson merely said that the Commission was currently evaluating stakeholder feedback and aimed to adopt the rules before July 12. The Brussels-based authority presented its draft implementing regulation in February and held a public consultation. The regulation and the accompanying questionnaire set out which financial contributions from foreign governments companies must disclose to the Commission when bidding for public contracts in the EU or acquiring a company.

The Foreign Subsidies Regulation is primarily aimed at China: The Commission will be able to intervene if massively subsidized Chinese companies acquire European businesses or use predatory pricing to win public contracts. In order to be WTO-compatible, however, the rules also apply to European companies active outside the EU. “German and European companies were not in the focus of the legislator, but are now particularly affected if they strive for diligent implementation,” says Sarah Blazek, partner at the law firm Noerr.

Commission revises draft

The first draft of the Commission’s implementing regulation startled not only the industry, but also the German government. Germany’s Economy Minister Robert Habeck is said to have personally urged Brussels to avoid unnecessary bureaucratic costs for the industry. The Commission has now presented a substantially revised draft.

The fundamental problem is that the Foreign Subsidies Regulation only generally mentions “financial contributions” from foreign governments, which companies must disclose if they plan a takeover or participate in a public tender. In this broad sense, this would mean that companies must also declare electricity supply or lease contracts concluded at market conditions in third countries, says Nadine Rossmann from the BDI. In government-related sectors like health care, companies would even have to disclose virtually every business transaction, says Sarah Blazek of the law firm Noerr, and that for the past three years. So far, companies usually do not record such benefits separately.

Focus on problematic subsidies

Therefore, Habeck and the BDI are urging the Commission to focus its implementation on potentially problematic subsidies and introduce higher thresholds. In the meantime, the Commission seems willing to focus the reporting obligation on certain areas also considered particularly problematic in EU state aid law. These include, for example, aid to struggling companies, unlimited loan guarantees or direct aid in the event of a takeover (Article 5 of the Regulation).

Moreover, companies should not have to list each financial contribution individually, says BDI representative Rossmann: “An aggregated list by country and type of contribution would be more appropriate.”

Such concessions by the Commission would stem the flood of information, which the authority could hardly process given the limited staff at the Directorate-General for Competition. This would possibly create some loopholes, says Blazek. “But the Commission can always dig deeper if it sees indications of distortions of competition.” And Rossmann argues: “It is more expedient to allow the new instrument to get started first instead of unnecessarily accumulating huge amounts of information.”

Hackers spy on critical US infrastructure

A state-backed Chinese hacker group allegedly spied on critical US infrastructure. According to Western intelligence services and Microsoft, the attackers, called “Volt Typhoon,” are believed to have targeted telecommunications networks and transport hubs, among other things. The US software company assumes with “medium probability” that the attackers are a group considered to be Chinese and close to the state.

The attack, which, according to the National Security Agency, the Five Eyes partner services from the UK, New Zealand, Australia, Canada and the FBI also helped uncover, is a particular political issue for two reasons: The New York Times reports that the attacks were first discovered when the controversy over the Chinese high-altitude balloons shot down over US airspace began. Additional political brisance lies in the fact that the Mariana Islands island of Guam, among others, is said to have been at the center of the attacks. Guam is the most important US military base in the northern Pacific and, for example, stations long-range bombers. These would play an essential role in the event of escalation with China. A disruption of the infrastructure would potentially have a massive impact on US capabilities in the region.

Access via security systems

The extensive report on the attack scenario published by Microsoft describes how the attackers operated. The comprehensive information on the attack scenario posted by Microsoft describes how the attackers proceeded. Devices such as routers, intended for use in homes or small offices, reportedly played a special role in the attack. Of all things, the group gained access via security systems: Fortinet’s Fortiguard is actually supposed to keep internet traffic clean from blackmail software attacks. But it is precisely this solution that Volt Typhoon exploited to gain access to local networks and spy on them using so-called “living-off-the-land commands,” writes Microsoft. The hackers are said to have been particularly interested in local web browser applications, such as intranet programs. The NSA has published a recommendation on how to deal with these attacks.

China denies and accuses the USA

According to a Reuters report, a spokeswoman for the Chinese Foreign Ministry dismissed the reports as disinformation by the Five Eyes intelligence services. The fact that a “certain company” (Microsoft) was involved would prove that the US was using additional channels beyond the intelligence services for disinformation. The spokesperson referred to a report on alleged NSA attacks on Chinese institutions last year, which the US should explain first. She accused the NSA of being the largest hacker organization in the world. fst/rtr

Von der Leyen: China strives for total control

In her speech at the European Trade Union Confederation Congress in Berlin, Ursula von der Leyen criticized the Chinese government. Without mentioning the country directly, she said that a party was seeking “total control” over the economy and the population.

The statement was made as part of a comparison: While other regions of the world are only concerned with profit, the EU has a social market economy in which “workers and society must also reap the benefits.” In the Commission President’s view, the principle of social partnership, in which trade unions and employers negotiate with each other, is central to this. red

Flying cars ready in 2025

In two to three years, flying cars will be market-ready in China. This means manufacturers will meet the Chinese government’s schedule. At a technology trade exhibition in Macau earlier this month, Guo Liang, CEO of Chinese flying car developer Aerofugia, told the Japanese newspaper Nikkei that he expects the market launch in 2025 or 2026: “The revolution will surpass the electrification of cars.” Flying cars would become a more affordable method of transportation than helicopters.

Flight cars, which differ from so-called air cabs by their road capability, combine features of helicopters, drones and small aircraft. According to the Vertical Flight Society, some 800 flying car concepts currently exist worldwide. A Morgan Stanley forecast predicts that the global market for flying cars will reach 1 trillion US dollars in 2040, rising to 9 trillion by 2050. Based on the estimates, China will hold a market share of 23 percent in 2050, behind the US with 27 percent.

Last August, China announced a timetable for flying cars in civil aviation. This envisages researching applications for autonomous short-haul passenger aircraft by 2025. Chinese companies now appear to have conducted enough test flights to position themselves at the international forefront: “Globally, we have conducted over 35,000 test flights in 12 countries, and believe we are at the forefront,” He Tianxing, Vice President of aircraft manufacturer EHang, told Nikkei. cyb

Eskelund becomes new EU Chamber president

The EU Chamber of Commerce in China has elected a successor for Joerg Wuttke. The new chamber president is Jens Eskelund from Denmark. He is the chief representative of the shipping company Maersk for China and Northeast Asia. His term of office will be two years.

Eskelund is already well acclimated: He served as the Chamber’s Vice President from 2019 to 2021 and from October 2022 to May 2023. He has also been involved in the working groups related to his sector. He has also served as Chairman of the Danish Chamber of Commerce in China. Eskelund is a native of Aarhus. He has lived in Beijing since 1998.

Bruno Weill, Miguel Montoya and Stefan Bernhart have been elected Vice Presidents, Xiaobo Zhang has been confirmed as Treasurer. The regional chapters also elected their chairmen: Carlo D’Andrea for Shanghai, Klaus Zenkel for South China and Massimo Bagnasco for Southwest China. fin

Layoffs at Lenovo and Alibaba

In the first quarter, the world’s largest PC manufacturer Lenovo Group laid off about five percent of its workforce. The company made the announcement at its earnings press conference on Wednesday. Shortly after, Alibaba Group announced plans to part with seven percent of employees in its cloud business, Nikkei Asia reported on Wednesday. With the slowdown in the Chinese and global economies, demand in the tech sector has fallen.

Chairman and Chief Executive of Lenovo, Yang Yuanqing stressed that this would be a one-time measure. “the restructuring is already finished. We don’t have any further action” to be taken this year.

According to Yang, the restructuring is expected to reduce annual costs by an estimated 794 million euros. In February, he stated that he expected the PC industry to return to growth in the second half of the year from the current weak demand and surplus inventories. cyb

China’s neighbors: It’s complicated

The relationship between China and Japan is somewhat comparable to that between Germany and France: historically and culturally intertwined, fraught with conflicts and wars, and their current relationship heavily influenced by the Second World War.

The big difference is that while Germany and France have overcome the acrimony and formed a close alliance, China and Japan have not. At least China is not ready to let go of the history of Japanese atrocities committed between 1937-1945.

If the two Koreas are also drawn into the picture, the relationship between the four also resembles, to a considerable extent, relationships within post-war Europe: harrowing historical memories and the division of the East and the West, perfectly symbolized by a divided Korean Peninsula.

However, when the world basked in lasting peace and spread of democratic liberalism around the turn of the century, particularly with the European Union emerging as a new power, there was a fantasy about China, Japan, and South Korea coming closer and eventually forming something similar.

With blessing from respective governments, scholars of the three countries worked together to write history textbooks on East Asia because different history narratives have been a daunting obstacle for rapprochement. Two versions were published in 2005 and 2013, with a newer version being promised. But with the development of current affairs, this effort, and the dream of an East Asian Community, is now shelved indefinitely.

In whatever way the China-Japan-South Korean triad relationship develops, North Korea has always been left out as a pariah. But it asserts its existence by implicit nuclear threat. This, together with the reshuffling of international relations triggered by the Ukrainian War, has prompted South Korean President Yoon Suk Yeol to make up his mind this year and put behind history and consolidate ties between his country and Japan. This was a boost to Team US and indicated South Korea has given up hope of getting China’s help in dealing with North Korea.

Since an analysis of the relationship between the four countries is complicated, the focus here will be on how China sees the other three countries.

North Korea

Contempt is the only word needed to describe Chinese people’s real feelings toward North Korea.

The two countries have a similar past under Mao Zedong and Kim Il-sung, the grandfather of its current leader Kim Jong-un. They jointly fought the US-led UN army in the Korean War (1950-1953). Today, they still have the United States as the same adversary.

The Chinese believe the Kim regime would not have survived without China’s intervention. A mocking tone can be heard whenever North Korea is mentioned in conversations today. Kim Jong-un is often referred to as Fat Kim III (金三胖) because, like his father and grandfather, he forms the overweight part of the Kim dynasty.

In fact, North Korea fared better than China until the collapse of the Soviet Union, which provided North Korea with generous financial support for decades. Around the same time, China started to emerge from dire poverty and gradually became an economic powerhouse. So the Chinese public’s disrespect for North Korea is also based on the bitter memory of their own past, an interesting psychological phenomenon.

Even Xi Jinping seemed to have disdain for North Korea. He cold-shouldered Kim during his first years as president. Then he made a 180-degree turnabout when his global ambitions bumped into the hard wall of the United States and realized North Korea could be a hand card to play. But the contempt is still there, in the hearts of Chinese politicians and both words and hearts of ordinary Chinese. And the North Koreans hate China in return.

South Korea

The country’s successful transition from a dictatorship to a working democracy, from which China could draw lessons, is unknown to the vast majority in China. Most Chinese see it as a rich little brother of the United States. However, ties between China and South Korea did have their good days.

K-Pop captured China’s youth ten years before it came to Europe. South Korean film stars and soap operas have many fans in China. China represented the next big economic opportunity for South Korean companies and its youth. Chinese was a popular foreign language for students, and Korean companies expanded their operations in China. In Beijing’s Wangjing (望京) area, South Koreans represented a quarter of its 300,000 population around 2010.

For the Chinese, South Korea became another country economically dependent on China. Things went sour abruptly in 2017 when South Korea installed a missile battery employing the US THAAD system to fend off the threat posed by North Korea.

South Korean cultural exports were banned in China. Many South Korean companies also felt the chill and began to move their investments to places like Southeast Asia. The number of South Koreans in China has been sharply dwindling.

However, the feeling of Chinese cultural superiority has not changed. Even today, many Chinese still see China as the progenitor of Japanese and Korean cultures, neglecting that Korea and Japan have long since developed their own cultural identities.

Japan

Another little brother of the United States, according to the Chinese.

However, this little brother changed the course of China. Had Japan not invaded, Chiang Kai-shek’s army could most likely have wiped out the Communists in the 1930s. Mao Zedong even directly expressed its thankfulness for this, which was, of course, not widely publicized. Sino-Japanese ties warmed up in the 1980s after China opened up and tried to attract Western foreign investments.

But the relations went bumpy again in the 1990s, and Japan has since never left the top two positions on the most disliked country rankings for the Chinese. The United States has the other top position. They take turns to be the number one and two.

The key reason is still the cruel deeds committed by Japan’s imperial army during the Second World War and the Japanese Government’s what is to be their inadequate acknowledgment of them. Japan being a staunch US ally only adds to China’s hostility towards Japan.

On China’s heavily censored television screens, fighting the “Japanese devils” during 1937-1945 has always been a safe theme for TV dramas. Calls for boycotting Japanese products were often heard until the 2010s, some, with tacit government approval, turned into violent demonstrations. Japan is such an easy tool for the Chinese Government whenever it wants to tap into nationalistic sentiment.

However, just as the US always stays a top choice for the Chinese when they seek to leave China, Japan is also one of the major destinations for the rich and skilled professionals in the current emigration wave.

A rare sight of the mega-metropolis of Chongqing: Under this idyllic layer of clouds live 32 million people. The incredible size of the world’s most populated city is the result of a territorial reform in 1997. It increased the administrative area to 82,403 square kilometers – almost the size of Austria. 6.9 million people live in the city center alone.

CHINA.TABLE EDITORIAL OFFICE

Amelie
Richter

Marcel
Grzanna

Fabian
Peltsch

Julia
Fiedler

Angela
Köckritz

Jörn
Petring

Feature

Premature euphoria among German suppliers

Making the competition big

Suppliers rake in record revenues

Is economic history repeating itself?

EU: Stricter subsidy control causes trouble

European companies particularly affected

Commission revises draft

Focus on problematic subsidies

Events

News

Hackers spy on critical US infrastructure

Access via security systems

China denies and accuses the USA

Von der Leyen: China strives for total control

Flying cars ready in 2025

Eskelund becomes new EU Chamber president

Layoffs at Lenovo and Alibaba

Opinion

China’s neighbors: It’s complicated

North Korea

South Korea

Japan

Executive Moves

Dessert

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

Feature

Premature euphoria among German suppliers

Making the competition big

Suppliers rake in record revenues

Is economic history repeating itself?

EU: Stricter subsidy control causes trouble

European companies particularly affected

Commission revises draft

Focus on problematic subsidies

Events

News

Hackers spy on critical US infrastructure

Access via security systems

China denies and accuses the USA

Von der Leyen: China strives for total control

Flying cars ready in 2025

Eskelund becomes new EU Chamber president

Layoffs at Lenovo and Alibaba

Opinion

China’s neighbors: It’s complicated

North Korea

South Korea

Japan

Executive Moves

Dessert

China.Table editorial office

CHINA.TABLE EDITORIAL OFFICE

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