Germany has no intention of giving up the Chinese market. The example of Volkswagen is emblematic.
Olaf Scholz has just returned to Germany after a three-day trip to China . The German Chancellor was accompanied by three ministers and a large group of entrepreneurs. He stopped in Chongqing, where he visited a fuel cell factory of the multinational Bosch, before heading to Shanghai and Beijing. Here he met the Chinese president Xi Jinping and the prime minister Li Qiang, with whom he spoke about foreign policy, the war in Ukraine, and the tensions between Iran and Israel.
Apart from the geopolitical dossiers, Scholz’s trip to the Asian giant had a purely economic purpose. It is not difficult to imagine the reason, given that in 2023, goods and services with a total value of 254.1 billion euro traveled along the Beijing-Berlin axis. As if that weren’t enough, half of the chemical turnover and a third of that of the Teutonic automotive industry still come from the People’s Republic of China, Germany’s main trading partner for the eighth consecutive year.
Far from de-risking: Scholz seems to have flown to China to give his country greater space for action in the complex Chinese market, as well as to clarify some thorny issues. Above all: the competition from local companies.
Meanwhile, the German giant Volkswagen has announced that it will launch an electric car production platform in China together with the local car manufacturer Xpeng. In this way, the Wolfsburg company - which controls around 5% of Xpeng’s capital - intends to create EVs destined for the Chinese market at reduced costs.
Germany still focuses on China
The spokesperson of the German federal government, Steffen Hebestreit, explained that Scholz’s trip to China does not mean a "normalization" of relations between Berlin and Beijing, but a signal of "continuity" with the strategy adopted by Berlin, which considers Beijing as a partner, competitor and systemic rival. However, the reality seems to be different.
German companies invested 10.4 billion euros in China last year and, unlike their Japanese and American counterparts, have shown no signs of slowing down. Around 5,000 German companies are active in China. But in a recent survey of 150 members of the German Chamber of Commerce in China, two-thirds of them said they believed they faced unfair competition in the country. Scholz, not surprisingly, underlined the role that German companies have played in helping China grow its economy, suggesting that he wants to improve Sino-German relations.
It matters little that Ursula von der Leyen, president of the European Commission, expressed concern about the fact that Europe remains the last market completely open to China. And that last autumn the EU launched an investigation to verify whether electric vehicles manufactured in China benefit from unfair subsidies or not (the decision is expected by the summer). The German chancellor brought with him the heads of BMW and Mercedes-Benz (Volkswagen should have also been there, but canceled at the last minute). For the record, all three of the main German car manufacturers have invested heavily in China and seem intent on remaining competitive in that market.
The Volkswagen case
Representatives of the German automotive industry, moreover, underline how thousands of jobs in Germany depend on the revenue generated in the Chinese market. Germany’s automakers also increasingly rely on teams in China for research and development in fields such as automated driving that are not as advanced in Europe.
Local electric vehicle companies, such as BYD, are also challenging foreign automakers, including Volkswagen. The simplified production model adopted by the latter, in collaboration with Xpeng, should help the German giant achieve the objective of reducing the costs of EVs made for the Chinese market by 40% and making it more competitive.
“High profitability and a rapid pace of development are crucial to our competitiveness in the dynamic Chinese market environment,” said Ralf Brandstaetter, head of Volkswagen’s China operations. No further details were provided, but it is reasonable to assume that the Wolfsburg giant’s move embodies the same modus operandi that other companies in Germany intend to adopt.
Original article published on Money.it Italy 2024-04-25 07:07:00. Original title: Perché la Germania non può fare a meno della Cina
