Siemens had to wait long for its first representative in the People’s Republic. Xiao Song, a universally praised manager with a wealth of international experience, is now taking the helm. It is pleasing and true that the era of foreign heads of organizations, which today consist almost exclusively of Chinese, is coming to an end. But in an era of rampant state influence, this can also lead to loyalty conflicts for the managers concerned, as Marcel Grzanna reports.
What is “sustainable”? China and Europe are by no means agreeing on this topic. For some, clean coal-fired power plants are already environmentally friendly; for others, it has to be wind power. Yet the question of the official definition of sustainability has severe economic consequences because only investments and projects with the fitting seal of approval receive financing from pots for sustainable investments. Nico Beckert describes the dispute over the classification of sustainability.
The law against food waste is a good week old. Frank Sieren looks at how the behavior of consumers and restaurants has changed since then. In China, more than elsewhere, full or empty plates are a sensitive question. If the country gets into the habit of producing too much waste, it will have to import even more. But Xi Jinping specifies: China should be as independent as possible from foreign countries. However, in Germany, we are one to talk – the EU produces far more food than it needs.
Green financial investments are one of the central future topics. Billions in investment are needed to transform the economy from fossil fuels toward climate-friendly production and consumption patterns. Beijing also recognized this: To attract more funding from international investors, the central bank wants to align standards for green investments and projects between the EU and China. It repeatedly announced its intention to introduce “common standards“, which should define what exactly counts as a green investment and will be set out in so-called taxonomies.
Since October 2020, a joint taxonomy working group is meeting to work out “the commonalities of the already existing taxonomies” by fall 2021. It is chaired by the EU and China. The outcome should become a guideline for members of the International Platform on Sustainable Finance (IPSF). The IPSF brings together authorities responsible for the development of environmentally sustainable financial policies from 17 countries and regions. The EU participates as a confederation of states. Other members are China, Japan, India, Great Britain and Canada. The US does not participate.
The IPSF is an exchange forum and has no legislative powers. According to the IPSF’s latest annual report, the work of the taxonomy working group is seen as a foundation on which a “common classification tool for the global green and sustainable finance market” could be built. Beijing aims to announce common standards as early as the end of the year.
The EU seems to be a bit more cautious. A spokesperson for the EU Commission gave an evasive answer to a question from China.Table as to whether common standards with China were sought. He referred to the taxonomy working groups, which are intended to identify commonalities between existing taxonomies. The spokesman declined to say whether this would be followed by political negotiations on common standards. Nevertheless, they stated, “international cooperation is key to developing common global standards in the area of sustainable finance. Global financial markets are already calling on authorities to define common standards so sustainable finance can continue to develop”.
According to Sven Giegold, finance policy spokesman for the Greens in the European Parliament and finance expert, it makes sense to exchange views on standards. But he disagrees with the EU Commission and does not see cooperation as a mandatory condition for the harmonization of standards for green investments. The EU Commission should not underestimate its power in setting global standards, Giegold said. If the EU countries agree on a standard for green investments, chances are good that it will be enforced worldwide.
The EU is, after all, a huge internal market. What is regulated here quickly applies worldwide. It is impractical for other regions to set separate rules – they already have to comply with those of the EU anyway. Also, costs would rise. Whereas political negotiations on common standards with other states are cumbersome, Giegold says. Thus, the Green politician favors the EU setting a good example rather than waiting for common processes.
Currently, classifications of what counts as a green investment are still in flux on both sides. While the EU has introduced a “taxonomy for sustainable activities”, it has not yet reached a final decision on whether gas and nuclear power plants, for example, will be considered sustainable or excluded from the green finance sector. A decision on this was recently postponed until the end of the year, as the individual EU member states were unable to agree on a compromise.
By Beijing standards, at least for green bonds, investments in “clean coal”, “clean oil production”, and even gas-fired power plants have long been considered green (China.Table reported). Recently, Beijing has tightened the standards for these instruments, cutting out fossil fuel production for the most part. Only gas infrastructure, such as pipelines and liquefied natural gas terminals, may continue to be financed with green bonds (China.Table reported).
The first pitfalls of common green finance standards between the EU and China lurk in the differences in content. It is possible that the standards will have to be tightened further in the future if it turns out that they are not sufficiently strict and allow too many investments in areas that are harmful to the climate. However, if the EU has then already agreed on common standards with China, it would not only have to find a compromise among its member states but also renegotiate with Beijing.
EU and Chinese standards also differ on ways to achieve the Paris climate goals. “The EU taxonomy was developed in line with the EU climate policy objective of aligning economic activities with the long-term goal of the Paris Agreement,” Byford Tsang, policy advisor at climate think tank E3G told China.Table. “Investments that meet the taxonomy’s standards are expected to support a specific set of climate mitigation and adaptation goals.” China’s recently revamped green bond standards do take into account metrics such as carbon peaks and targets such as carbon neutrality. But they don’t really align investments with climate change goals, Tsang said.
Common standards for green investments could accelerate cross-border investments in the environmental sector. They reduce transaction costs for financial actors. Currently, the Chinese market is still rather inaccessible for European financial actors when it comes to green investments, as standards still differ too much despite recent reforms.
Sven Giegold also points to the danger of social standards softening through EU-China negotiations. The EU taxonomy currently stipulates that economic activities are only classified as environmentally sustainable if they comply with the UN Guiding Principles on Business and Human Rights, for example. They should also be in line with the eight core labor standards of the International Labour Organization (ILO). These include a ban on forced labor and a guarantee of freedom of association. It will hardly be possible to reach a common denominator with China in these areas. Unless, of course, the Europeans lower their standards.
After almost 150 years in the country, a Chinese manager is taking over responsibility for the China business of the German industrial flagship Siemens for the first time: Xiao Song, born in Sichuan in 1965, holds a doctorate in engineering from the Technical University in Dortmund. In the concert of German conglomerates, this appointment is a real bombshell. Since the disaster of Deutsche Bank, which was still asked to pay for the corrupt machinations of its former Chinese top manager in the country more than ten years ago in 2019, only a few DAX companies have placed the overall responsibility of their China business in the hands of leaders from the People’s Republic. Fresenius Medical Care and the chemical group Covestro have been the exceptions.
Xiao’s appointment by an icon of European industry shows the professionalization of the Chinese economy since the start of the opening-up policy in the late 1970s, a zero hour for management knowledge in the country. But is it a sign that the country’s need for top foreign managers is coming to an end? Such a development would be in the interest of the government in Beijing, which wants to reduce external influence. Foreign companies, especially the big ones, are to be largely sinicized: Made in Germany, controlled by the Chinese. Siemens’ decision is therefore not without risk. No citizen of the People’s Republic is independent of his or her state.
On May 1, Xiao replaced his predecessor Lothar Herrmann at the helm of Siemens China. Xiao knows the company very well. Until the end of 2015, he had already worked for the company for eleven years, in various business areas: in the automotive sector, which was later sold, and in infrastructure such as transportation, logistics, mobility, smart grid, or building technology. “Of course, I am not completely new to the company, nor to many of our colleagues, customers, and partners. Nevertheless, this day marks a new beginning for me,” he wrote on his LinkedIn profile at the start of his service. He said he is excited and humbled to join the team. And, Xiao wrote, he is aware of his “great responsibility“.
Xiao now bears responsibility for the large China business of a company that wants to get rid of its image as a conglomerate and be perceived only as a technology group. Which employs almost 300,000 people worldwide and in 2020 achieved annual sales of €57.1 billion, twelve percent of which in the People’s Republic. Siemens has been one of the most important German companies for 170 years and has made important contributions to the history of technology, from the telegraph to the MRI scanner.
At headquarters in Munich, there is reportedly a great expectation that Xiao is aware of the importance of his role, almost 150 years after the group’s first walking attempts in the People’s Republic. The company’s new chief executive Roland Busch, who replaced Joe Kaeser at the helm just a few weeks ago, sent personal greetings to his new, old colleague under the LinkedIn post. “Dear Song, welcome back to Siemens. I wish you a great start and much success in your new role. I look forward to working with you again. See you soon, Roland,” Busch wrote. And Xiao promises, “Together we will make a difference.“
Xiao repeats this sentence several times among all the congratulations and welcomes. Here, Xiao deliberately emphasizes his qualities as a reliable long-term team player – a quality that is sometimes lacking among Chinese staff. He himself acquired the German way of thinking not only during his studies in Dortmund but also over the past decade and a half, first at Siemens and most recently as Asia Director of the Westphalian supplier Winkelmann Longchuan (SWL) Motorcomponents in Shanghai.
Xiao is friendly, obliging, and competent, that’s what they say about him in Munich. Siemens CEO Busch is convinced that he has chosen the right man. His task will be to drive the digital transformation of customers to increase their productivity and shorten their development times. Xiao will also be judged on his ability to maintain supply chains for Siemens when the going gets tough in stormy times of global trade disputes and protectionism. Xiao is a Chinese citizen, and his contacts with the state and politicians should pay off for Siemens in times of need.
Siemens’ first attempt to pave the way for a smooth China business with an Asian face at the top went awry a few years ago. Cheng Mei-Wei was already portrayed here and there in 2010 as the “first Chinese” to head Siemens in the country. However, Cheng is not from the People’s Republic but from Taiwan, and he has American citizenship. The experiment ended relatively quickly, and Lothar Herrmann took over until last week.
Deutsche Bank had its very own experience with the top manager Zhang Hongli, nicknamed Lee, from Heilongjiang province. Zhang was very well connected, played golf with the son of the former Chinese Prime Minister Wen Jiabao. He had earned his spurs in the financial industry at the US investment bank Goldman Sachs. In 2003, he took over the China business of Deutsche Bank. But the whole thing ended in a scandal. Zhang apparently paid millions to various advisers and contacts, putting the bank in a public relations crisis. In 2014, the bank sued its former employee. In August 2019, the company paid $16 million in fines to the US authorities.
But Zhang and Xiao are hardly comparable. At the time, Zhang took over the business of a bank that was hopelessly trailing its US competitors in China, which wanted to establish itself and had nothing to lose except its reputation. Xiao, on the other hand, is taking over a company that the Chinese knew back in the days of the empire, that was involved in all stages of the country’s technological development, that enjoys the trust of Chinese customers because it has German workmanship in its baggage and has been operating profitably in China for a long time.
Cicero magazine wrote back in 2010, when Cheng, a Taiwanese, took the helm: “But it is precisely the close ties with the country and its people that still urgently militate against Chinese CEOs in many international companies. For where do their interests lie, and to whom does their loyalty belong?”
The question seems outdated today in view of many successful Chinese executives in German service, but at the same time, it is more topical than ever. Legislation in the People’s Republic leaves citizens and companies less and less leeway to assert their sovereignty vis-à-vis the state. But as long as the numbers in China are right, the issue will hardly be relevant for Siemens. And problems or scandals are hard to be expected with proven personnel like Xiao. Marcel Grzanna
Siemens had to wait long for its first representative in the People’s Republic. Xiao Song, a universally praised manager with a wealth of international experience, is now taking the helm. It is pleasing and true that the era of foreign heads of organizations, which today consist almost exclusively of Chinese, is coming to an end. But in an era of rampant state influence, this can also lead to loyalty conflicts for the managers concerned, as Marcel Grzanna reports.
What is “sustainable”? China and Europe are by no means agreeing on this topic. For some, clean coal-fired power plants are already environmentally friendly; for others, it has to be wind power. Yet the question of the official definition of sustainability has severe economic consequences because only investments and projects with the fitting seal of approval receive financing from pots for sustainable investments. Nico Beckert describes the dispute over the classification of sustainability.
The law against food waste is a good week old. Frank Sieren looks at how the behavior of consumers and restaurants has changed since then. In China, more than elsewhere, full or empty plates are a sensitive question. If the country gets into the habit of producing too much waste, it will have to import even more. But Xi Jinping specifies: China should be as independent as possible from foreign countries. However, in Germany, we are one to talk – the EU produces far more food than it needs.
Green financial investments are one of the central future topics. Billions in investment are needed to transform the economy from fossil fuels toward climate-friendly production and consumption patterns. Beijing also recognized this: To attract more funding from international investors, the central bank wants to align standards for green investments and projects between the EU and China. It repeatedly announced its intention to introduce “common standards“, which should define what exactly counts as a green investment and will be set out in so-called taxonomies.
Since October 2020, a joint taxonomy working group is meeting to work out “the commonalities of the already existing taxonomies” by fall 2021. It is chaired by the EU and China. The outcome should become a guideline for members of the International Platform on Sustainable Finance (IPSF). The IPSF brings together authorities responsible for the development of environmentally sustainable financial policies from 17 countries and regions. The EU participates as a confederation of states. Other members are China, Japan, India, Great Britain and Canada. The US does not participate.
The IPSF is an exchange forum and has no legislative powers. According to the IPSF’s latest annual report, the work of the taxonomy working group is seen as a foundation on which a “common classification tool for the global green and sustainable finance market” could be built. Beijing aims to announce common standards as early as the end of the year.
The EU seems to be a bit more cautious. A spokesperson for the EU Commission gave an evasive answer to a question from China.Table as to whether common standards with China were sought. He referred to the taxonomy working groups, which are intended to identify commonalities between existing taxonomies. The spokesman declined to say whether this would be followed by political negotiations on common standards. Nevertheless, they stated, “international cooperation is key to developing common global standards in the area of sustainable finance. Global financial markets are already calling on authorities to define common standards so sustainable finance can continue to develop”.
According to Sven Giegold, finance policy spokesman for the Greens in the European Parliament and finance expert, it makes sense to exchange views on standards. But he disagrees with the EU Commission and does not see cooperation as a mandatory condition for the harmonization of standards for green investments. The EU Commission should not underestimate its power in setting global standards, Giegold said. If the EU countries agree on a standard for green investments, chances are good that it will be enforced worldwide.
The EU is, after all, a huge internal market. What is regulated here quickly applies worldwide. It is impractical for other regions to set separate rules – they already have to comply with those of the EU anyway. Also, costs would rise. Whereas political negotiations on common standards with other states are cumbersome, Giegold says. Thus, the Green politician favors the EU setting a good example rather than waiting for common processes.
Currently, classifications of what counts as a green investment are still in flux on both sides. While the EU has introduced a “taxonomy for sustainable activities”, it has not yet reached a final decision on whether gas and nuclear power plants, for example, will be considered sustainable or excluded from the green finance sector. A decision on this was recently postponed until the end of the year, as the individual EU member states were unable to agree on a compromise.
By Beijing standards, at least for green bonds, investments in “clean coal”, “clean oil production”, and even gas-fired power plants have long been considered green (China.Table reported). Recently, Beijing has tightened the standards for these instruments, cutting out fossil fuel production for the most part. Only gas infrastructure, such as pipelines and liquefied natural gas terminals, may continue to be financed with green bonds (China.Table reported).
The first pitfalls of common green finance standards between the EU and China lurk in the differences in content. It is possible that the standards will have to be tightened further in the future if it turns out that they are not sufficiently strict and allow too many investments in areas that are harmful to the climate. However, if the EU has then already agreed on common standards with China, it would not only have to find a compromise among its member states but also renegotiate with Beijing.
EU and Chinese standards also differ on ways to achieve the Paris climate goals. “The EU taxonomy was developed in line with the EU climate policy objective of aligning economic activities with the long-term goal of the Paris Agreement,” Byford Tsang, policy advisor at climate think tank E3G told China.Table. “Investments that meet the taxonomy’s standards are expected to support a specific set of climate mitigation and adaptation goals.” China’s recently revamped green bond standards do take into account metrics such as carbon peaks and targets such as carbon neutrality. But they don’t really align investments with climate change goals, Tsang said.
Common standards for green investments could accelerate cross-border investments in the environmental sector. They reduce transaction costs for financial actors. Currently, the Chinese market is still rather inaccessible for European financial actors when it comes to green investments, as standards still differ too much despite recent reforms.
Sven Giegold also points to the danger of social standards softening through EU-China negotiations. The EU taxonomy currently stipulates that economic activities are only classified as environmentally sustainable if they comply with the UN Guiding Principles on Business and Human Rights, for example. They should also be in line with the eight core labor standards of the International Labour Organization (ILO). These include a ban on forced labor and a guarantee of freedom of association. It will hardly be possible to reach a common denominator with China in these areas. Unless, of course, the Europeans lower their standards.
After almost 150 years in the country, a Chinese manager is taking over responsibility for the China business of the German industrial flagship Siemens for the first time: Xiao Song, born in Sichuan in 1965, holds a doctorate in engineering from the Technical University in Dortmund. In the concert of German conglomerates, this appointment is a real bombshell. Since the disaster of Deutsche Bank, which was still asked to pay for the corrupt machinations of its former Chinese top manager in the country more than ten years ago in 2019, only a few DAX companies have placed the overall responsibility of their China business in the hands of leaders from the People’s Republic. Fresenius Medical Care and the chemical group Covestro have been the exceptions.
Xiao’s appointment by an icon of European industry shows the professionalization of the Chinese economy since the start of the opening-up policy in the late 1970s, a zero hour for management knowledge in the country. But is it a sign that the country’s need for top foreign managers is coming to an end? Such a development would be in the interest of the government in Beijing, which wants to reduce external influence. Foreign companies, especially the big ones, are to be largely sinicized: Made in Germany, controlled by the Chinese. Siemens’ decision is therefore not without risk. No citizen of the People’s Republic is independent of his or her state.
On May 1, Xiao replaced his predecessor Lothar Herrmann at the helm of Siemens China. Xiao knows the company very well. Until the end of 2015, he had already worked for the company for eleven years, in various business areas: in the automotive sector, which was later sold, and in infrastructure such as transportation, logistics, mobility, smart grid, or building technology. “Of course, I am not completely new to the company, nor to many of our colleagues, customers, and partners. Nevertheless, this day marks a new beginning for me,” he wrote on his LinkedIn profile at the start of his service. He said he is excited and humbled to join the team. And, Xiao wrote, he is aware of his “great responsibility“.
Xiao now bears responsibility for the large China business of a company that wants to get rid of its image as a conglomerate and be perceived only as a technology group. Which employs almost 300,000 people worldwide and in 2020 achieved annual sales of €57.1 billion, twelve percent of which in the People’s Republic. Siemens has been one of the most important German companies for 170 years and has made important contributions to the history of technology, from the telegraph to the MRI scanner.
At headquarters in Munich, there is reportedly a great expectation that Xiao is aware of the importance of his role, almost 150 years after the group’s first walking attempts in the People’s Republic. The company’s new chief executive Roland Busch, who replaced Joe Kaeser at the helm just a few weeks ago, sent personal greetings to his new, old colleague under the LinkedIn post. “Dear Song, welcome back to Siemens. I wish you a great start and much success in your new role. I look forward to working with you again. See you soon, Roland,” Busch wrote. And Xiao promises, “Together we will make a difference.“
Xiao repeats this sentence several times among all the congratulations and welcomes. Here, Xiao deliberately emphasizes his qualities as a reliable long-term team player – a quality that is sometimes lacking among Chinese staff. He himself acquired the German way of thinking not only during his studies in Dortmund but also over the past decade and a half, first at Siemens and most recently as Asia Director of the Westphalian supplier Winkelmann Longchuan (SWL) Motorcomponents in Shanghai.
Xiao is friendly, obliging, and competent, that’s what they say about him in Munich. Siemens CEO Busch is convinced that he has chosen the right man. His task will be to drive the digital transformation of customers to increase their productivity and shorten their development times. Xiao will also be judged on his ability to maintain supply chains for Siemens when the going gets tough in stormy times of global trade disputes and protectionism. Xiao is a Chinese citizen, and his contacts with the state and politicians should pay off for Siemens in times of need.
Siemens’ first attempt to pave the way for a smooth China business with an Asian face at the top went awry a few years ago. Cheng Mei-Wei was already portrayed here and there in 2010 as the “first Chinese” to head Siemens in the country. However, Cheng is not from the People’s Republic but from Taiwan, and he has American citizenship. The experiment ended relatively quickly, and Lothar Herrmann took over until last week.
Deutsche Bank had its very own experience with the top manager Zhang Hongli, nicknamed Lee, from Heilongjiang province. Zhang was very well connected, played golf with the son of the former Chinese Prime Minister Wen Jiabao. He had earned his spurs in the financial industry at the US investment bank Goldman Sachs. In 2003, he took over the China business of Deutsche Bank. But the whole thing ended in a scandal. Zhang apparently paid millions to various advisers and contacts, putting the bank in a public relations crisis. In 2014, the bank sued its former employee. In August 2019, the company paid $16 million in fines to the US authorities.
But Zhang and Xiao are hardly comparable. At the time, Zhang took over the business of a bank that was hopelessly trailing its US competitors in China, which wanted to establish itself and had nothing to lose except its reputation. Xiao, on the other hand, is taking over a company that the Chinese knew back in the days of the empire, that was involved in all stages of the country’s technological development, that enjoys the trust of Chinese customers because it has German workmanship in its baggage and has been operating profitably in China for a long time.
Cicero magazine wrote back in 2010, when Cheng, a Taiwanese, took the helm: “But it is precisely the close ties with the country and its people that still urgently militate against Chinese CEOs in many international companies. For where do their interests lie, and to whom does their loyalty belong?”
The question seems outdated today in view of many successful Chinese executives in German service, but at the same time, it is more topical than ever. Legislation in the People’s Republic leaves citizens and companies less and less leeway to assert their sovereignty vis-à-vis the state. But as long as the numbers in China are right, the issue will hardly be relevant for Siemens. And problems or scandals are hard to be expected with proven personnel like Xiao. Marcel Grzanna
