China's Boom and German Reactions

BEIJING/BERLIN | | china

BEIJING/BERLIN (Own report) - Berlin is forging ahead with its contradictory policy toward China in the German-Chinese consultations that end today. The economic boom is persisting without interruption in the People's Republic of China. Economists are unanimous in their prediction that China will emerge to become the world's strongest economic power. German companies are preparing themselves for this eventuality and enhancing their presence in China, to be in a position to do business with the hub of global economy. While the focus of current consultations revolves around the intensification of business relations, strategists are warning that Beijing is also politically profiting from its economic boom. For example, the Chinese Prime Minister announced on the weekend that China would soon buy Hungarian state bonds and help Budapest with billions in investments out of the crisis. The People's Republic would therefore become a factor of power in a country, where, until now, Germany had wielded hegemonic influence. As a reaction to China's rise in influence, the establishment in Berlin is also seeking to weaken Beijing, through image campaigns ("human rights"), while sparing Germany's allies. At the same time, the boulevard press has launched a campaign against the People's Republic, using the classical pattern of the danger of a "Chinese invasion" and the traditional racist animosity of a "yellow peril."

A Plus in Opportunities

The current German-Chinese government consultations ending today focus on the elaboration of the bilateral economic relations. Last year, China, whose economy is growing incessantly, had not only bypassed the United States in its foreign trade with Germany (130.1 billion Euros as opposed to 113.7 billion), but is trailing very closely behind one of Germany's most important European business partners, The Netherlands (132 billion Euros). Experts even predict that in a few years it will catch up to Germany's most important business partner, France (152.5 billion Euros).[1] "China is a plus in opportunities for us," declared the German Minister of the Economy, Philipp Rösler in reference to the prospective profits that the Chinese boom could provide.[2]

Airbus, Boeing, Comac

The aircraft industry provides one of the most recent examples of the enormous economic progress China is making, even in hi-tech branches. In Shanghai, the aircraft manufacturer Comac (Commercial Aircraft Corporation of China), only in existence since May 2008, has announced that its medium-range C-919 aircraft will be ready for its maiden voyage already by 2014. It is planned to be on the market by 2016. The C-919 is a direct rival of its Boeing and Airbus counterparts. Comac is already contemplating the development of larger models (C-929, C-939). Rather than constructing the C-919 wings and fuselage out of the customary carbon fibers, aluminum alloy, considered a construction material of the future, will be used - giving Comac a long-term advantage. Boeing and Airbus, which have shared the market for medium and long-range aircraft, already view the Chinese company as a serious rival. "The days of the duopoly with Airbus are over," says the head of the Boeing civilian branch, and the Chinese are possibly "faster than everyone thinks."[3] This supposition is not far fetched. The high tempo with which China is capable of accomplishing ambitious technological projects can be seen with the new high-speed train linking Beijing and Shanghai, scheduled to be in service July 1, a whole year earlier than originally planned. Ninety trains per day will cover the 1,320 km in four hours and 48 minutes transporting 80 million passengers per year. Europe has nothing comparable.

Participation is What Counts

China's enormous progress shows why German companies are doing everything possible to strengthen their foothold in the country. The chemical giant, Bayer, for example, recently announced that it was planning to increase its investments in the People's Republic from 2 to 3 billion Euros by 2016 and intensify its research and development in Beijing and Shanghai.[4] The company will also transplant two of its headquarters from Leverkusen to China, because the Chinese share of the business is rapidly growing. In 2010, following a 40 percent increase, Bayer's Chinese business volume was 8.3 percent of its global intake. A further rapid increase is expected. The People's Republic currently has a 35 percent global share in polycarbonates, which is why Bayer has decided to move its polycarbonate headquarters to China. With these measures, Bayer is taking account of the long-term economic tendency - the global flow of business being shifted to Asia.

China - Hub of Global Economy

Just recently, the research department of the Standard Chartered Bank had pointed to this shift. It predicted that, over the next few years, trade between the threshold and developing nations will stimulate global economic growth. The EU and the USA, hard-hit by the long-term effects of the debilitating tendencies and the financial crisis, are falling behind and losing their previous predominating position. By 2030, the bank predicts, trade between the emerging nations, which accounted for only seven percent of global trade in 1990 and currently has already risen to 18 percent, will grow by 40 percent. "China will then be at in the hub of many important trade corridors."[5] The most important of these corridors would no longer lead toward Europe and North America, but rather from Asia to Latin America or from Asia to the Middle East. The Standard Chartered Bank's analysis concords with earlier studies by other financial institutions, predicting, almost in unison, China's ascendance to the head of the global economy with the simultaneous rise of other nations in Asia and Latin America, particularly India, Brazil and Mexico. According to the analysis, the European nations, on the other hand, including Germany will fall behind. (german-foreign-policy.com reported.[6])

Supporting Purchases

China's rise not only limits the West's share of the global economy, it also is accompanied by a stronger Chinese economic influence in Europe. Following Chinese supporting purchases of Greek state bonds, the most recent example is the development of Chinese-Hungarian economic relations. During his visit to Budapest, last weekend, Chinese Prime Minister Wen Jiabao announced the purchase of Hungarian government bonds. Hungary was also given a special credit of one billion Euros – for the promotion of their common investment projects. Beijing announced its intentions to double foreign trade between the two countries over the next four years to US $20 billion. This would be two-thirds of the trade volume today between Hungary and Germany, by far, its predominating economic power. Additional billions in Chinese investment projects for Hungary are being contemplated. It is improbable that this will not have an influence on the German political position currently predominating in Budapest.

The "Yellow Peril"

Given China's influence, Berlin's reactions are blatantly contradictory to the perspective of being forced to have to lose a part of its distinctive hegemonic influence in Europe. As German Chancellor Merkel was seeking even closer cooperation during the current consultations in Berlin, the German government was fueling "human rights" campaigns against Beijing - campaigns it never promotes against its allies with the most serious human rights violations. Numerous media organs printed hefty invectives against the People's Republic of China over the past few days. The boulevard press even revived old racist animosity ("the yellow peril"), warning against an alleged "Chinese invasion." Referring to Chinese companies, they write, "they are buying our property, traditional German companies" and "China is taking over Europe."[7] Contradictions between the attempts to develop closer cooperation, on the one hand, and the campaign type attacks on China, on the other, are not a sign of dissention in Berlin's foreign policy, but rather the product of divergent interests: the aspiration to profit from cooperation with the booming Chinese economy and the struggle against the political power resulting from China's boom.

[1] see also Intensifying the Pressure
[2] Merkel empfängt Premier Wen; www.n-tv.de 27.06.2011
[3] Chinesen belauern Boeing und Airbus; www.ftd.de 21.06.2011
[4] Bayer stockt in China auf; www.welt.de 23.06.2011
[5] China rückt ins Zentrum des Welthandels; www.ftd.de 22.06.2011
[6] see also Europe's Decline (II)
[7] Chinesen in Deutschland auf Shopping-Tour; www.bild.de 26.06.2011. See also Deutschland gegen China (I)