China has long since ceased to be merely the global workbench. The People’s Republic is striving for global leadership in electric cars, IT, and many other high-tech fields. The promotion of innovation, research, and science is high on Beijing’s agenda. But scientists must not repeat the mistakes of corporate leaders, warns Almuth Wietholtz-Eisert of the Leibniz Association in our interview. While scientific collaboration with China should be regarded as something positive, it should not lead to one-sided technology transfer and support for the repressive goals of the CCP. However, when it comes to funding science, Europe could learn a thing or two from China.
State subsidies and intervention in the free forces of the market have played a pivotal role in China’s economic rise. German companies seem to have slowly noticed this as well, as Juergen Matthes from the German Economic Institute (IW) explains in today’s opinion piece. According to an IW survey, many German companies are calling for a robust trade policy towards China, since subsidies have been identified as the main cause of tougher competition from the People’s Republic. But whether trade barriers actually benefit the German export industry and ensure its innovation and technology leadership is a different story
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
Ms. Wietholtz-Eisert, President Xi Jinping leaves no room for doubt about his intentions: China is to become a world power again – not only in politics and economics but also in science, your own area of expertise. Will this succeed?
China is already a major scientific power to be taken seriously. This can be observed in a differentiated way from corresponding bibliometric data, i.e. publication output, patent applications, and dynamic research and development investments. The proclamations of the National People’s Congress in March of this year and the current 14th Five-Year Plan leave no doubt that the Chinese Communist Party under Xi Jinping is aiming for China’s global innovation and high-tech leadership by 2049 at the latest. China is already at the forefront in certain research fields.
You say “in individual research fields”. Where exactly?
It begins at Electrical engineering, materials research, sub-areas of chemistry and physics such as quantum research, and sub-areas of information and communication technologies. The current five-year plan also identifies a future focus on research, including 5G applications, artificial intelligence, genetic engineering and biotechnology, neuroscience, new materials for aerospace, special robotics, new energy technologies, and smart vehicle drives. Recently, China has also made investments in basic research – a sign of a “mature” science nation.
What is the reason behind this clear focus?
The Chinese leadership recognized early on that the transition of its economy from pure production to development would require it to focus on technologies in which either the West’s lead is not yet established or which are occasionally developing disruptively, i.e. in leaps – for example in solar cells, electromobility, quantum research. China is still having a hard time in technology fields where other nations already draw on decades of experience, as the well-known example of semiconductor production shows. Here, the People’s Republic wants to liberate itself from dependence on other countries, especially the USA, which has so far weakened China’s position through conflicts such as the trade dispute.
Many scientists praise the fact that China promotes science and research so extensively. German scientists, too. What worries you about it?
At its core, it is good that science and research are promoted – for one’s own country as well as for cooperation partners, provided that research and cooperation follow comparable rules. However, as soon as science is instrumentalized by a major power with a clear claim to hegemony to maintain its political power, silently serving military, economic or repressive purposes, is clearly subject to different ethical standards or is directed at an uncoordinated, unilateral outflow of technology, international cooperation partners must not close their eyes to possible consequences.
What is the difference to Germany?
In our nation, freedom of science and research is backed by the constitution – but this does not make them “innocent” per se nor free of responsibility, nor are they allowed to be or pretend to be clueless. On the contrary, science has a pivotal role in brewing systemic conflict. For the individual researcher, this, unfortunately, makes cooperation more difficult.
Sounds pretty abstract. What does it look like in reality?
Two things need to be distinguished: On the one hand, there are – in a narrower sense – problematic scientific and technical cooperations with dual-use potential, i.e. a possible military use of research results. To eliminate such use as far as possible, export control and sanctions law apply with corresponding blacklists of goods and sanctions. However, the situation becomes difficult to the point of obscurity in supposedly harmless cooperation projects. Facial recognition utilizing artificial intelligence for social surveillance purposes is a well-known example of abusive research cooperation.
The problem seems obvious here. But you also warn of supposedly harmless fields like environmental research.
Yes, because is it clear to all involved that, for example, oceanographic or hydrographic research results, for which the seabed is jointly mapped, ocean currents and salinity are measured, or high-performance sonars are developed, could potentially be exploited for military submarine operations? Much of this cannot be regulated by classical export control – here it is necessary to quickly establish new formats of unbureaucratic, scientific exchange between the expert community and government agencies. However, this does not even address the much more fundamental question of competition for economic and technological dominance.
But is it reprehensible that a state wants to profit from its funding?
Of course not. On the contrary, it is fascinating how wisely and broadly the Communist Party invests in education, research, and talent development, learning from its own mistakes and achieving great technological advances in a short time, but with a long, strategic breath, together with scientists – also when it comes to the implementation. We should take a closer look here, without prejudice or arrogance, and learn from China wherever we can and wherever it is appropriate for us.
But?
But Beijing also resorts to fraudulent measures such as large-scale, state-enforced technology transfer, directed cyberattacks, the invisible global co-optation and financial favoritism of like-minded individuals through the so-called Chinese United Front, and the selected placement of People’s Liberation Army scientists in international scientific institutions – while its own military is being technologically upgraded through the long-standing official strategy of “civil-military fusion.”
So after a planned economy now a planned science?
In China, the CCP subordinates science to state goals. Education, science, economics, law, politics, and the military are all considered as a whole in China and managed strategically and with foresight by selecting the best. Even in science, this works better than many in the West, whose hearts rightly beat for academic freedom, are ready to admit. In terms of science policy and strategy, we are not playing on equal terms with our short-term cycles, nor are we researching under the same framework conditions and rules – regardless of the fact that Chinese colleagues are held in high regard, both professionally and personally.
This sounds a lot like “bad, bad China.”
No, not at all. Because first, we should practice modesty and learn from China’s scientific rise. The German and European research and research administration would benefit from a complete makeover – the keywords being a lack of innovative capacity and over-bureaucratization. Even without China, we need to do better on all levels – and it does not exactly improve our future viability when 52 percent of all third-graders in my home city of Berlin are functionally illiterate, if I may say so.
Okay. And then what? End all cooperation with China?
No. But German scientists must ponder the costs and benefits of cooperating with Chinese partners. These costs also include risk management with regard to technology outflow, financial dependencies, value chains, and information security. If we lay bare our knowledge – be it out of idealism, ignorance, convenience, or scientific opportunism while the other party does not do so to the same extent, this leads to an imbalance.
Imbalance doesn’t sound very dangerous. Or what do you have in mind?
Not in the short term, but it is worth taking a look at other areas to see what consequences this could have. Our economic experiences clearly prove this, where for years the outflow of knowledge for the sake of a quick euro was forced and also accepted through mandatory joint ventures. At some point, the Chinese will slam the door shut on our scientists in the same way as they did on the economy. The question is how to deal with this today.
Are German scientists not aware of this?
A certain sensitization is indeed currently taking place in science, but it is mainly limited to the area of dual-use goods and corresponding compliance issues. To put it bluntly, common reactions from academia could be assigned to one of four categories: relativism, idealism, escapism, or fatalism, which I described in my essay “Dornröschen schlägt die Augen auf” (Sleeping Beauty opens her eyes). But more and more scientists are now becoming aware and realize that the standard reactions described above will not get us anywhere when dealing with China. Instead of pulling the pin early, we need to take a more differentiated and educated look at this country, its plans, and strategies and then make educated decisions about possible cooperation based on it. But first and foremost, we need to clearly enunciate our own long-term interests, goals, and strategies and do better ourselves.
That may all be true, but science is not a one-way road. German scientists also have access to Chinese data and research results during their visits.
No, they don’t. With new regulations such as the Cyber Security Law, the Data Security Law, the Anti-Sanctions Law, and the recently frequently applied extraterritorial clause of the National Security Law, the Chinese are erecting a veritable legal protection wall around their knowledge and data. This makes me doubt Beijing’s good faith. Not to mention the censorship and the anticipatory self-censorship of Western scientists and journals.
After this exciting error analysis, one very specific question arises: How should German science react?
First, the federal, corporatist structure in Germany also favors the well-known blame game of concealing responsibility. Every agency should therefore face up to this challenge in all its consequences and complexities, and not whitewash anything. One example: Science is not the same as business. In science, it’s not possible to talk in analogy to the economy about a consumer surplus on cheaper produced goods or own sales markets.
Second, we need a clear and long-term political positioning, preferably at the European level, along which science and administration can operate without navigating between the Scylla of personal liability and the sirens of scientific mercantilist exploitation of scientific freedom.
And third?
Third – first, actually – we need the aforementioned makeover to the benefit of scientific performance and innovation. And fourth, we need unbureaucratic, scientifically adequate, and risk-appropriate ways to draw sensible mutual red lines. The emphasis being on unbureaucratic. A “business as usual” would be irresponsible. What happened to the economy cannot be allowed to happen to science.
Almuth Wietholtz-Eisert is Scientific Officer for International Affairs at the Presidential Staff of the Leibniz Association, where she is responsible, among other things, for cooperation with China. The Leibniz Association brings together 96 research institutions. It unites disciplines ranging from the natural sciences, engineering, and environmental sciences to economics, social sciences, and the humanities. It is part of the Alliance of Science Organisations.
Europe’s companies are facing increasing competitive pressure from China. Just a glance at the development of export market shares since the turn of the millennium illustrates China’s enormous export success: it has immensely increased its share of world exports of goods and services from around three percent in 2000 to almost eleven percent in 2019, especially in the first decade. In parallel, the world export shares of other major industrialized countries already declined significantly in the 2000s.
Empirical studies, most of which relate to the period before 2010, indicate that Chinese and German exports were largely complementary rather than substitutive to each other during this period, meaning that the intensity of competition from China was kept within narrow limits from a German perspective. Looking to the future, however, the question arises as to whether China will not increasingly penetrate those sectors in which the German economy has its strengths. The Made in China 2025 strategy at least sets this as its goal. If this is the case, Germany’s global market share could come under much greater pressure in the current decade than has been the case to date.
A look at the development of China’s and Germany’s market shares of EU imports between 2000 and 2019 indeed shows that China’s exports are increasingly penetrating those sectors in which the German economy has its strengths. It can be seen that China’s shares have also increased very significantly here, while Germany’s shares have been declining since 2005. In the case of sophisticated industrial product groups, in which Germany is more specialised, the contrast is even more pronounced than in goods trade as a whole. Moreover, Chinese exports have shifted very clearly in the direction of sophisticated industrial goods.
Against this backdrop, German companies from industry and industry-related services were surveyed in late autumn 2020 as part of the IW Future Panel on how strongly they already feel the competition from China, what causes they suspect behind this and how they view a more robust EU trade policy towards China. The results speak a very clear language.
German industrial companies even rate the relevance of competitive pressure from China over the next five years significantly higher than the relevance of protectionism. Almost one-third of the companies attach a rather high or very high significance to competition from Chinese companies. Among companies that export to China, this proportion is even over 42 percent.
At the same time, Chinese competitors are seen as efficient and innovative. But agreement on the relevance of competitive distortions is even greater. For example, around 71 percent of German companies that feel very high competitive pressure from China agreed with the question of whether subsidies give Chinese competitors a competitive advantage. Only a good 42 percent of these companies see their Chinese competitors as efficient and innovative.
The companies surveyed also attach great importance to a more robust trade policy against Chinese distortions of competition in the coming years. For example, over 60 percent of the companies surveyed with a high export share consider a more robust approach to China to be very or somewhat important. It is noteworthy that the approval rates are similarly high or even somewhat higher among firms with exports to or production in China, even though these companies presumably have to fear countermeasures from China.
Among firms that feel very high competitive pressure from Chinese companies, even more than two out of three strongly support a more robust policy orientation. They are apparently convinced that this is necessary to counteract the competitive distortions caused by Chinese state subsidies, which are very clearly perceived by these companies, as shown.
The response of German companies can thus be interpreted as an urgent appeal to European and German economic policy to take measures to ensure fair competitive conditions (“level playing field”).
This article belongs in the context of the event series “Global China Conversations” of the Kiel Institute for the World Economy (IfW). On Thursday, 30.09.2021, Jürgen Matthes from the Institute of German Business and Dietmar Baetge, Professor at TH Wildau, will discuss the topic “China’s competition for Europe’s companies: Fair Competition or Illicit Subsidization?” China.Table is a media partner of the event series.
October 1st marks the 72nd anniversary of the founding of the People’s Republic of China. Hong Kong’s citizens are being reminded of this as well. The Hong Qi, the Chinese national flag, and the flag of the metropolis are lining the streets this week.
China has long since ceased to be merely the global workbench. The People’s Republic is striving for global leadership in electric cars, IT, and many other high-tech fields. The promotion of innovation, research, and science is high on Beijing’s agenda. But scientists must not repeat the mistakes of corporate leaders, warns Almuth Wietholtz-Eisert of the Leibniz Association in our interview. While scientific collaboration with China should be regarded as something positive, it should not lead to one-sided technology transfer and support for the repressive goals of the CCP. However, when it comes to funding science, Europe could learn a thing or two from China.
State subsidies and intervention in the free forces of the market have played a pivotal role in China’s economic rise. German companies seem to have slowly noticed this as well, as Juergen Matthes from the German Economic Institute (IW) explains in today’s opinion piece. According to an IW survey, many German companies are calling for a robust trade policy towards China, since subsidies have been identified as the main cause of tougher competition from the People’s Republic. But whether trade barriers actually benefit the German export industry and ensure its innovation and technology leadership is a different story
Disclaimer: This interview has been translated into English and is not considered an official translation by any party involved in the interview.
Ms. Wietholtz-Eisert, President Xi Jinping leaves no room for doubt about his intentions: China is to become a world power again – not only in politics and economics but also in science, your own area of expertise. Will this succeed?
China is already a major scientific power to be taken seriously. This can be observed in a differentiated way from corresponding bibliometric data, i.e. publication output, patent applications, and dynamic research and development investments. The proclamations of the National People’s Congress in March of this year and the current 14th Five-Year Plan leave no doubt that the Chinese Communist Party under Xi Jinping is aiming for China’s global innovation and high-tech leadership by 2049 at the latest. China is already at the forefront in certain research fields.
You say “in individual research fields”. Where exactly?
It begins at Electrical engineering, materials research, sub-areas of chemistry and physics such as quantum research, and sub-areas of information and communication technologies. The current five-year plan also identifies a future focus on research, including 5G applications, artificial intelligence, genetic engineering and biotechnology, neuroscience, new materials for aerospace, special robotics, new energy technologies, and smart vehicle drives. Recently, China has also made investments in basic research – a sign of a “mature” science nation.
What is the reason behind this clear focus?
The Chinese leadership recognized early on that the transition of its economy from pure production to development would require it to focus on technologies in which either the West’s lead is not yet established or which are occasionally developing disruptively, i.e. in leaps – for example in solar cells, electromobility, quantum research. China is still having a hard time in technology fields where other nations already draw on decades of experience, as the well-known example of semiconductor production shows. Here, the People’s Republic wants to liberate itself from dependence on other countries, especially the USA, which has so far weakened China’s position through conflicts such as the trade dispute.
Many scientists praise the fact that China promotes science and research so extensively. German scientists, too. What worries you about it?
At its core, it is good that science and research are promoted – for one’s own country as well as for cooperation partners, provided that research and cooperation follow comparable rules. However, as soon as science is instrumentalized by a major power with a clear claim to hegemony to maintain its political power, silently serving military, economic or repressive purposes, is clearly subject to different ethical standards or is directed at an uncoordinated, unilateral outflow of technology, international cooperation partners must not close their eyes to possible consequences.
What is the difference to Germany?
In our nation, freedom of science and research is backed by the constitution – but this does not make them “innocent” per se nor free of responsibility, nor are they allowed to be or pretend to be clueless. On the contrary, science has a pivotal role in brewing systemic conflict. For the individual researcher, this, unfortunately, makes cooperation more difficult.
Sounds pretty abstract. What does it look like in reality?
Two things need to be distinguished: On the one hand, there are – in a narrower sense – problematic scientific and technical cooperations with dual-use potential, i.e. a possible military use of research results. To eliminate such use as far as possible, export control and sanctions law apply with corresponding blacklists of goods and sanctions. However, the situation becomes difficult to the point of obscurity in supposedly harmless cooperation projects. Facial recognition utilizing artificial intelligence for social surveillance purposes is a well-known example of abusive research cooperation.
The problem seems obvious here. But you also warn of supposedly harmless fields like environmental research.
Yes, because is it clear to all involved that, for example, oceanographic or hydrographic research results, for which the seabed is jointly mapped, ocean currents and salinity are measured, or high-performance sonars are developed, could potentially be exploited for military submarine operations? Much of this cannot be regulated by classical export control – here it is necessary to quickly establish new formats of unbureaucratic, scientific exchange between the expert community and government agencies. However, this does not even address the much more fundamental question of competition for economic and technological dominance.
But is it reprehensible that a state wants to profit from its funding?
Of course not. On the contrary, it is fascinating how wisely and broadly the Communist Party invests in education, research, and talent development, learning from its own mistakes and achieving great technological advances in a short time, but with a long, strategic breath, together with scientists – also when it comes to the implementation. We should take a closer look here, without prejudice or arrogance, and learn from China wherever we can and wherever it is appropriate for us.
But?
But Beijing also resorts to fraudulent measures such as large-scale, state-enforced technology transfer, directed cyberattacks, the invisible global co-optation and financial favoritism of like-minded individuals through the so-called Chinese United Front, and the selected placement of People’s Liberation Army scientists in international scientific institutions – while its own military is being technologically upgraded through the long-standing official strategy of “civil-military fusion.”
So after a planned economy now a planned science?
In China, the CCP subordinates science to state goals. Education, science, economics, law, politics, and the military are all considered as a whole in China and managed strategically and with foresight by selecting the best. Even in science, this works better than many in the West, whose hearts rightly beat for academic freedom, are ready to admit. In terms of science policy and strategy, we are not playing on equal terms with our short-term cycles, nor are we researching under the same framework conditions and rules – regardless of the fact that Chinese colleagues are held in high regard, both professionally and personally.
This sounds a lot like “bad, bad China.”
No, not at all. Because first, we should practice modesty and learn from China’s scientific rise. The German and European research and research administration would benefit from a complete makeover – the keywords being a lack of innovative capacity and over-bureaucratization. Even without China, we need to do better on all levels – and it does not exactly improve our future viability when 52 percent of all third-graders in my home city of Berlin are functionally illiterate, if I may say so.
Okay. And then what? End all cooperation with China?
No. But German scientists must ponder the costs and benefits of cooperating with Chinese partners. These costs also include risk management with regard to technology outflow, financial dependencies, value chains, and information security. If we lay bare our knowledge – be it out of idealism, ignorance, convenience, or scientific opportunism while the other party does not do so to the same extent, this leads to an imbalance.
Imbalance doesn’t sound very dangerous. Or what do you have in mind?
Not in the short term, but it is worth taking a look at other areas to see what consequences this could have. Our economic experiences clearly prove this, where for years the outflow of knowledge for the sake of a quick euro was forced and also accepted through mandatory joint ventures. At some point, the Chinese will slam the door shut on our scientists in the same way as they did on the economy. The question is how to deal with this today.
Are German scientists not aware of this?
A certain sensitization is indeed currently taking place in science, but it is mainly limited to the area of dual-use goods and corresponding compliance issues. To put it bluntly, common reactions from academia could be assigned to one of four categories: relativism, idealism, escapism, or fatalism, which I described in my essay “Dornröschen schlägt die Augen auf” (Sleeping Beauty opens her eyes). But more and more scientists are now becoming aware and realize that the standard reactions described above will not get us anywhere when dealing with China. Instead of pulling the pin early, we need to take a more differentiated and educated look at this country, its plans, and strategies and then make educated decisions about possible cooperation based on it. But first and foremost, we need to clearly enunciate our own long-term interests, goals, and strategies and do better ourselves.
That may all be true, but science is not a one-way road. German scientists also have access to Chinese data and research results during their visits.
No, they don’t. With new regulations such as the Cyber Security Law, the Data Security Law, the Anti-Sanctions Law, and the recently frequently applied extraterritorial clause of the National Security Law, the Chinese are erecting a veritable legal protection wall around their knowledge and data. This makes me doubt Beijing’s good faith. Not to mention the censorship and the anticipatory self-censorship of Western scientists and journals.
After this exciting error analysis, one very specific question arises: How should German science react?
First, the federal, corporatist structure in Germany also favors the well-known blame game of concealing responsibility. Every agency should therefore face up to this challenge in all its consequences and complexities, and not whitewash anything. One example: Science is not the same as business. In science, it’s not possible to talk in analogy to the economy about a consumer surplus on cheaper produced goods or own sales markets.
Second, we need a clear and long-term political positioning, preferably at the European level, along which science and administration can operate without navigating between the Scylla of personal liability and the sirens of scientific mercantilist exploitation of scientific freedom.
And third?
Third – first, actually – we need the aforementioned makeover to the benefit of scientific performance and innovation. And fourth, we need unbureaucratic, scientifically adequate, and risk-appropriate ways to draw sensible mutual red lines. The emphasis being on unbureaucratic. A “business as usual” would be irresponsible. What happened to the economy cannot be allowed to happen to science.
Almuth Wietholtz-Eisert is Scientific Officer for International Affairs at the Presidential Staff of the Leibniz Association, where she is responsible, among other things, for cooperation with China. The Leibniz Association brings together 96 research institutions. It unites disciplines ranging from the natural sciences, engineering, and environmental sciences to economics, social sciences, and the humanities. It is part of the Alliance of Science Organisations.
Europe’s companies are facing increasing competitive pressure from China. Just a glance at the development of export market shares since the turn of the millennium illustrates China’s enormous export success: it has immensely increased its share of world exports of goods and services from around three percent in 2000 to almost eleven percent in 2019, especially in the first decade. In parallel, the world export shares of other major industrialized countries already declined significantly in the 2000s.
Empirical studies, most of which relate to the period before 2010, indicate that Chinese and German exports were largely complementary rather than substitutive to each other during this period, meaning that the intensity of competition from China was kept within narrow limits from a German perspective. Looking to the future, however, the question arises as to whether China will not increasingly penetrate those sectors in which the German economy has its strengths. The Made in China 2025 strategy at least sets this as its goal. If this is the case, Germany’s global market share could come under much greater pressure in the current decade than has been the case to date.
A look at the development of China’s and Germany’s market shares of EU imports between 2000 and 2019 indeed shows that China’s exports are increasingly penetrating those sectors in which the German economy has its strengths. It can be seen that China’s shares have also increased very significantly here, while Germany’s shares have been declining since 2005. In the case of sophisticated industrial product groups, in which Germany is more specialised, the contrast is even more pronounced than in goods trade as a whole. Moreover, Chinese exports have shifted very clearly in the direction of sophisticated industrial goods.
Against this backdrop, German companies from industry and industry-related services were surveyed in late autumn 2020 as part of the IW Future Panel on how strongly they already feel the competition from China, what causes they suspect behind this and how they view a more robust EU trade policy towards China. The results speak a very clear language.
German industrial companies even rate the relevance of competitive pressure from China over the next five years significantly higher than the relevance of protectionism. Almost one-third of the companies attach a rather high or very high significance to competition from Chinese companies. Among companies that export to China, this proportion is even over 42 percent.
At the same time, Chinese competitors are seen as efficient and innovative. But agreement on the relevance of competitive distortions is even greater. For example, around 71 percent of German companies that feel very high competitive pressure from China agreed with the question of whether subsidies give Chinese competitors a competitive advantage. Only a good 42 percent of these companies see their Chinese competitors as efficient and innovative.
The companies surveyed also attach great importance to a more robust trade policy against Chinese distortions of competition in the coming years. For example, over 60 percent of the companies surveyed with a high export share consider a more robust approach to China to be very or somewhat important. It is noteworthy that the approval rates are similarly high or even somewhat higher among firms with exports to or production in China, even though these companies presumably have to fear countermeasures from China.
Among firms that feel very high competitive pressure from Chinese companies, even more than two out of three strongly support a more robust policy orientation. They are apparently convinced that this is necessary to counteract the competitive distortions caused by Chinese state subsidies, which are very clearly perceived by these companies, as shown.
The response of German companies can thus be interpreted as an urgent appeal to European and German economic policy to take measures to ensure fair competitive conditions (“level playing field”).
This article belongs in the context of the event series “Global China Conversations” of the Kiel Institute for the World Economy (IfW). On Thursday, 30.09.2021, Jürgen Matthes from the Institute of German Business and Dietmar Baetge, Professor at TH Wildau, will discuss the topic “China’s competition for Europe’s companies: Fair Competition or Illicit Subsidization?” China.Table is a media partner of the event series.
October 1st marks the 72nd anniversary of the founding of the People’s Republic of China. Hong Kong’s citizens are being reminded of this as well. The Hong Qi, the Chinese national flag, and the flag of the metropolis are lining the streets this week.
