BERLIN/BEIJING (own report) - Economists are warning of a “China shock” for German industry. Increasing numbers of German companies are not only losing market share on the Chinese market to their Chinese competitors but also struggling to compete with Chinese companies in their other export markets. This pattern of decline can be seen in the Germany’s three most important industries. German automotive companies have fallen behind their Chinese competitors in the electric vehicle sector. Mechanical engineering companies from Germany are now languishing in the People’s Republic, while facing burgeoning Chinese competition in third markets. The chemical industry, too, is floundering, badly affected not least by the sharp rise in gas prices. Chemical giants like BASF are hardly able to keep up with Chinese companies, especially in the basic chemicals segment. Plants are being forced into closure. “Germany’s biggest customer is turning into its biggest competitor,” concludes Yanmei Xie, an expert from Hong Kong-based business analysists Gavekal. Specialists have been voicing “concerns about the German export model” as such, as German companies increasingly fail to keep pace with Chinese producers in previously attractive markets. Read more

BRUSSELS/BERLIN/BEIJING (own report) – Shortly before German Economy Minister Robert Habeck’s trip to South Korea and China, there is another twist in the downward spiral of a trade war between the EU and the People’s Republic of China. At the beginning of the week, Beijing launched an anti-dumping investigation into EU pork exports to China. Punitive tariffs are likely to follow. This product group has an annual value of 2.5 billion euros. It will be China’s response to the European Commission announcement that it will impose punitive tariffs ranging from 17.4 to 38.1 per cent on imports of Chinese-made electric vehicles from 4 July. These tariff hikes come on top of the regular import 10 per cent duties. This move by Brussels is highly controversial in Germany. While major car manufacturers vigorously oppose it, the German Economic Institute (IW) reports that a survey of around 900 companies – including lots of small and medium-sized enterprises – showed that some 80 per cent, often ones facing Chinese competition, are in favour of punitive tariffs. The new EU tariffs will also hurt European and US manufacturers that produce cars in China for export. Tesla and BMW are particularly vulnerable. Read more

BEIJING/BERLIN (own report) – Germany and the EU are fast losing economic clout in their trading relations with countries of the Global South. They should “not be surprised” by their parallel loss of political influence. This is the key finding of a recent analysis by the Cologne-based German Economic Institute (IW). The report shows how Germany’s share of trade with relatively strong economies in Asia, Africa and Latin America is stagnating. The EU’s share is declining even more markedly. Meanwhile, China’s share has been rising rapidly and now eclipses that of both the European Union and the United States. This trend is central to understanding why Germany’s “geopolitical weight in the Global South is also in decline,” explains the IW study. It takes Brazil as a case in point: under President Luis Inacio Lula da Silva this important country and BRIC member “is adopting a stance on the Ukraine war and the Middle East conflict that is contrary to the West’s position”, due not least to “the economic importance of China and Russia for Brazil”. The IW argues for decisive measures by Berlin to promote foreign trade with the Global South. Read more

BERLIN/TOKYO/CANBERRA (own report) – Germany’s armed forces are expanding their “Indo-Pacific deployment”. Germany will send almost three dozen military aircraft and two warships to the Asia-Pacific region for war exercises this year. Plans include participation in a large-scale US exercise near Hawaii, an air force exercise in Australia and more military training in Japan, as well as in US-led monitoring of the various sanctions placed on North Korea. Until now, the Germany has only deployed to the Asia-Pacific region units from one military wing at a time: the naval frigate “Bayern” in 2021/22, an air force squadron in 2022, and land army troops in 2023. As the head of the Luftwaffe, Lieutenant General Ingo Gerhartz, has confirmed, the expansion of Germany’s “Indo-Pacific deployment” is intended to demonstrate Berlin’s readiness to participate in military activities against China, in parallel to its military deployment against Russia. For its part, the US is working hard to consolidate its military alliances in East Asia. One aim is to take control of the First Island Chain, to which strategists attach particular importance in the push against the People’s Republic. US media are speaking of a “united front against China”. Read more

SHENZHEN/BERLIN (own report) - The West’s battle against an export offensive by Chinese electric car manufacturers is getting serious. While the EU Commission pushes ahead with its anti-subsidy investigation, which could lead to hefty punitive tariffs on Chinese electric vehicle imports this year, US President Joe Biden has now announced that smart cars from China may pose a risk to American national security. With their cameras and sensors they are deemed capable of spying on the US. This is, Biden says, unacceptable and must be prevented. The biggest threat to Western manufacturers comes from the BYD Group, based in the south-eastern Chinese high-tech metropolis of Shenzhen. At the end of last year they became the world’s largest electric car manufacturer, ahead of Tesla, and are getting ready to expand into North America and, above all, into the EU. The company plans to sell 120,000 electric cars in Germany alone in 2026. This makes BYD a dangerous competitor for the Germany’s legacy automotive companies. Last week, the carmaker made headlines by exporting 3,000 electric cars to Germany in the first of its own specially-built car carrier vessel. Read more

BEIJING/BRUSSELS/BERLIN (own report) - European Commission President Ursula von der Leyen and German Economics Minister Robert Habeck have failed in their attempt to introduce the investment controls into EU legislation demanded by the United States. Both politicians campaigned last year for regulations to screen, control and, if necessary, ban investments by EU companies in specified third countries, above all China. Washington adopted such rules last year and urged its allies to do the same. The European Commission has now come up with watered-down proposals. In its 2023 EU “Strategy for Economic Security”, presented on 24 January 2024, Brussel’s calls for “data” on investments in China and elsewhere to be collected, but is no longer seeking to impose actual controls. The transatlantic plan has failed due to resistance from the European business community, not least German companies. They see this move as a direct threat to their strategically crucial trade with, and operations in, China. As for foreign inward investment into the EU, the existing controls will however be tightened. In addition, there will be stricter regulations governing research cooperation between EU-based universities and partner organisations, especially Chinese institutions. Read more

WOLFSBURG/BEIJING (own report) – In the run-up to the EU-China summit, which begins today, the trend towards relocating German corporate activities to the People’s Republic is gaining momentum. A few days ago Volkswagen announced that it would be developing a new platform for electric car models at a new centre in Hefei in eastern China, where the vehicles are then to be manufactured. This departs from VW’s previous practice of keeping vehicle development mainly in Germany. The company also plans to source almost entirely from domestic Chinese suppliers for its electric car manufacture in the People’s Republic. This will, the company claims, mean faster, cheaper and better production. But it also means that operations in Germany will be lost. Moreover, VW China will be in a position to split off from the German headquarters – again, to the detriment of the group’s base in Germany – should the West’s economic war on the People’s Republic escalate. Similar preparations are also being made by medium-sized enterprises operating in China. This is reflected in the recent sharp upturn in German investment in China, where the overall German investment portfolio is at a record level. Economists concede that this is a “paradoxical and unintended consequence” of the West’s economic war. Read more

BERLIN/BEIJING (Own report) – In its power struggle with China, the EU has passed a new law to strengthen its independence from supplies of Chinese raw materials. The Critical Raw Materials Act (CRMA), approved by the relevant bodies on Monday and set to be officially adopted before the end of this year, stipulates that in future only 65 percent of the strategically important raw materials may be purchased from a single country. At the same time mining and processing are to be expanded in Europe. Currently, German companies are purchasing some of their strategic raw materials to a large extent or even almost entirely from the People’s Republic of China. Beijing, which has always been a reliable supplier, is currently beginning to defend itself against the West’s economic war, in which it is coming under increasing attacks with punitive tariffs and sanctions. It is resorting to restrictions on its exports of strategically essential natural resources – including gallium, germanium and soon also graphite. If the West persists in its economic warfare, it will face material shortages in the foreseeable future, for example, in regards to the production of semiconductors and climate change technologies. Read more

BERLIN/BEIJING (Own report) – Germany and the EU’s new political-economic measures against China are overshadowing today’s German-Chinese government consultations. While numerous ministers from Germany and the People's Republic of China are meeting today in Berlin, to reinforce bilateral cooperation, the German government is drafting a China strategy, that promises a significant toughening of the course against China. As was announced yesterday morning, the Minister of the Interior claims to have found “indications” that the use of Huawei technology in German 5G networks, “would pose a threat to the German public order or security.” This categorization implies an eventual Huawei ban. In addition, it is reported that the EU Commission is preparing a new strategy for “economic security,” based on US measures and providing for bans on exports and investments. Decoupling begins. At the beginning of the month, the US venture capital giant Sequoia became the first company to split up into a Western and a Chinese enterprise. Other enterprises are considering splitting off their branches in China. This includes German companies – VW and BASF have been named. Read more

BERLIN/CANBERRA/BEIJING (Own report) – The EU Foreign Affairs Commissioner, Josep Borrell, calls on European navies to patrol the Taiwan Strait, thus challenging once again China’s red lines. The Taiwan Strait is an “absolutely crucial area,” where “ freedom of navigation” must be guaranteed, Borrell alleged in an op-ed article over the weekend. When Foreign Minister Annalena Baerbock was asked, whether she meant to announce a possible “German participation in a war against China” with her aggressive comments on Taiwan, she gave an evasive answer avoiding a “No.” In the meantime, the risk of war in East Asia has reached such a level that the public radio ABC in Australia – where the German Bundeswehr is regularly engaged in war exercises – has begun to openly discuss the concrete consequences of a war for the Australian population. Speaking to ABC radio, the military experts agreed that the West could not win such a war, but Australia would have to suffer tremendous losses, be plunged into poverty and even risk nuclear annihilation. They urgently call for preventing a war against China. Read more