The German mechanical engineering sector has been one of the cornerstones of the German economy for years. But German companies in China are currently increasingly pessimistic. This is the result of the latest survey by the German Mechanical Engineering Industry Association (VDMA), available to China.Table in advance. Finn Mayer-Kuckuk has taken a closer look.
There are certainly positive aspects: The harsh Covid measures have finally ended and access to raw materials has improved significantly in the meantime. But the industry is now struggling to find new contracts. Still, companies expect growth of six percent this year.
The digital sector holds far greater growth potential. Here, ChatGPT in particular has recently caused a stir – not only in America and Europe. In China, too, leading tech companies are entering the race for the best AI app. But what Baidu, Alibaba and Co. have presented to date is a total disappointment.
Some industry experts estimate that China is three years behind in AI language models. Joern Petring has looked into the reasons for the Chinese poor performance when it comes to AI language models. His conclusion: The US technology blockade is effectively cutting China off from the semiconductor market. Instead of the powerful A100 chips, the People’s Republic only receives the vastly inferior A800 variant.
The current business climate survey of the German Mechanical Engineering Industry Association VDMA in China reveals waning optimism in the sector. “The mood among our members in China remains restrained, as the Chinese economy is developing with both light and shade following the lifting of the Covid measures,” explains Daniel Yoo, VDMA office manager in Shanghai. China.Table was able to preview the survey results.
A full 30 percent of the companies surveyed rate their situation as “poor”; last fall it was still 23 percent. The number of companies that rate their situation as “good” or at least “satisfactory” dropped by 7 percentage points to 70 percent.
These figures are particularly alarming in the long-term trend. In spring 2018, the number of companies with a “good” business situation was still 64 percentage points larger than those in a “bad” situation. The ratio has reversed. The bad assessments now dominate with a negative lead of 11 percent. In an interview with China.Table, the head of the VDMA office in Beijing, Claudia Barkowsky, lamented the shrinking technical advantage of German manufacturers – particularly in the mid-range segment of machine tools.
Association members in China currently see the key problems in the lack of new orders, following last fall’s raw material bottlenecks. Clients are simply placing fewer orders because they are not investing as much as they used to.
That means that the hopes for a solid recovery early in the year have not materialized. One-third of the companies surveyed are unable to fully utilize their capacities. One reason, for instance, is the slowing demand from the automotive industry, which has already made major investments and is currently again experiencing declining sales.
However, companies expect the trend to turn around soon. “The good news, however, is that 40 percent of our surveyed members expect orders to pick up in the coming months,” says Shanghai office manager Yoo. As many as 31 percent of the 200 companies surveyed expect orders from overseas to increase. Companies in the food and packaging machinery industries will profit most from this.
Last year, the German mechanical engineering sector in China saw a five percent sales growth. The current expectation is slightly higher at six percent. However, these growth levels are considerably below previous surveys. However, if consumption in China picks up again, investment in new equipment could also go up again.
At least the Covid restrictions have now finally been overcome. Only a minority of companies still consider lockdowns and similar measures to be business barriers.
Chinese companies face a serious problem in the race for AI language models like ChatGPT. They do not have enough chips capable of computing these complex models. Yin Qi, CEO and co-founder of Megvii, has now been surprisingly frank about the challenges the industry faces. Megvii is a leading AI company in China.
Yin told the Chinese business magazine Caixin that companies in China currently have access to around 40,000 state-of-the-art A100 chips manufactured by the US company Nvidia. The A100 is considered the gold standard for running AI language models. It is estimated that the US company Open AI uses more than 30,000 of these processors for ChatGPT alone.
However, due to the shortage of A100 processors, Chinese companies currently have to make do with 3000 to 5000 A100 chips, according to Yin. The US government is responsible for the lack of chips. As part of its technology embargo, it has prohibited the export of the A100 to China.
Nvidia is still permitted to sell a slimmed-down version of the A100, the A800, to the People’s Republic. According to experts, however, these are less suited for such AI models. The same is true for chips from Intel and AMD, which are still being sold in China.
Megvii itself is not working on an AI language model. Rather, the Beijing-based company mainly offers intelligent image recognition services for modern CCTV cameras. But other Chinese companies are working at full speed on their own ChatGPT models, such as the search engine group Baidu.
However, the presentation of the Ernie Bot language model in March disappointed. After its release, accusations were even made that Baidu had copied ChatGPT for its model. This was reported by the Chinese newspaper South China Morning Post.
According to the report, tech giant Alibaba did not fare much better. The company also presented its own AI, Tongyi Qianwen, in April. However, an internal memo said the model was about 18 months behind ChatGPT. Other industry insiders estimate China’s deficit in AI language models to be as high as three years, an eternity in the tech world.
Caixin experts say that China’s chip problems would not be solved even if a Chinese company were able to develop a chip completely on par with the A100. The reason is that production would also be dependent on foreign partners. However, due to US regulations, they are barred from cooperating with Chinese companies.
Nvidia’s AI chips are in high demand worldwide, reflecting the chip manufacturer’s share price. The company’s value has doubled since the beginning of the year. Chinese competitor Baidu, on the other hand, has lost around 25 percent on the stock market since the presentation of Ernie Bot.
As DigiTimes Asia even reports, Chinese chip manufacturers are experiencing a veritable wave of bankruptcies: Around 10,000 Chinese chip manufacturers will reportedly go out of business between 2021 and 2022. The reasons are manifold. But what is also clear is that only 16 percent of chips in China are produced domestically – and they only count among the less sophisticated semiconductors.
And to make matters worse. China’s companies risk falling even further behind in the AI race: Nvidia has already ramped up production of the even more powerful A100 successor, the H100. They, too, are not allowed to be sold to China.
Xifan Yang lives on the 18th floor of a high-rise building in Beijing. She moved here five years ago as a correspondent for the German weekly newspaper Die Zeit. “Since then, every year has been an exceptional situation.” In 2019, the protests in Hong Kong, then the pandemic. Which also had far-reaching consequences for Yang. “The social climate has changed around me,” she says. “People have become more reserved and distrustful – especially of journalists.”
For Yang, this is all the more reason to stay in Beijing. Amid the changing mood and the escalating geopolitical debate, she believes it has become all the more important to provide fact-based coverage of China. “I want to continue to provide insights into the country, even though it’s becoming more and more difficult.”
Yang was born in Hengyang in the province of Hunan and grew up in the German city of Freiburg im Breisgau, where her parents earned their PhDs. After graduating from school, she studied psychology because she “wanted to do something with people” – and has to smile at her own cliché formulation. But there is some truth in it, she says.
After finishing her studies, she learned the journalistic craft at the German School of Journalism. “I wanted to get out into the world, meet people from all sorts of different backgrounds, with all sorts of different life stories and views.” She considers it a luxury to deal with a wide range of topics without having to commit to one thing.
When she first moved back to China in 2011, she was fascinated by the country’s dynamism and sense of optimism. “The stories were literally on the street back then,” she recalls. She is all the more struck today by how much her parents’ country has changed. “Society’s belief that things are always going up, economically and personally, is fading.” Young people, in particular, are pessimistic about the future. “Xi Jinping has this vision of the great rejuvenation. But I wonder if the government will manage to rally the population to its cause in the same way it did in the past.”
When Yang says “back in the day,” she thinks of her own family history: “My grandfather joined the CCP as a young man full of hope and had to spend 20 years in forced labor under Mao.” Even when she was growing up, she was interested in the dynamics at play between a government and the governed – for example, how economic growth has changed perspectives on government.
Many in Yang’s family are critical of the CCP, but it is her grandfather, of all people, who is once again looking at the party in a reconciliatory way, she says. “I started writing about my family because I wanted to understand how their biographies are intertwined with China’s history.” Yang’s first book, “Als die Karpfen fliegen lernten – China am Beispiel meiner Familie,” was published in 2015.
Yang is currently traveling throughout China for a major dossier. She does not want to speculate about what the future holds in store. For now, she will stay in Beijing – “but of course, I can imagine living in Germany again.” Her husband and their cat are waiting for her there. Svenja Napp
No science fiction, but reality: The sun over Chongqing carries a colorful ring on Monday. This is a rare celestial phenomenon called halo. It is caused by reflection and refraction of light on ice crystals floating in the air.
The German mechanical engineering sector has been one of the cornerstones of the German economy for years. But German companies in China are currently increasingly pessimistic. This is the result of the latest survey by the German Mechanical Engineering Industry Association (VDMA), available to China.Table in advance. Finn Mayer-Kuckuk has taken a closer look.
There are certainly positive aspects: The harsh Covid measures have finally ended and access to raw materials has improved significantly in the meantime. But the industry is now struggling to find new contracts. Still, companies expect growth of six percent this year.
The digital sector holds far greater growth potential. Here, ChatGPT in particular has recently caused a stir – not only in America and Europe. In China, too, leading tech companies are entering the race for the best AI app. But what Baidu, Alibaba and Co. have presented to date is a total disappointment.
Some industry experts estimate that China is three years behind in AI language models. Joern Petring has looked into the reasons for the Chinese poor performance when it comes to AI language models. His conclusion: The US technology blockade is effectively cutting China off from the semiconductor market. Instead of the powerful A100 chips, the People’s Republic only receives the vastly inferior A800 variant.
The current business climate survey of the German Mechanical Engineering Industry Association VDMA in China reveals waning optimism in the sector. “The mood among our members in China remains restrained, as the Chinese economy is developing with both light and shade following the lifting of the Covid measures,” explains Daniel Yoo, VDMA office manager in Shanghai. China.Table was able to preview the survey results.
A full 30 percent of the companies surveyed rate their situation as “poor”; last fall it was still 23 percent. The number of companies that rate their situation as “good” or at least “satisfactory” dropped by 7 percentage points to 70 percent.
These figures are particularly alarming in the long-term trend. In spring 2018, the number of companies with a “good” business situation was still 64 percentage points larger than those in a “bad” situation. The ratio has reversed. The bad assessments now dominate with a negative lead of 11 percent. In an interview with China.Table, the head of the VDMA office in Beijing, Claudia Barkowsky, lamented the shrinking technical advantage of German manufacturers – particularly in the mid-range segment of machine tools.
Association members in China currently see the key problems in the lack of new orders, following last fall’s raw material bottlenecks. Clients are simply placing fewer orders because they are not investing as much as they used to.
That means that the hopes for a solid recovery early in the year have not materialized. One-third of the companies surveyed are unable to fully utilize their capacities. One reason, for instance, is the slowing demand from the automotive industry, which has already made major investments and is currently again experiencing declining sales.
However, companies expect the trend to turn around soon. “The good news, however, is that 40 percent of our surveyed members expect orders to pick up in the coming months,” says Shanghai office manager Yoo. As many as 31 percent of the 200 companies surveyed expect orders from overseas to increase. Companies in the food and packaging machinery industries will profit most from this.
Last year, the German mechanical engineering sector in China saw a five percent sales growth. The current expectation is slightly higher at six percent. However, these growth levels are considerably below previous surveys. However, if consumption in China picks up again, investment in new equipment could also go up again.
At least the Covid restrictions have now finally been overcome. Only a minority of companies still consider lockdowns and similar measures to be business barriers.
Chinese companies face a serious problem in the race for AI language models like ChatGPT. They do not have enough chips capable of computing these complex models. Yin Qi, CEO and co-founder of Megvii, has now been surprisingly frank about the challenges the industry faces. Megvii is a leading AI company in China.
Yin told the Chinese business magazine Caixin that companies in China currently have access to around 40,000 state-of-the-art A100 chips manufactured by the US company Nvidia. The A100 is considered the gold standard for running AI language models. It is estimated that the US company Open AI uses more than 30,000 of these processors for ChatGPT alone.
However, due to the shortage of A100 processors, Chinese companies currently have to make do with 3000 to 5000 A100 chips, according to Yin. The US government is responsible for the lack of chips. As part of its technology embargo, it has prohibited the export of the A100 to China.
Nvidia is still permitted to sell a slimmed-down version of the A100, the A800, to the People’s Republic. According to experts, however, these are less suited for such AI models. The same is true for chips from Intel and AMD, which are still being sold in China.
Megvii itself is not working on an AI language model. Rather, the Beijing-based company mainly offers intelligent image recognition services for modern CCTV cameras. But other Chinese companies are working at full speed on their own ChatGPT models, such as the search engine group Baidu.
However, the presentation of the Ernie Bot language model in March disappointed. After its release, accusations were even made that Baidu had copied ChatGPT for its model. This was reported by the Chinese newspaper South China Morning Post.
According to the report, tech giant Alibaba did not fare much better. The company also presented its own AI, Tongyi Qianwen, in April. However, an internal memo said the model was about 18 months behind ChatGPT. Other industry insiders estimate China’s deficit in AI language models to be as high as three years, an eternity in the tech world.
Caixin experts say that China’s chip problems would not be solved even if a Chinese company were able to develop a chip completely on par with the A100. The reason is that production would also be dependent on foreign partners. However, due to US regulations, they are barred from cooperating with Chinese companies.
Nvidia’s AI chips are in high demand worldwide, reflecting the chip manufacturer’s share price. The company’s value has doubled since the beginning of the year. Chinese competitor Baidu, on the other hand, has lost around 25 percent on the stock market since the presentation of Ernie Bot.
As DigiTimes Asia even reports, Chinese chip manufacturers are experiencing a veritable wave of bankruptcies: Around 10,000 Chinese chip manufacturers will reportedly go out of business between 2021 and 2022. The reasons are manifold. But what is also clear is that only 16 percent of chips in China are produced domestically – and they only count among the less sophisticated semiconductors.
And to make matters worse. China’s companies risk falling even further behind in the AI race: Nvidia has already ramped up production of the even more powerful A100 successor, the H100. They, too, are not allowed to be sold to China.
Xifan Yang lives on the 18th floor of a high-rise building in Beijing. She moved here five years ago as a correspondent for the German weekly newspaper Die Zeit. “Since then, every year has been an exceptional situation.” In 2019, the protests in Hong Kong, then the pandemic. Which also had far-reaching consequences for Yang. “The social climate has changed around me,” she says. “People have become more reserved and distrustful – especially of journalists.”
For Yang, this is all the more reason to stay in Beijing. Amid the changing mood and the escalating geopolitical debate, she believes it has become all the more important to provide fact-based coverage of China. “I want to continue to provide insights into the country, even though it’s becoming more and more difficult.”
Yang was born in Hengyang in the province of Hunan and grew up in the German city of Freiburg im Breisgau, where her parents earned their PhDs. After graduating from school, she studied psychology because she “wanted to do something with people” – and has to smile at her own cliché formulation. But there is some truth in it, she says.
After finishing her studies, she learned the journalistic craft at the German School of Journalism. “I wanted to get out into the world, meet people from all sorts of different backgrounds, with all sorts of different life stories and views.” She considers it a luxury to deal with a wide range of topics without having to commit to one thing.
When she first moved back to China in 2011, she was fascinated by the country’s dynamism and sense of optimism. “The stories were literally on the street back then,” she recalls. She is all the more struck today by how much her parents’ country has changed. “Society’s belief that things are always going up, economically and personally, is fading.” Young people, in particular, are pessimistic about the future. “Xi Jinping has this vision of the great rejuvenation. But I wonder if the government will manage to rally the population to its cause in the same way it did in the past.”
When Yang says “back in the day,” she thinks of her own family history: “My grandfather joined the CCP as a young man full of hope and had to spend 20 years in forced labor under Mao.” Even when she was growing up, she was interested in the dynamics at play between a government and the governed – for example, how economic growth has changed perspectives on government.
Many in Yang’s family are critical of the CCP, but it is her grandfather, of all people, who is once again looking at the party in a reconciliatory way, she says. “I started writing about my family because I wanted to understand how their biographies are intertwined with China’s history.” Yang’s first book, “Als die Karpfen fliegen lernten – China am Beispiel meiner Familie,” was published in 2015.
Yang is currently traveling throughout China for a major dossier. She does not want to speculate about what the future holds in store. For now, she will stay in Beijing – “but of course, I can imagine living in Germany again.” Her husband and their cat are waiting for her there. Svenja Napp
No science fiction, but reality: The sun over Chongqing carries a colorful ring on Monday. This is a rare celestial phenomenon called halo. It is caused by reflection and refraction of light on ice crystals floating in the air.
