2024-04-14 18:17:16
The Chancellor is traveling to China and bringing with him several business leaders with a number of wishes. One industry in particular is worried about German-Chinese relations.
Under observation: When Chancellor Olaf Scholz travels to China this weekend and meets President Xi Jinping, among others, he will be accompanied by a number of German business bosses and a whole team of ministers.
Ministers Cem Özdemir (Agriculture, Greens), Volker Wissing (Transport, FDP) and Steffi Lemke (Environment, Greens) will be there in Beijing. In addition to pressing geopolitical and foreign policy questions about the war in Ukraine and the tensions between China and Taiwan, discussions about economic policy are also likely to be on the agenda.
For Jürgen Matthes, economist at the employer-oriented Institute of German Economics (IW) in Cologne, there are several strains on German-Chinese economic relations. “China is threatening to flood our market with more and more products. We can buy goods that we don’t produce ourselves so cheaply. But where we have competitive production ourselves, jobs are at stake due to the often unfair competitive pressure from China,” says he t-online.
Chinese economy is weakening
China’s economic recovery after the end of the strict Corona requirements has so far been weak overall. Domestic consumption in China also remains hesitant. This was particularly evident in March, although this was exacerbated by two public holidays. Exports fell by 7.5 percent compared to the same month last year, as customs in Beijing announced on Friday. Imports also fell by 1.9 percent. Experts had forecast a significantly weaker decline in exports and slight growth in imports.
The weakened Chinese economy is also leading to politicians becoming more open to foreign companies again. “There are tendencies that the Chinese government could improve the business conditions for German companies somewhat,” said Matthes. “However, the extent to which Chinese words are followed by action remains to be seen.” Scholz’s visit could therefore take place at a good time. However, companies should not get their hopes up too much. “China will stick to its goal of becoming more independent,” estimates Matthes.
When weighing up the situation, expert Matthes considers the strain on Sino-German economic relations to be particularly significant. “I consider the overcapacity problem to be even more relevant to the economy as a whole than the question of market access,” explains Matthes. Because products from overproduction can then cause unrest on the world market at prices below market prices.
The automotive industry in particular is shaking
This is becoming more noticeable in one industry and relations with China are becoming more important. “China is particularly important for the German auto industry,” says Matthes. “After all, more than a quarter of the foreign investments in this industry go to China. In the overall economy it is only seven percent.”
There are several reasons why automobile companies are investing so heavily in the Chinese market. On the one hand, many people expect a growing customer group in the emerging country of China, and the current customer group is also large in such a populous country.
In addition, Chinese car manufacturers are on the rise. Only the manufacturer BYD, which is still relatively unknown in this country, has already overtaken Volkswagen in terms of sales in China. BYD reacted quickly to the end of e-car funding in Germany with an aggressive pricing policy and is otherwise engaged in a showdown with US competitor Tesla. You can read more about BYD and the Chinese car strategy here.
This is also made possible by high government subsidies in China, which last year were estimated at up to 100 billion US dollars. The EU Commission is therefore currently conducting an investigation into the extent to which prices on the European market are being kept artificially low – much to the annoyance of the Chinese authorities. The results of the investigation are still pending, but punitive tariffs could be imposed as a result.