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A good two years ago, the automotive supplier Webasto was the first company in Germany to be hit by a COVID case. There was a great deal of uproar at the time, but in the overall picture of the pandemic, the event proved to be a mere episode that has almost been forgotten today. In an interview with China.Table, the CEO of Webasto, Holger Engelmann, now talks about the economic consequences of the pandemic.
Engelmann fears an “economic long COVID” for the post-COVID phase for several reasons. Shortages of skilled workers, raw materials, or semiconductors will continue to hold companies back for a while, he tells Marcel Grzanna. Webasto has therefore made its supplier relationships as robust as possible. But Engelmann warns: “A supply chain is only as strong as its weakest link” – and in the end, parts always come from other parts of the world.
For China, Engelmann even entertains thoughts of decoupled circuits, as Beijing has also learned its lessons from the crisis. Meanwhile, Engelmann considers the country’s response to the pandemic that began at the end of 2019 to be insufficiently transparent – the world lost valuable time at that time.
As of today, the new Personal Information Protection Law – PIPL for short – is in effect. Frank Sieren analyses how China’s tech companies have prepared for the changes to the legal framework since the announcement: What choice did they have but to comply and now offer decent data protection to citizens? The state, however, continues to exempt itself from the obligations.
Back in July, we featured the book “Xi Jinping – The Most Powerful Man in the World”. Actually, the authors Stefan Aust and Adrian Geiges were supposed to read from their work at two Confucius Institutes last week. This did not happen, because they canceled under pressure from Beijing. This has not only led to a loss of image for the German universities involved. Education Minister Anja Karliczek is now firing a warning shot at the Confucius Institutes and their partners. They should “deal decisively” with China’s influence.
A good start to the week wishes
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
Mr. Engelmann, Webasto was in the headlines at the start of the COVID pandemic. The first person to contract COVID in Germany was one of your employees, who was infected by a colleague from Wuhan. What do you feel when you look back on the past year and a half?
I immediately get a mental picture in my head. When we were confronted with the virus back then, it didn’t just have an economic dimension. It was also about the health of our employees and our environment. We had to act quickly, within a few hours, and make tough decisions such as the temporary closure of our headquarters in Stockdorf. In retrospect, we are proud of how well we managed this.
What is your conclusion from a business-economic perspective of this period?
All in all, the COVID pandemic hit us hard as an automotive supplier. However, things could have been worse. The Chinese market recovered very quickly, which helped us. Nevertheless, we did not close 2020 with a positive result. However, this was also because we continued to invest despite the crisis, for example in new locations or our e-mobility or autonomous driving solutions.
Is the crisis over now?
We are now entering the post-COVID phase, the economic long COVID, so to speak. We feel that the world is out of step. This is manifesting itself in semiconductors, in the shortage of raw materials, or the reduced availability of labor. This is a development that worries me very much. Over many years we have built up a very complex global system, which is very fragile, as learned now. That system is now out of balance. If I may use a metaphor here, it is comparable to throwing a stone into the water. We will now see whether this is just a wave that slowly ebbs away or whether we have unleashed a system that enters a kind of natural frequency and no longer stops oscillating.
Can you be more specific?
Right now, there are not enough semiconductors in the world. A storm in the U.S., a fire at a chip producer in Japan, or a COVID outbreak in Malaysia, these now suddenly felt all around the world. There are other issues as well: commodity prices are rising, there is a power shortage in China. Each problem may be solvable individually, but when this condition becomes systemic and more and more issues pop up here and there, then of course, things will get difficult.
Do you dare to make a prediction?
Both scenarios are equally likely. We don’t know what will happen in 2022 or 2023. Will we have the semiconductor problem under control then, or will everything get worse? And will then the next problem come our way, and the next, and then the next? The only certain thing is that some fundamental things about workflows have changed forever. Digital meetings will continue to be an integral part of the future. But here, too, we need to find a sensible balance.
Why?
If everything is only held virtual, then the interpersonal aspect comes up short, i.e. the possibility of exchanging ideas in private after a meeting, of quickly identifying the mood of my counterpart, asking questions, or pointing something out. Our industry has few reserves in its systems. Everything is tightly timed and geared to small margins. Communication can be crucial to the success or failure of a project. We accept the new normal, but we still have to improve it.
What have you learned about China in the past year and a half?
The initial phase of the pandemic was marked by a lack of transparency. As early as October 2019, we in Wuhan noticed that something was going on. But we didn’t take the first rumors seriously.
Many companies prefer to remain silent rather than accuse the Chinese government of making mistakes.
I think we can objectively conclude that the information policy could have been more transparent. However, I must also say that our Chinese employee, who was carrying the virus at the time, provided detailed information to the Robert Koch Institute after her return to China and provided important insights into the course of her illness. We certainly would have been better prepared for the pandemic if we in Europe had known earlier just how serious the situation in Wuhan was. With that information head start, we would have had a better chance of containing the virus. Admittedly, the Europeans or Americans could have been much better in their following crisis management.
…while China celebrated its early victory over the virus.
With its harshness and extreme efficiency, the Chinese government has greatly minimized the impact on their country. The intensity of the measures is certainly debatable, but in terms of containing the virus, they have been successful.
The pandemic has exposed the weak points of global supply chains. Will Webasto continue to regionalize?
Our DNA is that we produce in the region for the region and also source our parts there. Therefore, we are less directly exposed to the vulnerability of supply chains. But each component has its own supply chain, which in turn can be affected. In this respect, we are affected where our suppliers need components. We can’t go through all these levels ourselves, right down to the last nook and cranny. A supply chain is therefore only as strong as its weakest link. And even if we were to stockpile components, it could happen that one of our customers is missing another component. Even then, we would be affected. The complexity of value creation is enormous.
China wants to unbundle this complexity from national interests. For Webasto and others, this means having to set up two supply chains in the future. One for China and one for the rest of the world.
I fear that we will have to prepare ourselves to enable such a self-sufficient cycle in China in the future. We assume that the Chinese economy has learned from the crisis and wants to reduce its dependence on foreign countries. That is not yet the case now, but it could come down to all components being available in China at some point.
Does this decoupling make you nervous?
We have always been able to adapt flexibly to the respective circumstances in all regions of the world. The same will apply in China. But it is another issue whether regionalization makes sense in purely economic terms. It leaves efficiency untapped because purchasing volumes are reduced, leading to price increases for everyone involved, including the consumer.
Are we also paying a political price in terms of uprooting our businesses?
Difficult question. At least we, as Webasto, have not had any problems in the 20 years that we have now been operating in China. We have been able to develop on our terms in individual regions. We can freely manage our employees according to our values, just as we do in Germany. And we have a loyal Chinese workforce. Even when Chinese competitors have infringed our patents in the past, we have been able to legally assert our interests. So as a company, we have not experienced anything negative in China and have been able to develop well and maintain our market leadership in roofs so far. Of course, we notice that Chinese competitors are rising. But we can hold our own against them according to the rules of the market economy.
However, with the tightened data protection legislation, Chinese authorities now have the power to decide what data a company is allowed to transfer out of the country. Doesn’t that worry you?
We were told by our local organization that we would not have any problems. We only had to disclose whether we comply with all regulations. This is not a disadvantage for us for the time being. Rather, we are convinced that some competitors will have to adapt to the regulations.
Do you collect data in China that is transferred to Germany?
No, we don’t have to collect any data in China. Our entire Chinese organization is based on systems in Germany. So that’s where the data is stored.
The new anti-sanctions law may force companies to decide for or against China. Will Webasto and others become pawns on the geopolitical stage?
That is certainly part of the reality. If the political situation intensifies and decoupling looms, then, as a company, you have to be positioned in such a way that it enables you to survive in every region in which you operate. But the fact is that we are doing good business in China and can continue to invest in our development or innovative technologies. We benefit from the cash flow from China, also by creating jobs in Germany. But we are, of course, positioned in such a way that we can operate profitably in every region.
As long as the power isn’t cut off.
Like many of our customers, Webasto is directly affected by the power shortage. To cushion the situation and maintain production, we have rented additional power generators in the meantime. Our impression is that the authorities are making great efforts to stabilize the situation. However, the power-intensive winter will be another challenge regardless.
In its new battery center in Jiaxing, Webasto is now also breaking new ground in China, moving away from automobile roofs and auxiliary heaters. Will you be entering battery production in the medium term?
No, we will not produce battery cells but want to occupy a niche in which we, as a system manufacturer, develop and sell battery packs that manufacturers are then able to integrate into their vehicles. This will allow cell suppliers and OEMs to focus on their core competencies. It was a bold decision back in 2016 to invest in this new area of electromobility. Our goal is to generate more than one billion euros in sales with our system solutions for electromobility in a few years.
China is the largest single market for Webasto, accounting for almost 40 percent of the company’s revenue. You have twelve locations there. Will your central R&D nevertheless remain in Germany?
Yes. Our battery technology was developed entirely in Germany. But we now have our own China-specific battery product together with Chinese OEMs. I see an important basic principle for free competition here: We should not try to keep other countries down, but instead strive to be better, faster, more innovative.
Holger Engelmann is the CEO of German automotive supplier Webasto, based in Gauting near Munich, since 2013. Before that, Engelmann, who holds a doctorate in economics, held the positions of Deputy CEO and Chief Financial Officer. Webasto was founded in 1901 and is still a family business today. Its main focus is on roofs, heating and air conditioning systems, as well as charging equipment and complete battery systems for electric cars. Webasto has been manufacturing in Shanghai since 2001. China is now the company’s most important single market. In September 2019, Chancellor Angela Merkel visited the Webasto plant in Wuhan. In January 2020, some company employees were infected at the company headquarters in Gauting. The company received much praise at the time for its rapid response to contain infection chains.
Education Minister Anja Karliczek (CDU) is concerned about the increasing influence of Confucius Institutes on intellectual life in Germany. In a letter to the German universities, she writes of an“unacceptable” exertion of influence. She calls for “a re-evaluation of the role of the Confucius Institutes in the German university landscape and to draw the right conclusions from this.” It recommends that universities “scrutinize their cooperation with the institutes” and “deal decisively with China’s influence”.
The letter’s occasion is a discussion about an event that was initially scheduled at two Confucius Institutes. Stefan Aust and Adrian Geiges, the authors of the book “Xi Jinping – The Most Powerful Man in the World”, originally wanted to present and read from their work on October 27. However, the Confucius Institutes at the Universities of Hanover and Duisburg canceled the events at short notice. In Duisburg, the book presentation was then organized by the university itself.
The Leibniz Confucius Institute Hanover (LKIH) posted a statement online explaining its reasons. It says: “After the announcement of the online talk about the biography of the Chinese president with book author Adrian Geiges, disagreements arose with the Chinese partners, which made it no longer possible to adhere to the format and to involve the LKIH.”
According to the Piper publishing house, Shanghai’s Tongji University is said to have insisted to the Confucius Institute in Hanover that the event be canceled. The Confucius Institute in Hanover is run jointly by Tongji University and Leibniz University. In Duisburg, according to the press release, Feng Haiyang, the Consul General of China in Düsseldorf, personally intervened “to prevent the event”.
For Markus Taube, holder of the Chair of East Asian Economics / China at the Mercator School of Management and co-director of the Confucius Institute Metropole Ruhr at the University of Duisburg Essen, the cancellation came “out of the blue“. “So far, there has never been any interference despite critical events,” Taube told China.Table. This precedent is a “lose-lose constellation” for all involved, Taube said. He is referring not only to the long-standing relationships that universities have with their partner universities in China but also to the fact that it puts the fundamental issue of Chinese interference back on the table.
Confucius Institutes like the one in Duisburg-Essen are legally non-profit associations and are subject to German law. They are not obliged to disclose their finances to the universities to which they are affiliated, but only have to declare their income to the tax office. The German tax authority’s audit is also not public.
There are 19 Confucius Institutes in Germany. They are mostly affiliated with universities. Their official aim is to promote the teaching of the Chinese language and culture and to form a bridge for cultural exchange.
Back in 2014, State and Party leader Xi Jinping said, “We should strengthen China’s soft power, convey a good Chinese narrative, and better carry China’s messages to the world.” Such remarks, however, also fuel distrust. Confucius Institutes are said to be Beijing’s extended arm abroad with their program.
Confucius Institutes are Chinese state educational organizations. They are subordinate to the Center for Language Education and Cooperation (Hanban). They are therefore suspected of working closely with the government to influence opinion abroad on China as the government in Beijing would like to see it.
The funding of a professorship at Freie Universität Berlin with half a million euros from China’s treasury also caused a stir. Quite independently of financial contributions, there is discussion about how the universities provide the Confucius Institutes with legitimacy through the spatial overlaps. There is also criticism that the institutes damage the reputation of German universities and the freedom of research and science.
Among the most vehement critics is China expert Andreas Fulda of the University of Nottingham. Fulda says Confucius Institutes “have no place in universities”. “This is a kind of laundering of ideas, where political propaganda is given the stamp of unobjectionability,” he told the Tagesspiegel.
After the cancellation of the book presentation, Lower Saxony’s Science Minister Björn Thümler (CDU) criticized the event, according to NDR: “In Germany, freedom of science and freedom of opinion prevail”. Thümler, like Karliczek most recently, also called the cancellation of the event by the two Confucius Institutes “unacceptable”.
According to the Piper publishing house, which publishes the Xi book, the Confucius Institutes are said to have received pressure “from the very top”. “The cancellation of the event by the two Confucius Institutes is a worrying and disturbing signal,” says Piper publisher Felicitas von Lovenberg.
Those familiar with the incidents say in private that the credibility of the Confucius Institutes has suffered massively. But the basis of trust between German and Chinese academics at the universities involved has also been damaged.
Organized by the University of Duisburg, the online book launch finally took place. However, without the participation of the Confucius Institutes. Instead, all those involved agreed that the Institute for East Asian Studies at the University of Duisburg-Essen, where Taube is currently director, should act as the sole organizer.
Stefan Aust, co-author of the Xi biography, sees the basic theses of his book confirmed by the incident: “For the first time, a dictatorship is about to overtake the West economically and is now also trying to impose its values, which are directed against our freedom, internationally.”
Adrian Geiges points out that the book presents China in a very differentiated way, for example also the successful overcoming of poverty in the past decades. “Apparently, such balanced reports are no longer enough for Xi Jinping – he now wants an international cult around his person, just like in China itself,” a Piper press release quotes the two authors as saying.
In the press release, the Piper publishing house also quotes an employee of the Confucius Institutes. She justifies the cancellation of the book presentation with the following sentence: “You can’t talk about Xi Jinping as a normal person anymore, he is supposed to be untouchable and unspeakable now.”
In an interview with NDR, Geiges makes it clear that this quote is not the employee’s own opinion and should not be understood as criticism of Beijing’s actions. Rather, she says, it reflects the prohibitions communicated to the Confucius Institutes by the Chinese side. “That it is like this in China is nothing new, but that it is now to be extended to Germany is something new,” Geiges said.
At the recent UN General Assembly on September 21, China’s President Xi Jinping announced that he would stop building new coal projects overseas. “China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power projects abroad.” (English and Chinese versions of the speech)
This announcement did not come as a complete surprise. But on the same day, the storm of questions started: What exactly did the president mean by that? Does that include financing and insurance? What about the coal industry? Which companies and banks are affected?
For the time being, official China did not provide any answers. However, the announcement was certainly coordinated internally and externally. Bilateral talks were held behind the scenes. China’s coal industry and coal financiers had come under pressure in the last two years, and not only from the global climate protection movement. The lighthouse BRI project appeared to be entering serious reputational straits. Especially in the run-up to the World Climate Summit, there was now a need for an official response. Alok Sharma, the president of the 26th World Climate Summit, met with the head of one of China’s largest banks, the central bank (People’s Bank of China), as well as the National Planning Commission and the National Energy Administration (NEA). At issue was the financing of coal worldwide. A few months earlier, Japan and South Korea announced plans to phase out public financing of coal projects. Since 2013, these two countries, along with China, have spent 95 percent of public money on coal projects outside their own borders – though China has spent the most, a total of $50 billion and about 56 GW of installed capacity.
What will change now that President Xi Jinping has announced the coal phase-out outside China with media attention?
There are 60 gigawatts of coal-fired power generation planned in 20 countries, financed by Chinese public banks. It is not yet clear how many of the planned new coal mines (for example, in Russia and Pakistan) will actually be canceled.
Expansionists – these are the absolute climate killers, from urgewald’s point of view. According to the Global Coal Exit List (GCEL) 2021, just published in October 2021 by urgewald and NGO partners, Chinese companies are currently still among the biggest expansionists in coal-fired power plants around the world: of the 503 companies with plans for new plants, 26 percent are Chinese companies, compared to 11 percent from India, the second biggest expansionist.
Nevertheless, it is now necessary to record how much of the coal power in planning has already reached financial close (not defined as “new”, and thus probably not addressed), and what happens to those in preparation for construction (this could concern, for example, two of the five power plants under construction in Cambodia). Urgewald, together with colleagues worldwide, is investigating which and how much coal investments abroad could be covered.
It’s pretty clear: the announcement was also a test. It had two parts. Coupled with the offer to promote low-carbon technology in a big way in the BRI countries, wish lists are now being sought between now and COP 26 on how to “transform” the coal plans. This is also about competing to see who will end up providing the most money for low-carbon in Southeast Asia, Latin America, and Africa.
What we are seeing around the world is one fossil fuel being replaced by another. About a third of the coal plants “retired” in the U.S. between 2011 and 2019 were actually converted to gas. And countries like Bangladesh, which has canceled a third of its planned coal plants, and the Philippines, which has canceled more than half of the new coal plants in its project pipeline, are now heading for a massive expansion of liquefied natural gas (LNG) terminals and gas-fired plants.
These plans must be stopped if we are to meet the 1.5-degree target. Just in October 2021, OECD countries, including Japan, Australia, and Turkey, agreed to end export credits for new coal-fired power plants that do not use Carbon Capture (Utilization) and Storage (CCUS/CCS). Although this is the first internationally binding agreement to end export support for international coal projects by the end of 2021, it relies on false solutions. There is no such thing as a “clean” coal plant. Even if emissions can be “captured/stored”, the coal industry is still attached to dirty coal production, coal mining. CCS legitimizes the continuation of fossil industries. The processes are energy-intensive, costly, and pose new risks.
However, China will also follow exactly this path: Switch to gas and liquefied natural gas (LNG), and CCS/CCUS. Nuclear power and dams are the other two “climate-friendly” technologies touted at COP26. Gas cannot be a bridging technology in which massive investment is now being made. Although combustion produces less CO2 per kWh, the extraction and transport of fossil gas releases methane, which is even more harmful to the climate.
We want to prevent these technologies from finding their way into the European taxonomy. They are among the ‘false solutions’. Another bogus solution is the ETM (Energy Transition Mechanism) scheme, under which power plants are paid compensation for shutting down earlier. This is what is supposed to happen with the German lignite phase-out (though this is still under review in the EU Commission since 2021). At COP26, this scheme will be touted as the golden road by the Asian Development Bank (ADB) (3 November 2021). An expert opinion at the European level has shown that these ETMs allow de facto extensions. These solutions are also shams in China and Asia. The ADB, which would then own coal-fired power plants, despite its “coal phase-out strategy”, declares the “reduction of the lifetime to 15 years”. This cannot be a real solution given the new IPCC report of 9 August 2021. Moreover, these buyout plans are supposed to happen in conjunction with investors who are among the biggest expansionists, such as Blackrock, HSBC, and Citigroup Inc.
In a grand coalition of like-minded people, we are working to move away from such bogus solutions. But aside from that: China’s internal coal expansion plans alone, 250 gigawatts of new coal-fired power plant capacity, after all, could however overturn the Paris climate agreement. Building the giant dam in Tibet or mega-solar plants in the desert will compete with new coal power for the grid. A fundamental statement on the coal phase-out within China is more urgent than ever.
Nora Sausmikat is head of the China Desk of the environmental and human rights organization urgewald e.V.
A good two years ago, the automotive supplier Webasto was the first company in Germany to be hit by a COVID case. There was a great deal of uproar at the time, but in the overall picture of the pandemic, the event proved to be a mere episode that has almost been forgotten today. In an interview with China.Table, the CEO of Webasto, Holger Engelmann, now talks about the economic consequences of the pandemic.
Engelmann fears an “economic long COVID” for the post-COVID phase for several reasons. Shortages of skilled workers, raw materials, or semiconductors will continue to hold companies back for a while, he tells Marcel Grzanna. Webasto has therefore made its supplier relationships as robust as possible. But Engelmann warns: “A supply chain is only as strong as its weakest link” – and in the end, parts always come from other parts of the world.
For China, Engelmann even entertains thoughts of decoupled circuits, as Beijing has also learned its lessons from the crisis. Meanwhile, Engelmann considers the country’s response to the pandemic that began at the end of 2019 to be insufficiently transparent – the world lost valuable time at that time.
As of today, the new Personal Information Protection Law – PIPL for short – is in effect. Frank Sieren analyses how China’s tech companies have prepared for the changes to the legal framework since the announcement: What choice did they have but to comply and now offer decent data protection to citizens? The state, however, continues to exempt itself from the obligations.
Back in July, we featured the book “Xi Jinping – The Most Powerful Man in the World”. Actually, the authors Stefan Aust and Adrian Geiges were supposed to read from their work at two Confucius Institutes last week. This did not happen, because they canceled under pressure from Beijing. This has not only led to a loss of image for the German universities involved. Education Minister Anja Karliczek is now firing a warning shot at the Confucius Institutes and their partners. They should “deal decisively” with China’s influence.
A good start to the week wishes
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
Mr. Engelmann, Webasto was in the headlines at the start of the COVID pandemic. The first person to contract COVID in Germany was one of your employees, who was infected by a colleague from Wuhan. What do you feel when you look back on the past year and a half?
I immediately get a mental picture in my head. When we were confronted with the virus back then, it didn’t just have an economic dimension. It was also about the health of our employees and our environment. We had to act quickly, within a few hours, and make tough decisions such as the temporary closure of our headquarters in Stockdorf. In retrospect, we are proud of how well we managed this.
What is your conclusion from a business-economic perspective of this period?
All in all, the COVID pandemic hit us hard as an automotive supplier. However, things could have been worse. The Chinese market recovered very quickly, which helped us. Nevertheless, we did not close 2020 with a positive result. However, this was also because we continued to invest despite the crisis, for example in new locations or our e-mobility or autonomous driving solutions.
Is the crisis over now?
We are now entering the post-COVID phase, the economic long COVID, so to speak. We feel that the world is out of step. This is manifesting itself in semiconductors, in the shortage of raw materials, or the reduced availability of labor. This is a development that worries me very much. Over many years we have built up a very complex global system, which is very fragile, as learned now. That system is now out of balance. If I may use a metaphor here, it is comparable to throwing a stone into the water. We will now see whether this is just a wave that slowly ebbs away or whether we have unleashed a system that enters a kind of natural frequency and no longer stops oscillating.
Can you be more specific?
Right now, there are not enough semiconductors in the world. A storm in the U.S., a fire at a chip producer in Japan, or a COVID outbreak in Malaysia, these now suddenly felt all around the world. There are other issues as well: commodity prices are rising, there is a power shortage in China. Each problem may be solvable individually, but when this condition becomes systemic and more and more issues pop up here and there, then of course, things will get difficult.
Do you dare to make a prediction?
Both scenarios are equally likely. We don’t know what will happen in 2022 or 2023. Will we have the semiconductor problem under control then, or will everything get worse? And will then the next problem come our way, and the next, and then the next? The only certain thing is that some fundamental things about workflows have changed forever. Digital meetings will continue to be an integral part of the future. But here, too, we need to find a sensible balance.
Why?
If everything is only held virtual, then the interpersonal aspect comes up short, i.e. the possibility of exchanging ideas in private after a meeting, of quickly identifying the mood of my counterpart, asking questions, or pointing something out. Our industry has few reserves in its systems. Everything is tightly timed and geared to small margins. Communication can be crucial to the success or failure of a project. We accept the new normal, but we still have to improve it.
What have you learned about China in the past year and a half?
The initial phase of the pandemic was marked by a lack of transparency. As early as October 2019, we in Wuhan noticed that something was going on. But we didn’t take the first rumors seriously.
Many companies prefer to remain silent rather than accuse the Chinese government of making mistakes.
I think we can objectively conclude that the information policy could have been more transparent. However, I must also say that our Chinese employee, who was carrying the virus at the time, provided detailed information to the Robert Koch Institute after her return to China and provided important insights into the course of her illness. We certainly would have been better prepared for the pandemic if we in Europe had known earlier just how serious the situation in Wuhan was. With that information head start, we would have had a better chance of containing the virus. Admittedly, the Europeans or Americans could have been much better in their following crisis management.
…while China celebrated its early victory over the virus.
With its harshness and extreme efficiency, the Chinese government has greatly minimized the impact on their country. The intensity of the measures is certainly debatable, but in terms of containing the virus, they have been successful.
The pandemic has exposed the weak points of global supply chains. Will Webasto continue to regionalize?
Our DNA is that we produce in the region for the region and also source our parts there. Therefore, we are less directly exposed to the vulnerability of supply chains. But each component has its own supply chain, which in turn can be affected. In this respect, we are affected where our suppliers need components. We can’t go through all these levels ourselves, right down to the last nook and cranny. A supply chain is therefore only as strong as its weakest link. And even if we were to stockpile components, it could happen that one of our customers is missing another component. Even then, we would be affected. The complexity of value creation is enormous.
China wants to unbundle this complexity from national interests. For Webasto and others, this means having to set up two supply chains in the future. One for China and one for the rest of the world.
I fear that we will have to prepare ourselves to enable such a self-sufficient cycle in China in the future. We assume that the Chinese economy has learned from the crisis and wants to reduce its dependence on foreign countries. That is not yet the case now, but it could come down to all components being available in China at some point.
Does this decoupling make you nervous?
We have always been able to adapt flexibly to the respective circumstances in all regions of the world. The same will apply in China. But it is another issue whether regionalization makes sense in purely economic terms. It leaves efficiency untapped because purchasing volumes are reduced, leading to price increases for everyone involved, including the consumer.
Are we also paying a political price in terms of uprooting our businesses?
Difficult question. At least we, as Webasto, have not had any problems in the 20 years that we have now been operating in China. We have been able to develop on our terms in individual regions. We can freely manage our employees according to our values, just as we do in Germany. And we have a loyal Chinese workforce. Even when Chinese competitors have infringed our patents in the past, we have been able to legally assert our interests. So as a company, we have not experienced anything negative in China and have been able to develop well and maintain our market leadership in roofs so far. Of course, we notice that Chinese competitors are rising. But we can hold our own against them according to the rules of the market economy.
However, with the tightened data protection legislation, Chinese authorities now have the power to decide what data a company is allowed to transfer out of the country. Doesn’t that worry you?
We were told by our local organization that we would not have any problems. We only had to disclose whether we comply with all regulations. This is not a disadvantage for us for the time being. Rather, we are convinced that some competitors will have to adapt to the regulations.
Do you collect data in China that is transferred to Germany?
No, we don’t have to collect any data in China. Our entire Chinese organization is based on systems in Germany. So that’s where the data is stored.
The new anti-sanctions law may force companies to decide for or against China. Will Webasto and others become pawns on the geopolitical stage?
That is certainly part of the reality. If the political situation intensifies and decoupling looms, then, as a company, you have to be positioned in such a way that it enables you to survive in every region in which you operate. But the fact is that we are doing good business in China and can continue to invest in our development or innovative technologies. We benefit from the cash flow from China, also by creating jobs in Germany. But we are, of course, positioned in such a way that we can operate profitably in every region.
As long as the power isn’t cut off.
Like many of our customers, Webasto is directly affected by the power shortage. To cushion the situation and maintain production, we have rented additional power generators in the meantime. Our impression is that the authorities are making great efforts to stabilize the situation. However, the power-intensive winter will be another challenge regardless.
In its new battery center in Jiaxing, Webasto is now also breaking new ground in China, moving away from automobile roofs and auxiliary heaters. Will you be entering battery production in the medium term?
No, we will not produce battery cells but want to occupy a niche in which we, as a system manufacturer, develop and sell battery packs that manufacturers are then able to integrate into their vehicles. This will allow cell suppliers and OEMs to focus on their core competencies. It was a bold decision back in 2016 to invest in this new area of electromobility. Our goal is to generate more than one billion euros in sales with our system solutions for electromobility in a few years.
China is the largest single market for Webasto, accounting for almost 40 percent of the company’s revenue. You have twelve locations there. Will your central R&D nevertheless remain in Germany?
Yes. Our battery technology was developed entirely in Germany. But we now have our own China-specific battery product together with Chinese OEMs. I see an important basic principle for free competition here: We should not try to keep other countries down, but instead strive to be better, faster, more innovative.
Holger Engelmann is the CEO of German automotive supplier Webasto, based in Gauting near Munich, since 2013. Before that, Engelmann, who holds a doctorate in economics, held the positions of Deputy CEO and Chief Financial Officer. Webasto was founded in 1901 and is still a family business today. Its main focus is on roofs, heating and air conditioning systems, as well as charging equipment and complete battery systems for electric cars. Webasto has been manufacturing in Shanghai since 2001. China is now the company’s most important single market. In September 2019, Chancellor Angela Merkel visited the Webasto plant in Wuhan. In January 2020, some company employees were infected at the company headquarters in Gauting. The company received much praise at the time for its rapid response to contain infection chains.
Education Minister Anja Karliczek (CDU) is concerned about the increasing influence of Confucius Institutes on intellectual life in Germany. In a letter to the German universities, she writes of an“unacceptable” exertion of influence. She calls for “a re-evaluation of the role of the Confucius Institutes in the German university landscape and to draw the right conclusions from this.” It recommends that universities “scrutinize their cooperation with the institutes” and “deal decisively with China’s influence”.
The letter’s occasion is a discussion about an event that was initially scheduled at two Confucius Institutes. Stefan Aust and Adrian Geiges, the authors of the book “Xi Jinping – The Most Powerful Man in the World”, originally wanted to present and read from their work on October 27. However, the Confucius Institutes at the Universities of Hanover and Duisburg canceled the events at short notice. In Duisburg, the book presentation was then organized by the university itself.
The Leibniz Confucius Institute Hanover (LKIH) posted a statement online explaining its reasons. It says: “After the announcement of the online talk about the biography of the Chinese president with book author Adrian Geiges, disagreements arose with the Chinese partners, which made it no longer possible to adhere to the format and to involve the LKIH.”
According to the Piper publishing house, Shanghai’s Tongji University is said to have insisted to the Confucius Institute in Hanover that the event be canceled. The Confucius Institute in Hanover is run jointly by Tongji University and Leibniz University. In Duisburg, according to the press release, Feng Haiyang, the Consul General of China in Düsseldorf, personally intervened “to prevent the event”.
For Markus Taube, holder of the Chair of East Asian Economics / China at the Mercator School of Management and co-director of the Confucius Institute Metropole Ruhr at the University of Duisburg Essen, the cancellation came “out of the blue“. “So far, there has never been any interference despite critical events,” Taube told China.Table. This precedent is a “lose-lose constellation” for all involved, Taube said. He is referring not only to the long-standing relationships that universities have with their partner universities in China but also to the fact that it puts the fundamental issue of Chinese interference back on the table.
Confucius Institutes like the one in Duisburg-Essen are legally non-profit associations and are subject to German law. They are not obliged to disclose their finances to the universities to which they are affiliated, but only have to declare their income to the tax office. The German tax authority’s audit is also not public.
There are 19 Confucius Institutes in Germany. They are mostly affiliated with universities. Their official aim is to promote the teaching of the Chinese language and culture and to form a bridge for cultural exchange.
Back in 2014, State and Party leader Xi Jinping said, “We should strengthen China’s soft power, convey a good Chinese narrative, and better carry China’s messages to the world.” Such remarks, however, also fuel distrust. Confucius Institutes are said to be Beijing’s extended arm abroad with their program.
Confucius Institutes are Chinese state educational organizations. They are subordinate to the Center for Language Education and Cooperation (Hanban). They are therefore suspected of working closely with the government to influence opinion abroad on China as the government in Beijing would like to see it.
The funding of a professorship at Freie Universität Berlin with half a million euros from China’s treasury also caused a stir. Quite independently of financial contributions, there is discussion about how the universities provide the Confucius Institutes with legitimacy through the spatial overlaps. There is also criticism that the institutes damage the reputation of German universities and the freedom of research and science.
Among the most vehement critics is China expert Andreas Fulda of the University of Nottingham. Fulda says Confucius Institutes “have no place in universities”. “This is a kind of laundering of ideas, where political propaganda is given the stamp of unobjectionability,” he told the Tagesspiegel.
After the cancellation of the book presentation, Lower Saxony’s Science Minister Björn Thümler (CDU) criticized the event, according to NDR: “In Germany, freedom of science and freedom of opinion prevail”. Thümler, like Karliczek most recently, also called the cancellation of the event by the two Confucius Institutes “unacceptable”.
According to the Piper publishing house, which publishes the Xi book, the Confucius Institutes are said to have received pressure “from the very top”. “The cancellation of the event by the two Confucius Institutes is a worrying and disturbing signal,” says Piper publisher Felicitas von Lovenberg.
Those familiar with the incidents say in private that the credibility of the Confucius Institutes has suffered massively. But the basis of trust between German and Chinese academics at the universities involved has also been damaged.
Organized by the University of Duisburg, the online book launch finally took place. However, without the participation of the Confucius Institutes. Instead, all those involved agreed that the Institute for East Asian Studies at the University of Duisburg-Essen, where Taube is currently director, should act as the sole organizer.
Stefan Aust, co-author of the Xi biography, sees the basic theses of his book confirmed by the incident: “For the first time, a dictatorship is about to overtake the West economically and is now also trying to impose its values, which are directed against our freedom, internationally.”
Adrian Geiges points out that the book presents China in a very differentiated way, for example also the successful overcoming of poverty in the past decades. “Apparently, such balanced reports are no longer enough for Xi Jinping – he now wants an international cult around his person, just like in China itself,” a Piper press release quotes the two authors as saying.
In the press release, the Piper publishing house also quotes an employee of the Confucius Institutes. She justifies the cancellation of the book presentation with the following sentence: “You can’t talk about Xi Jinping as a normal person anymore, he is supposed to be untouchable and unspeakable now.”
In an interview with NDR, Geiges makes it clear that this quote is not the employee’s own opinion and should not be understood as criticism of Beijing’s actions. Rather, she says, it reflects the prohibitions communicated to the Confucius Institutes by the Chinese side. “That it is like this in China is nothing new, but that it is now to be extended to Germany is something new,” Geiges said.
At the recent UN General Assembly on September 21, China’s President Xi Jinping announced that he would stop building new coal projects overseas. “China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power projects abroad.” (English and Chinese versions of the speech)
This announcement did not come as a complete surprise. But on the same day, the storm of questions started: What exactly did the president mean by that? Does that include financing and insurance? What about the coal industry? Which companies and banks are affected?
For the time being, official China did not provide any answers. However, the announcement was certainly coordinated internally and externally. Bilateral talks were held behind the scenes. China’s coal industry and coal financiers had come under pressure in the last two years, and not only from the global climate protection movement. The lighthouse BRI project appeared to be entering serious reputational straits. Especially in the run-up to the World Climate Summit, there was now a need for an official response. Alok Sharma, the president of the 26th World Climate Summit, met with the head of one of China’s largest banks, the central bank (People’s Bank of China), as well as the National Planning Commission and the National Energy Administration (NEA). At issue was the financing of coal worldwide. A few months earlier, Japan and South Korea announced plans to phase out public financing of coal projects. Since 2013, these two countries, along with China, have spent 95 percent of public money on coal projects outside their own borders – though China has spent the most, a total of $50 billion and about 56 GW of installed capacity.
What will change now that President Xi Jinping has announced the coal phase-out outside China with media attention?
There are 60 gigawatts of coal-fired power generation planned in 20 countries, financed by Chinese public banks. It is not yet clear how many of the planned new coal mines (for example, in Russia and Pakistan) will actually be canceled.
Expansionists – these are the absolute climate killers, from urgewald’s point of view. According to the Global Coal Exit List (GCEL) 2021, just published in October 2021 by urgewald and NGO partners, Chinese companies are currently still among the biggest expansionists in coal-fired power plants around the world: of the 503 companies with plans for new plants, 26 percent are Chinese companies, compared to 11 percent from India, the second biggest expansionist.
Nevertheless, it is now necessary to record how much of the coal power in planning has already reached financial close (not defined as “new”, and thus probably not addressed), and what happens to those in preparation for construction (this could concern, for example, two of the five power plants under construction in Cambodia). Urgewald, together with colleagues worldwide, is investigating which and how much coal investments abroad could be covered.
It’s pretty clear: the announcement was also a test. It had two parts. Coupled with the offer to promote low-carbon technology in a big way in the BRI countries, wish lists are now being sought between now and COP 26 on how to “transform” the coal plans. This is also about competing to see who will end up providing the most money for low-carbon in Southeast Asia, Latin America, and Africa.
What we are seeing around the world is one fossil fuel being replaced by another. About a third of the coal plants “retired” in the U.S. between 2011 and 2019 were actually converted to gas. And countries like Bangladesh, which has canceled a third of its planned coal plants, and the Philippines, which has canceled more than half of the new coal plants in its project pipeline, are now heading for a massive expansion of liquefied natural gas (LNG) terminals and gas-fired plants.
These plans must be stopped if we are to meet the 1.5-degree target. Just in October 2021, OECD countries, including Japan, Australia, and Turkey, agreed to end export credits for new coal-fired power plants that do not use Carbon Capture (Utilization) and Storage (CCUS/CCS). Although this is the first internationally binding agreement to end export support for international coal projects by the end of 2021, it relies on false solutions. There is no such thing as a “clean” coal plant. Even if emissions can be “captured/stored”, the coal industry is still attached to dirty coal production, coal mining. CCS legitimizes the continuation of fossil industries. The processes are energy-intensive, costly, and pose new risks.
However, China will also follow exactly this path: Switch to gas and liquefied natural gas (LNG), and CCS/CCUS. Nuclear power and dams are the other two “climate-friendly” technologies touted at COP26. Gas cannot be a bridging technology in which massive investment is now being made. Although combustion produces less CO2 per kWh, the extraction and transport of fossil gas releases methane, which is even more harmful to the climate.
We want to prevent these technologies from finding their way into the European taxonomy. They are among the ‘false solutions’. Another bogus solution is the ETM (Energy Transition Mechanism) scheme, under which power plants are paid compensation for shutting down earlier. This is what is supposed to happen with the German lignite phase-out (though this is still under review in the EU Commission since 2021). At COP26, this scheme will be touted as the golden road by the Asian Development Bank (ADB) (3 November 2021). An expert opinion at the European level has shown that these ETMs allow de facto extensions. These solutions are also shams in China and Asia. The ADB, which would then own coal-fired power plants, despite its “coal phase-out strategy”, declares the “reduction of the lifetime to 15 years”. This cannot be a real solution given the new IPCC report of 9 August 2021. Moreover, these buyout plans are supposed to happen in conjunction with investors who are among the biggest expansionists, such as Blackrock, HSBC, and Citigroup Inc.
In a grand coalition of like-minded people, we are working to move away from such bogus solutions. But aside from that: China’s internal coal expansion plans alone, 250 gigawatts of new coal-fired power plant capacity, after all, could however overturn the Paris climate agreement. Building the giant dam in Tibet or mega-solar plants in the desert will compete with new coal power for the grid. A fundamental statement on the coal phase-out within China is more urgent than ever.
Nora Sausmikat is head of the China Desk of the environmental and human rights organization urgewald e.V.