The person of the day at China.Table is not the new German chancellor Olaf Scholz, it is Ralf Brandstaetter. In the future, he will be responsible for China on the VW board of management. His task is to turn around business in the world’s largest car market. There, the market leader could lose its dominant position: For example, the company preferred to install urgently needed chips in Germany rather than in the Far East. Such decisions about the allocation of scarce resources are made at the board level. And until now, CEO Diess was also responsible for China. Brandstaetter is now supposed to “relieve” Diess and set proper priorities. Christian Domke Seidel analyzes the story behind the staff carousel at VW’s top level.
The new German government places a stronger emphasis on defending human rights and liberal values than its predecessor. However, the old government left it with an advantage: Germany’s Supply Chain Act. The law is intended to mandate companies to monitor the conditions surrounding their production. What sounds noble in theory is likely to run into difficulties in practice. Who is supposed to identify and assess human rights violations? Amelie Richter talked about this with Jens Hildebrandt from the German Chamber of Commerce in China.
Meanwhile, China is gradually putting more details of its climate concepts on the table. Nico Beckert has now taken a look at the brand-new Five-Year Plan for Green Economy – and couldn’t find any solid, tangible goals for transforming production. Instead, Beijing is relying on relative metrics based on economic growth. But that doesn’t necessarily mean that nothing will happen. In fact, the change in China is probably happening quicker than hoped.
Trouble is brewing in Wolfsburg. However, shortly before today’s supervisory board meeting of the Volkswagen Group, the car giant has managed to put out the hottest fires. Ralf Brandstaetter (53), until now head of the core brand VW, will also become a board member of VW China. In doing so, he will relieve group boss Herbert Diess of his duties. The battered chairman of the board will thus keep his post for the moment. However, there is no reason for him to feel safe.
Brandstaetter had only taken over the management of the core Volkswagen brand from Diess in the summer of 2020. In retrospect, one line of Brandstaetter’s presentation at the time is particularly striking: “Dr. Herbert Diess, who had previously been responsible for both functions, will therefore receive greater leeway for his tasks as Group CEO.” Because the Wolfsburg company can now reuse the same line. Brandstaetter’s next promotion once again gives his CEO “more freedom”.
Brandstaetter has to tackle two key challenges as the new China board member. The first is to drive forward electromobility. Volkswagen is lagging behind its own expectations in China. This already cost Stephan Woellenstein his job as head of Volkswagen Group China (VGC). He failed due to bad timing, explained industry expert Ferdinand Dudenhoeffer in an interview with China.Table. Volkswagen simply could only offer European cars in China, but needed SUVs and Tesla-like sedans.
The second task is to balance the semiconductor shortage. In the coming year, this will probably only work at the expense of the European market. However, Volkswagen’s revenue is significantly lower on cars sold in China than on models in other markets. Joint venture partners SAIC and FAW are partly to blame, which naturally take their share of the returns. That’s why, when the semiconductor shortage hit, the group favored European factories for allocation. Because this caused massive resentment in the People’s Republic, the Chinese locations are likely to receive better treatment next year. Through this, VW also wants to keep its threatened position as the market leader. Whether the European factories will still receive enough parts is uncertain.
In any case, the chip shortage will continue to plague Volkswagen in 2022. There will be bottlenecks for at least the first half of the year, said Murat Aksel, member of the Management Board for Group Purchasing. A task force is trying to maintain the supply. However, the shortage of electronic components continues to leave deep scars. In October, the group’s global deliveries fell by a third, with the sharpest decline in China and Europe. In any case, Brandstatter would first have to focus on the joint venture with FAW and SAIC. The semiconductor shortage had caused the biggest mayhem there.
Unlike Woellenstein, Brandstaetter has no experience in China. But he knows his way around the Group. He has spent more than half his life climbing the career ladder at VW: He joined the company in 1993, and by 1998, at the age of 30, he was already in charge of the important task of sourcing metal for chassis and drive components. Less than five years later, he then was responsible for new vehicle projects. After that, Brandstaetter moved up to a new management post every two to three years. He gained experience outside Germany at Seat in Spain, first in procurement and then as a member of the Executive Board.
In summer 2020, the automotive industry was nonetheless surprised when Brandstaetter became CEO of the core Volkswagen Passenger Cars brand, taking over part of Diess’ authority. As his latest career move shows, however, this was only the beginning of a significant expansion of his competencies. The steep rise can be attributed to the fact that Brandstaetter enjoys an excellent reputation on the Supervisory Board.
But should EV sales decline in Europe as well – for example, due to a lack of semiconductors manufactured in China – things could get unpleasant for Diess. His job is decided by the Porsche and Piëch families. They hold 53 percent of the votes at the annual general meeting. Besides the share price, they are also interested in good relations with politicians. Stephan Weil is the current Minister-President of Lower Saxony. The SPD man is close to the works council of the group, which in turn has fallen out with Diess. That doesn’t bode well for Diess.
It remains to be seen what the changes on the VW board will mean for Woellenstein’s successor. Experts consider two possibilities:
In parallel, the position of President of Audi China was reassigned much more quietly. Juergen Unser takes over the management of the business in the People’s Republic and succeeds Werner Eichhorn, who is retiring. Unser is a mechanical engineer and has been with the VW Group since 2004. Since 2013, he has been Technical Vice President for Research and Development, Product Management and Production as well as a member of the Board of FAW-Volkswagen in China.
In addition, the VW board of management will receive three new faces, increasing the number of seats to eleven:
For Diess, the latter personnel change is particularly exciting, because initially there were plans to simply transfer Werner’s tasks to him. But it seems that he is to be given the aforementioned “leeway” here as well. Diess, however, will be given responsibility for the subsidiary Cariad. The company bundles the Group’s software activities. However, it is clearly behind schedule.
These are company names that barely make the headlines. But they are more relevant to the world’s climate than entire countries. China Baowu, the world’s largest steel producer, produces more CO2 emissions than Pakistan. Chinese carmaker Saic Motors produces CO2 emissions comparable to Argentina’s. And the manufacturer of building materials, China National Building Material Group, is on a par with the industrial nation of France in terms of emissions.
If China is to achieve its climate targets, the industrial sector must massively reduce its emissions. Currently, it is directly responsible for 27 percent of China’s emissions. Indirectly, i.e. through power demand, the sector contributes a further 28 percent of China’s CO2 emissions. This is why the People’s Republic recently presented a five-year green development plan for industrial sectors. This document is one of the sector plans announced back in the autumn. They are intended to break down China’s climate targets (China.Table reported).
The plan noted that the “problem of pollution in key regions and industries has not yet been solved.” At the same time, the current five-year period, from 2021 to 2025, is crucial to “tackle climate change.” During these years, the government in Beijing must set the course to reach peak CO2 emissions by 2030.
China’s plan includes several major milestones, but does not include absolute emission reduction targets:
Specifically, the 18 percent target means that if industrial value-added increases by more than four percent per year, CO2 emissions from this sector could continue to rise in absolute terms, as calculated by climate expert Lauri Myllyvirta from the Centre for Research on Energy and Clean Air in Helsinki.
Overall, the targets do not seem overly ambitious compared to China’s capabilities. In the period from 2015 to 2020, energy intensity already fell by 16 percent, which was more than the projected goal. Moreover, services are playing an increasingly important role in China’s economy. These do not emit as many greenhouse gases anyway. The third factor is that overall growth is declining, which also dampens emissions growth. Moreover, as intensity drops, China’s industrial emissions may soon peak, Myllyvirta said. If the role of industry shrinks in this way, as well as its coal and oil consumption, then the projected targets are within reach.
However, Myllyvirta also criticizes the fact that, while the government shows itself ambitious, it does not specify any tangible milestones for achieving the lofty goals: “The hope and the expectation is that these will be exceeded but no guarantees provided.” However, the plan will still be broken down into other plans for individual economic sectors, as is customary in China. Interim targets could then be found there.
To reduce emissions, the plan lists several projects. For example, the industry is to be supported in shifting from coal-fired power to gas and renewable energies. At the same time, hydrogen is to gain relevance. The production of coal-fired power is to become cleaner. However, power experts point out that there is hardly any potential for improvement here, as many coal-fired power plants have already been converted. Production processes should also be improved to make them consume less power. “Closing old capacity”, i.e. old factories and power plants, are to be shut down. However, there is no mention of specific goals, making it “simply repeating the slogans”.
However, the plan contains little information on how Beijing intends to achieve these goals politically. The field of green finance, i.e. the financing of green investments, is to be strengthened. In addition, one sentence mentions tax breaks for companies that are active in the areas of environmental protection and energy efficiency.
The national emissions trading scheme launched by China in summer 2021 is not mentioned at all. Actually, emissions trading was supposed to include some industrial sectors from the start but then was only initiated for the power sector and mainly for coal-fired power plants (China.Table reported). However, there are indications that at least the aluminum and cement sectors will have to participate in emissions trading from 2023. By 2025, all industrial sectors could be required to participate, as Zhang Xiliang, one of the heads behind emissions trading, recently explained. Other analysts even assume that the cement and aluminum sectors could be included in trading as early as next year.
All in all, the 14th Five-Year Plan does not provide any spectacular new impetus for the green development of the industry. However, this is quite typical of the mentality of Chinese planners. Those in charge prefer to set small goals that they then exceed by far, instead of ambitious targets that they might miss.
The German Supply Chain Act will come into force in just over a year. How are companies in China prepared for this?
The Supply Chain Act has naturally caused a lot of discussions and raised many questions. Not only among companies in China but also German companies worldwide. They are wondering how they are supposed to manage this audit and control of their immediate supply chain down to the lowest level, i.e. to the raw material supplier.
How have companies prepared themselves so far? First, they determine internally who is in charge. In large companies, compliance departments take care of this. In small companies, the question arises as to whether the responsibility lies with management, purchasing, or compliance. That’s the first challenge. What companies also need to do: Set up risk management, in which they elicit and figure out who is present in their supply chain. Where are they? What are they doing? That assessment is happening right now.
But shouldn’t I inherently know who I have in my supply chain?
This certainly is the case in the textile and automotive industries. This is a whole system that is coordinated and has to fit into each other here. Many companies know their supply chains in depth. The classic medium-sized company in mechanical engineering or other areas, that is, most small and medium-sized companies, know their supply chain in their own area, the business partners with whom they have contracts. In addition, they also know the supply chains for important components, but not in-depth; above all, they do not know all raw material suppliers.
For most, knowing where raw material XY comes from was not an issue in the past. When the Supply Chain Law was passed, we at the AHK in China developed a model Code of Conduct relatively soon. Companies can use this as a guideline and pass it on to their suppliers. Some large companies already have such a code in place anyway. This is not always the case for small and medium-sized companies. It depends on how complex the products are.
Is there still a lot of uncertainty?
The Federal Office of Economics and Export Control (BAFA) has yet to issue the implementing regulations. These are not available yet, and the companies are waiting for them. Right now, we are actually in the assessment phase, where everyone is aware: Okay, something is coming, it will be introduced in 2023. But first, we have to get some clarity. It remains to be seen what the implementation will look like. It is also planned that BAFA will make control trips. And we have to see how that will work. How are they supposed to get to suppliers in the countries? We are not only talking about China but about other countries as well. There is also the question as to how this can be implemented in joint ventures. But the implementing regulations will certainly provide a guideline.
Will one year be enough to implement all the requirements by the time the law goes into effect in early 2023?
From the perspective of many companies, time is very, very tight given the complexity. Right now, we are also battling a pandemic, a raw materials crisis, and logistics problems. It’s an extremely difficult situation. But: It is what it is. We are experiencing great efforts and are part of it. In any case, it’s going to be tight, because we don’t yet know when more details on the implementation will be presented.
What will monitoring look like? Will there be certificates?
There are already certificates. Companies conduct audits and social audits, especially in the automotive industry. The big question is who is supposed to identify and document allegations of forced labor in a system like China, or even in other countries. My feeling is that it will be difficult to find certification institutions that will do that.
Who could handle that?
There are, for example, large authorized certification companies such as the TÜVs or Bureau Veritas. There are also Chinese companies. But what is also quite clear is that, according to Chinese law, there can be no forced labor. By the same token, it is not possible to identify forced labor. That’s why I find it difficult to imagine how foreign or Chinese certifiers want to confirm or document an allegation of forced labor.
So you don’t believe that the TÜV in Xinjiang is allowed to enter any factory halls to check how things are going?
I cannot judge that. However, the press has already reported that foreign certifiers do not go to Xinjiang.
Are there any companies operating in Xinjiang that say, “Things are getting too dicey for me here, I’d rather leave”?
The German economy is, after all, largely active on the east coast of China. We know of probably no more than two handfuls of German companies that are active in Xinjiang. Xinjiang also does not have a sufficient industrial structure to qualify as a supplier location for the German economy. Be that as it may, the Supply Chain Law obliges companies to inspect their supply chains in depth. And if that is the case in the region, then the company must decide for itself what to do with it. So far, we have not heard from any company that a withdrawal was discussed.
The EU supply chain law could be stricter than the German one. What challenges could arise for companies in China?
Again, the question of implementation arises. Who is to verify this? For German companies, corporate responsibility is at the top of the agenda. They are aware of the challenges and that is why they are currently conducting risk management and compliance management assessments. Companies will fully review their supply chain. Of course, this will also be a completely different challenge for large companies.
What do you expect from the Chinese side?
This is a German and European supply chain law, which means that it has nothing to do with the involvement of the Chinese government. What needs to be clear for the Chinese government: This law is not targeting China, so it is not a Lex Sinica. The supply chain law has emerged from the history of corporate responsibility, which is aimed at the global activities of German companies.
Are you worried that Chinese authorities might block the execution?
There are individual instruments, such as the Chinese anti-sanctions law. According to this law, foreign companies can theoretically face legal action if they withdraw from doing business with Chinese companies as part of sanctions. But I believe what companies need to be more aware of: In B2C, in social media, there could be shitstorms. We have seen that before. Companies need to prepare themselves for how they want to deal with that and how to manage that if necessary.
H&M or Nike have already experienced shitstorms this year, primarily because of Xinjiang. How can companies prepare for the fact that supply chains are becoming increasingly politicized?
Companies are sensitized to the fact that they are basically in a situation where they have a responsibility in both directions. To the European consumer, but also to the Chinese consumer. Everyone in the industry has to balance this out for themselves. This will require communication with European and German stakeholders as well as governments, and equally on the Chinese side. There is no simple solution for companies.
Is the Supply Chain Act a pill that companies just have to swallow? Or are they perhaps glad that this issue is now being addressed?
German trade associations have provided their assessments of the implementation in advance. The requirements that will be imposed in some markets may become extremely difficult. This will increase costs and administrative burdens on companies. That in itself is something that puts small and medium-sized companies in particular at a disadvantage. Nevertheless, it is clear to companies that corporate responsibility applies. German companies in China are exemplary in this respect. As the German Chamber of Commerce, we have been running a CSR campaign here for six years, in which German companies participate and prove that they are not only here to do business, but also to give something back to society. This includes adhering to environmental standards and complying with social and labor laws.
Jens Hildebrandt is an executive member of the board at the German Chamber of Commerce in China for North China (AHK).
Eckhard Nagel remembers well how he stumbled upon the name “Wuhan” by chance in a French journal three years ago. “That was the first time I read about the city in a European newspaper,” he says. Unlike most in Germany, the head of the Institute for Medical Management and Health Sciences at the University of Bayreuth knew the megacity before the Coronavirus. Since 2018, the 61-year-old has been one of two presidents of the Sino-German Friendship Hospital at the Tongji Clinic.
He personally first heard of the city of Wuhan more than 30 years ago. At that time, he was still working at the Clinic for Abdominal and Transplant Surgery at Hanover Medical School. There, he met the Chinese surgeon Qiu Fazu. Qiu was on a mission: fostering German-Chinese relations in medicine. Qiu was very familiar with Germany, having married a German woman and even studied in Munich for a time.
The mission was successful. In the meantime, German students can complete their compulsory internship at the Tongji Hospital as part of the exchange program of the German-Chinese Medical Society (DCGM) and its partner company. Chinese students also regularly study in German hospitals. Nagel was first drawn to China after completing his studies, for the first time in the early 2000s, with former Chancellor Gerhard Schröder.
Nagel knew early on that he wanted to become a doctor. The trigger: his appendicitis. The then 13-year-old was supposed to be in the hospital for a week after his operation. “After two days I was well again and had time to discover the hospital. That fascinated me a lot,” he says. He later had an internship at the same hospital. After that, Nagel was sure of his career aspirations. Only during his medical studies in Hanover did he suddenly feel a void. “I was missing what medicine is actually about – the whole spectrum of human existence,” he explains his decision to study philosophy and history in addition.
In the meantime, the study of medicine has changed. Today, health economics and medical ethics are also part of the curriculum. Luckily, believes Nagel. At the University of Bayreuth, he has been campaigning for years to establish new courses of study in the health sector, such as the recent “Global Food, Nutrition & Health” course. It is clear for him that the training of health professionals must become more interdisciplinary, and the view more global. “The pandemic, in particular, has shown that we should not only look at medical developments from a European perspective,” he says.
Especially in his role as president of the Friendship Hospital at the Tongji Hospital, he has learned that both sides can always learn from each other. One example: A university children’s hospital with more than 800 beds is currently being built in Wuhan. “The quality will be based on the high standards in Europe, and we, in turn, can learn how to build such a large hospital in such a short time,” says the physician, who last visited the hospital in 2019.
While Nagel does not actually speak Chinese, he does speak Latin and ancient Greek. “I started Chinese too late. But I try to encourage my students to do so,” he says. Lisa Oder
The Chinese lunar robot “Yutu 2”, the second Jade Rabbit, has found something! On the far side of the moon, it is said to have spotted a “cube-shaped” object on the surface of Earth’s companion. This caused great excitement on social media, after all, the object looks a bit like the black monolith from the movie “2001: A Space Odyssey” by Stanley Kubrick. But if you look closely at the picture of the Jade Rabbit, you will be a little disappointed. The mysterious object looks more like a large stone. But who knows? Can you make out the hammer and sickle in the shadows?
The person of the day at China.Table is not the new German chancellor Olaf Scholz, it is Ralf Brandstaetter. In the future, he will be responsible for China on the VW board of management. His task is to turn around business in the world’s largest car market. There, the market leader could lose its dominant position: For example, the company preferred to install urgently needed chips in Germany rather than in the Far East. Such decisions about the allocation of scarce resources are made at the board level. And until now, CEO Diess was also responsible for China. Brandstaetter is now supposed to “relieve” Diess and set proper priorities. Christian Domke Seidel analyzes the story behind the staff carousel at VW’s top level.
The new German government places a stronger emphasis on defending human rights and liberal values than its predecessor. However, the old government left it with an advantage: Germany’s Supply Chain Act. The law is intended to mandate companies to monitor the conditions surrounding their production. What sounds noble in theory is likely to run into difficulties in practice. Who is supposed to identify and assess human rights violations? Amelie Richter talked about this with Jens Hildebrandt from the German Chamber of Commerce in China.
Meanwhile, China is gradually putting more details of its climate concepts on the table. Nico Beckert has now taken a look at the brand-new Five-Year Plan for Green Economy – and couldn’t find any solid, tangible goals for transforming production. Instead, Beijing is relying on relative metrics based on economic growth. But that doesn’t necessarily mean that nothing will happen. In fact, the change in China is probably happening quicker than hoped.
Trouble is brewing in Wolfsburg. However, shortly before today’s supervisory board meeting of the Volkswagen Group, the car giant has managed to put out the hottest fires. Ralf Brandstaetter (53), until now head of the core brand VW, will also become a board member of VW China. In doing so, he will relieve group boss Herbert Diess of his duties. The battered chairman of the board will thus keep his post for the moment. However, there is no reason for him to feel safe.
Brandstaetter had only taken over the management of the core Volkswagen brand from Diess in the summer of 2020. In retrospect, one line of Brandstaetter’s presentation at the time is particularly striking: “Dr. Herbert Diess, who had previously been responsible for both functions, will therefore receive greater leeway for his tasks as Group CEO.” Because the Wolfsburg company can now reuse the same line. Brandstaetter’s next promotion once again gives his CEO “more freedom”.
Brandstaetter has to tackle two key challenges as the new China board member. The first is to drive forward electromobility. Volkswagen is lagging behind its own expectations in China. This already cost Stephan Woellenstein his job as head of Volkswagen Group China (VGC). He failed due to bad timing, explained industry expert Ferdinand Dudenhoeffer in an interview with China.Table. Volkswagen simply could only offer European cars in China, but needed SUVs and Tesla-like sedans.
The second task is to balance the semiconductor shortage. In the coming year, this will probably only work at the expense of the European market. However, Volkswagen’s revenue is significantly lower on cars sold in China than on models in other markets. Joint venture partners SAIC and FAW are partly to blame, which naturally take their share of the returns. That’s why, when the semiconductor shortage hit, the group favored European factories for allocation. Because this caused massive resentment in the People’s Republic, the Chinese locations are likely to receive better treatment next year. Through this, VW also wants to keep its threatened position as the market leader. Whether the European factories will still receive enough parts is uncertain.
In any case, the chip shortage will continue to plague Volkswagen in 2022. There will be bottlenecks for at least the first half of the year, said Murat Aksel, member of the Management Board for Group Purchasing. A task force is trying to maintain the supply. However, the shortage of electronic components continues to leave deep scars. In October, the group’s global deliveries fell by a third, with the sharpest decline in China and Europe. In any case, Brandstatter would first have to focus on the joint venture with FAW and SAIC. The semiconductor shortage had caused the biggest mayhem there.
Unlike Woellenstein, Brandstaetter has no experience in China. But he knows his way around the Group. He has spent more than half his life climbing the career ladder at VW: He joined the company in 1993, and by 1998, at the age of 30, he was already in charge of the important task of sourcing metal for chassis and drive components. Less than five years later, he then was responsible for new vehicle projects. After that, Brandstaetter moved up to a new management post every two to three years. He gained experience outside Germany at Seat in Spain, first in procurement and then as a member of the Executive Board.
In summer 2020, the automotive industry was nonetheless surprised when Brandstaetter became CEO of the core Volkswagen Passenger Cars brand, taking over part of Diess’ authority. As his latest career move shows, however, this was only the beginning of a significant expansion of his competencies. The steep rise can be attributed to the fact that Brandstaetter enjoys an excellent reputation on the Supervisory Board.
But should EV sales decline in Europe as well – for example, due to a lack of semiconductors manufactured in China – things could get unpleasant for Diess. His job is decided by the Porsche and Piëch families. They hold 53 percent of the votes at the annual general meeting. Besides the share price, they are also interested in good relations with politicians. Stephan Weil is the current Minister-President of Lower Saxony. The SPD man is close to the works council of the group, which in turn has fallen out with Diess. That doesn’t bode well for Diess.
It remains to be seen what the changes on the VW board will mean for Woellenstein’s successor. Experts consider two possibilities:
In parallel, the position of President of Audi China was reassigned much more quietly. Juergen Unser takes over the management of the business in the People’s Republic and succeeds Werner Eichhorn, who is retiring. Unser is a mechanical engineer and has been with the VW Group since 2004. Since 2013, he has been Technical Vice President for Research and Development, Product Management and Production as well as a member of the Board of FAW-Volkswagen in China.
In addition, the VW board of management will receive three new faces, increasing the number of seats to eleven:
For Diess, the latter personnel change is particularly exciting, because initially there were plans to simply transfer Werner’s tasks to him. But it seems that he is to be given the aforementioned “leeway” here as well. Diess, however, will be given responsibility for the subsidiary Cariad. The company bundles the Group’s software activities. However, it is clearly behind schedule.
These are company names that barely make the headlines. But they are more relevant to the world’s climate than entire countries. China Baowu, the world’s largest steel producer, produces more CO2 emissions than Pakistan. Chinese carmaker Saic Motors produces CO2 emissions comparable to Argentina’s. And the manufacturer of building materials, China National Building Material Group, is on a par with the industrial nation of France in terms of emissions.
If China is to achieve its climate targets, the industrial sector must massively reduce its emissions. Currently, it is directly responsible for 27 percent of China’s emissions. Indirectly, i.e. through power demand, the sector contributes a further 28 percent of China’s CO2 emissions. This is why the People’s Republic recently presented a five-year green development plan for industrial sectors. This document is one of the sector plans announced back in the autumn. They are intended to break down China’s climate targets (China.Table reported).
The plan noted that the “problem of pollution in key regions and industries has not yet been solved.” At the same time, the current five-year period, from 2021 to 2025, is crucial to “tackle climate change.” During these years, the government in Beijing must set the course to reach peak CO2 emissions by 2030.
China’s plan includes several major milestones, but does not include absolute emission reduction targets:
Specifically, the 18 percent target means that if industrial value-added increases by more than four percent per year, CO2 emissions from this sector could continue to rise in absolute terms, as calculated by climate expert Lauri Myllyvirta from the Centre for Research on Energy and Clean Air in Helsinki.
Overall, the targets do not seem overly ambitious compared to China’s capabilities. In the period from 2015 to 2020, energy intensity already fell by 16 percent, which was more than the projected goal. Moreover, services are playing an increasingly important role in China’s economy. These do not emit as many greenhouse gases anyway. The third factor is that overall growth is declining, which also dampens emissions growth. Moreover, as intensity drops, China’s industrial emissions may soon peak, Myllyvirta said. If the role of industry shrinks in this way, as well as its coal and oil consumption, then the projected targets are within reach.
However, Myllyvirta also criticizes the fact that, while the government shows itself ambitious, it does not specify any tangible milestones for achieving the lofty goals: “The hope and the expectation is that these will be exceeded but no guarantees provided.” However, the plan will still be broken down into other plans for individual economic sectors, as is customary in China. Interim targets could then be found there.
To reduce emissions, the plan lists several projects. For example, the industry is to be supported in shifting from coal-fired power to gas and renewable energies. At the same time, hydrogen is to gain relevance. The production of coal-fired power is to become cleaner. However, power experts point out that there is hardly any potential for improvement here, as many coal-fired power plants have already been converted. Production processes should also be improved to make them consume less power. “Closing old capacity”, i.e. old factories and power plants, are to be shut down. However, there is no mention of specific goals, making it “simply repeating the slogans”.
However, the plan contains little information on how Beijing intends to achieve these goals politically. The field of green finance, i.e. the financing of green investments, is to be strengthened. In addition, one sentence mentions tax breaks for companies that are active in the areas of environmental protection and energy efficiency.
The national emissions trading scheme launched by China in summer 2021 is not mentioned at all. Actually, emissions trading was supposed to include some industrial sectors from the start but then was only initiated for the power sector and mainly for coal-fired power plants (China.Table reported). However, there are indications that at least the aluminum and cement sectors will have to participate in emissions trading from 2023. By 2025, all industrial sectors could be required to participate, as Zhang Xiliang, one of the heads behind emissions trading, recently explained. Other analysts even assume that the cement and aluminum sectors could be included in trading as early as next year.
All in all, the 14th Five-Year Plan does not provide any spectacular new impetus for the green development of the industry. However, this is quite typical of the mentality of Chinese planners. Those in charge prefer to set small goals that they then exceed by far, instead of ambitious targets that they might miss.
The German Supply Chain Act will come into force in just over a year. How are companies in China prepared for this?
The Supply Chain Act has naturally caused a lot of discussions and raised many questions. Not only among companies in China but also German companies worldwide. They are wondering how they are supposed to manage this audit and control of their immediate supply chain down to the lowest level, i.e. to the raw material supplier.
How have companies prepared themselves so far? First, they determine internally who is in charge. In large companies, compliance departments take care of this. In small companies, the question arises as to whether the responsibility lies with management, purchasing, or compliance. That’s the first challenge. What companies also need to do: Set up risk management, in which they elicit and figure out who is present in their supply chain. Where are they? What are they doing? That assessment is happening right now.
But shouldn’t I inherently know who I have in my supply chain?
This certainly is the case in the textile and automotive industries. This is a whole system that is coordinated and has to fit into each other here. Many companies know their supply chains in depth. The classic medium-sized company in mechanical engineering or other areas, that is, most small and medium-sized companies, know their supply chain in their own area, the business partners with whom they have contracts. In addition, they also know the supply chains for important components, but not in-depth; above all, they do not know all raw material suppliers.
For most, knowing where raw material XY comes from was not an issue in the past. When the Supply Chain Law was passed, we at the AHK in China developed a model Code of Conduct relatively soon. Companies can use this as a guideline and pass it on to their suppliers. Some large companies already have such a code in place anyway. This is not always the case for small and medium-sized companies. It depends on how complex the products are.
Is there still a lot of uncertainty?
The Federal Office of Economics and Export Control (BAFA) has yet to issue the implementing regulations. These are not available yet, and the companies are waiting for them. Right now, we are actually in the assessment phase, where everyone is aware: Okay, something is coming, it will be introduced in 2023. But first, we have to get some clarity. It remains to be seen what the implementation will look like. It is also planned that BAFA will make control trips. And we have to see how that will work. How are they supposed to get to suppliers in the countries? We are not only talking about China but about other countries as well. There is also the question as to how this can be implemented in joint ventures. But the implementing regulations will certainly provide a guideline.
Will one year be enough to implement all the requirements by the time the law goes into effect in early 2023?
From the perspective of many companies, time is very, very tight given the complexity. Right now, we are also battling a pandemic, a raw materials crisis, and logistics problems. It’s an extremely difficult situation. But: It is what it is. We are experiencing great efforts and are part of it. In any case, it’s going to be tight, because we don’t yet know when more details on the implementation will be presented.
What will monitoring look like? Will there be certificates?
There are already certificates. Companies conduct audits and social audits, especially in the automotive industry. The big question is who is supposed to identify and document allegations of forced labor in a system like China, or even in other countries. My feeling is that it will be difficult to find certification institutions that will do that.
Who could handle that?
There are, for example, large authorized certification companies such as the TÜVs or Bureau Veritas. There are also Chinese companies. But what is also quite clear is that, according to Chinese law, there can be no forced labor. By the same token, it is not possible to identify forced labor. That’s why I find it difficult to imagine how foreign or Chinese certifiers want to confirm or document an allegation of forced labor.
So you don’t believe that the TÜV in Xinjiang is allowed to enter any factory halls to check how things are going?
I cannot judge that. However, the press has already reported that foreign certifiers do not go to Xinjiang.
Are there any companies operating in Xinjiang that say, “Things are getting too dicey for me here, I’d rather leave”?
The German economy is, after all, largely active on the east coast of China. We know of probably no more than two handfuls of German companies that are active in Xinjiang. Xinjiang also does not have a sufficient industrial structure to qualify as a supplier location for the German economy. Be that as it may, the Supply Chain Law obliges companies to inspect their supply chains in depth. And if that is the case in the region, then the company must decide for itself what to do with it. So far, we have not heard from any company that a withdrawal was discussed.
The EU supply chain law could be stricter than the German one. What challenges could arise for companies in China?
Again, the question of implementation arises. Who is to verify this? For German companies, corporate responsibility is at the top of the agenda. They are aware of the challenges and that is why they are currently conducting risk management and compliance management assessments. Companies will fully review their supply chain. Of course, this will also be a completely different challenge for large companies.
What do you expect from the Chinese side?
This is a German and European supply chain law, which means that it has nothing to do with the involvement of the Chinese government. What needs to be clear for the Chinese government: This law is not targeting China, so it is not a Lex Sinica. The supply chain law has emerged from the history of corporate responsibility, which is aimed at the global activities of German companies.
Are you worried that Chinese authorities might block the execution?
There are individual instruments, such as the Chinese anti-sanctions law. According to this law, foreign companies can theoretically face legal action if they withdraw from doing business with Chinese companies as part of sanctions. But I believe what companies need to be more aware of: In B2C, in social media, there could be shitstorms. We have seen that before. Companies need to prepare themselves for how they want to deal with that and how to manage that if necessary.
H&M or Nike have already experienced shitstorms this year, primarily because of Xinjiang. How can companies prepare for the fact that supply chains are becoming increasingly politicized?
Companies are sensitized to the fact that they are basically in a situation where they have a responsibility in both directions. To the European consumer, but also to the Chinese consumer. Everyone in the industry has to balance this out for themselves. This will require communication with European and German stakeholders as well as governments, and equally on the Chinese side. There is no simple solution for companies.
Is the Supply Chain Act a pill that companies just have to swallow? Or are they perhaps glad that this issue is now being addressed?
German trade associations have provided their assessments of the implementation in advance. The requirements that will be imposed in some markets may become extremely difficult. This will increase costs and administrative burdens on companies. That in itself is something that puts small and medium-sized companies in particular at a disadvantage. Nevertheless, it is clear to companies that corporate responsibility applies. German companies in China are exemplary in this respect. As the German Chamber of Commerce, we have been running a CSR campaign here for six years, in which German companies participate and prove that they are not only here to do business, but also to give something back to society. This includes adhering to environmental standards and complying with social and labor laws.
Jens Hildebrandt is an executive member of the board at the German Chamber of Commerce in China for North China (AHK).
Eckhard Nagel remembers well how he stumbled upon the name “Wuhan” by chance in a French journal three years ago. “That was the first time I read about the city in a European newspaper,” he says. Unlike most in Germany, the head of the Institute for Medical Management and Health Sciences at the University of Bayreuth knew the megacity before the Coronavirus. Since 2018, the 61-year-old has been one of two presidents of the Sino-German Friendship Hospital at the Tongji Clinic.
He personally first heard of the city of Wuhan more than 30 years ago. At that time, he was still working at the Clinic for Abdominal and Transplant Surgery at Hanover Medical School. There, he met the Chinese surgeon Qiu Fazu. Qiu was on a mission: fostering German-Chinese relations in medicine. Qiu was very familiar with Germany, having married a German woman and even studied in Munich for a time.
The mission was successful. In the meantime, German students can complete their compulsory internship at the Tongji Hospital as part of the exchange program of the German-Chinese Medical Society (DCGM) and its partner company. Chinese students also regularly study in German hospitals. Nagel was first drawn to China after completing his studies, for the first time in the early 2000s, with former Chancellor Gerhard Schröder.
Nagel knew early on that he wanted to become a doctor. The trigger: his appendicitis. The then 13-year-old was supposed to be in the hospital for a week after his operation. “After two days I was well again and had time to discover the hospital. That fascinated me a lot,” he says. He later had an internship at the same hospital. After that, Nagel was sure of his career aspirations. Only during his medical studies in Hanover did he suddenly feel a void. “I was missing what medicine is actually about – the whole spectrum of human existence,” he explains his decision to study philosophy and history in addition.
In the meantime, the study of medicine has changed. Today, health economics and medical ethics are also part of the curriculum. Luckily, believes Nagel. At the University of Bayreuth, he has been campaigning for years to establish new courses of study in the health sector, such as the recent “Global Food, Nutrition & Health” course. It is clear for him that the training of health professionals must become more interdisciplinary, and the view more global. “The pandemic, in particular, has shown that we should not only look at medical developments from a European perspective,” he says.
Especially in his role as president of the Friendship Hospital at the Tongji Hospital, he has learned that both sides can always learn from each other. One example: A university children’s hospital with more than 800 beds is currently being built in Wuhan. “The quality will be based on the high standards in Europe, and we, in turn, can learn how to build such a large hospital in such a short time,” says the physician, who last visited the hospital in 2019.
While Nagel does not actually speak Chinese, he does speak Latin and ancient Greek. “I started Chinese too late. But I try to encourage my students to do so,” he says. Lisa Oder
The Chinese lunar robot “Yutu 2”, the second Jade Rabbit, has found something! On the far side of the moon, it is said to have spotted a “cube-shaped” object on the surface of Earth’s companion. This caused great excitement on social media, after all, the object looks a bit like the black monolith from the movie “2001: A Space Odyssey” by Stanley Kubrick. But if you look closely at the picture of the Jade Rabbit, you will be a little disappointed. The mysterious object looks more like a large stone. But who knows? Can you make out the hammer and sickle in the shadows?
