What are the Germans thinking about China? – Mark Schaub

 

Mark Schaub

The German government has become much more assertive about the country’s wheeling and dealing with China. Veteran China lawyer Mark Schaub visited over the past few weeks Berlin and Munich and felt the pulse of the German business communities toward China, he reports in his China Chit-chat. “Politicians in Germany have limited ability to influence or pressure German business. Consumers can be upset … but will become upset about something else 5 minutes later,” he writes.

Mark Schaub:

Geo-political Situation is Much Worse – a common theme was that media coverage was much more negative about China than in the past. Most also felt that the reporting was not particularly well informed nor nuanced. Hot topics include Xinjiang and Hong Kong. Many felt that China was judged much more harshly and subject to greater scrutiny than the United States. One friend who runs a China group told us that he was holding closed sessions on these sensitive topics because his organization places great importance on transparency and openness. This was somewhat dampened by his closing the door as he discussed this, but his heart is in the right place.

But Geo-Politics Likely to have Limited Real Effect – most felt that consumers and government may be more negatively inclined towards China but that this was unlikely to translate to much in the way of real action. Politicians in Germany have limited ability to influence or pressure German business. Consumers can be upset … but will become upset about something else 5 minutes later.

De-Risk not De-Couple – one German consultant reacted negatively to the term de-coupling finding it both exceedingly negative but also unrealistic. He has German medium sized businesses looking to de-risk the Chinese business but not quit China. It is more likely that the next factory will be in a site outside of China. However, probably not Vietnam as that is seen to be too integrated in China anyway. There was widely held agreement that really excluding China from the global supply chain was wishful thinking or unthinking populism.

COVID is a real Management Problem – most of the Mittelstand companies really felt that they are lacking insight into their local operations. In the past there was at least a bit of pantomime that the local management was following HQ rules and directions. Few feel the compulsion to even engage in such a charade now. One GM commented that what made her feel most comforted was that the local management in her entity were likely too stupid to be stealing. Normally this would be a red flag but I have met the management in question and I think she may be on to something there. In any event, COVID was really the biggest practical problem.

There is Still Interest in China – one consultant had conducted a detailed survey of 30 Mittelstand companies and found there was still strong interest. The major issue holding them back was concerns re IP rights. Although IP rights are a legitimate concern the level of understanding seemed very immature. Have you protected your IP legally? Do you have a strategy in place to protect the IP rights? If your IP rights are really so great and of great interest to the Chinese market you can bet someone will have bought it and reverse engineered the buggery out of it. Hiding will not work. Personally, I think the much greater challenges are: how do you launch a business in China if you cannot visit China? How do you compete with Chinese competition? Deal with an uneven playing field? These are all complexities that few mentioned.

The Chinese are Coming – it was striking how many Chinese companies were based around Munich – car companies, battery companies – it is curious why they all plumped for the most expensive part of Germany (for people, offices and factories). One German tech investor mused that he thinks to combat China’s new lead in new energy vehicles Europe of the 2030s will likely adopt the Chinese playbook from the 1990s for the auto industry – require Chinese companies to enter into JVs and forced tech transfers against market access.

More in the China Chit-chat.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

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US and Australia lose without China students – Shaun Rein

 

Shaun Rein

More than three million Chinese students went to the US for their study, but with the rising sinophobia both the US and Australia are losing out huge advantages of those eager learners, says business analyst Shaun Rein to state-broadcaster CGTN. Even losing only tuition fees might cost them dearly, he adds.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Slow recovery in China, but expanding global coronavirus mayhem

Tenerife

The China government is trying to push positive news in the way it handles the coronavirus crisis, but the economic fallout is only shaping up as the panic moves to other parts of the world. Airlines, shipping lines and other logistics and hospitality providers are maintaining the reduction on services, as demand is not yet picking up. Some logistic providers contemplate resuming services only in June, although they do not wish to confirm that less-favorable scenario.

Europe has become the latest victim of the coronavirus panic, and the number of patients rises, while numbers in the Americas are still low, but expected to go up too. That means that even when containerships are picking up cargo in China again soon, there might be limited capacity to unload them in the rest of the world.

The policy at the China Speakers Bureau is to advise against planning major events at this stage in Asia and Europe, but most clients have delayed or cancelled already. The option of relocating events becomes also unattractive, as major economic centers like Norther Italy, France, South Korea, Japan and other countries suffer from the coronavirus panic. Not only our speakers have problems in moving around in the world, event organizers have a hard time too to get international audiences together.

Containing the virus and its effects, including a reduction of the spread of the virus when Spring kicks in are still part of the optimistic scenarios. But those scenarios are not strong enough to support planning major events that require larger amount of people to come together. We do see some online speeches taking off, but that is only a very limited number.

Are you interested in discussing your plans and pick our brains on the future developments: do not hesitate to get in touch.

Trade war, phase 2 - Arthur Kroeber

Arthur Kroeber

After a first symbolic truce, the world should brace for the next phase in the trade war between China and the US, warns leading economist Arthur Kroeber, according to Barron's. China has stalled its economic reforms and mechanisms to contain the US power fail, and the technology war is likely to resume, he stresses.

Barron's:

What may be a tactical positive for markets and the global economy is viewed as a strategic negative by those who look at the deal through a longer-term policy lens. “The agreement falls far short of achieving the U.S. goal of forcing China to change its state-led economic system,” writes Arthur Kroeber, founding partner of China research firm Gavekal Dragonomics,in a note to clients. “Instead, it cements a pattern of managed trade reminiscent of Japan’s ‘voluntary’ export restraints in the late 1980s. And it will do nothing to stop further escalation of the two countries’ technology war.”... 

The U.S.-China technology war is also likely to escalate, playing out over emerging technologies like 5G. Kroeber says the U.S. is upping pressure on European allies to rethink using gear from China’s Huawei Technologies in their 5G networks. Norway’s telecom utility decided to use Huawei rivals, and German legislators are pushing back against chancellor Angela Merkel’s efforts to keep buying Huawei gear. More Chinese companies could also end up on the U.S. export-control or sanctions blacklists—all of which will push China to further re-energize its investments to reduce its dependence on U.S. suppliers, he adds. 

And don’t count out another tariff war emerging after the election. With the Trump administration’s efforts to debilitate the World Trade Organization’s dispute resolution mechanism, Kroeber says there is no effective check on the U.S. ability to engage in unilateral trade actions like tariffs, especially after the election. Kroeber is also skeptical about China’s purchase commitments, adding that it is hard to see how these targets can be met in the real world. That suggests tariff wars could resume in 2021 if the targets aren’t met.

More in Barron's.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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German relations with China follow former US track - Ian Johnson

Ian Johnson

Less than a decade ago, the relations between China and the US dominated globally, not only for the economy but also for human rights. When the flight of Liu Xia, the widow of Nobel prize winner Liu Xiaobo, to Berlin last week, shows one thing, it is that Germany is taking over that role, says Pulitzer price winner Ian Johnson, author of The Souls of China: The Return of Religion After Mao, who gave a eulogy on Liu Xiaobo in Berlin, last Friday, at DW.

DW:

"The German government is one of the few major Western governments that is still actively pursuing a human rights agenda," said Ian Johnson, a Beijing-based, Pulitzer Prize-winning author who also spoke at the ceremony. "The US has retreated to just trade issues, the same with the UK." 

Johnson added that the service would encourage people in China "who are fighting for a more open society to know that there's a church full of people commemorating Liu Xiaobo here."

More at DW.

You can read a translation of Ian Johnson's eulogy at the ChinaFile here:

‘Liu Knew His Responsibility in History’.

Ian Johnson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Ian Johnson at Friday's meeting in Berlin

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Chinese consumers prefer German over American brands - James Roy

James Roy

Especially in the car industry, American brands are fighting heavily with their German competitors. And the Germans are doing better tells retail analyst James Roy to Bloomberg.

Bloomberg:

Mainland buyers have traditionally equated luxury with German nameplates. Volkswagen-owned Audi is China’s top luxury brand, with 30 percent of the high-end market in 2015; BMW is No. 2, with 25 percent; and Daimler’s Mercedes-Benz line is third, with 20 percent. 

Cadillac is far behind, tied with Chinese automaker Geely Automobile Holdings’ Volvo at No. 6—they each commanded 4 percent of the market last year, according to Bloomberg Intelligence. Lincoln had less than 1 percent. “There really is a solid association in Chinese consumers’ minds with the premium German brands,” says James Roy, associate principal of China Market Research Group. “American cars are viewed as fine and good and functional, but they don’t have that premium image.”... 

President Xi Jinping’s campaign against corruption and conspicuous consumption among officials may also provide an opening for U.S. cars. “Consumers are trading down,” says Roy of China Market Research Group. “People are not looking to be as obvious or flashy with their wealth as before.”

More in Bloomberg.

James Roy is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

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Why China needs Europe now - Shaun Rein

+Shaun Rein 

Premier Li Keqiang will visit Germany this week with the largest business delegation ever. Business analyst Shaun Rein explains why China has a rather weak economy, and needs Europe for support. With some advise on German business how to treat Chinese competitors.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers´request form.

Are you interested in more experts on risk management at the China Speakers Bureau. Do check out our latest list.

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China: a loser in cyber attacks

The German website

Who is hacking who, we asked ourselves last month in the China Weekly Hangout, after China was accused of being the center of many global cyber attacks. Last week at the German CEBIT, a German organization disclosed a global overview of where the attacks from last month are coming from. China takes only a poor 12th spot, after other rogue countries like Russia and Germany. (The data might vary, since the investigation is an ongoing, real time one.)
The global operation is set up by German telecom provider Deutsche Telecom, who has installed 97 so-called 'honey-pots', who sniff out cyber attacks, so the company can prepare itself, and its clients for attacks.
The number two on the list is Taiwan, politically correct described as a Chinese province, is the source of 900,000 attacks. Mainland China only slightly over 150,000. Even the US is, with over 350,000 attacks, a major source of cyber attacks.
Other site come up with other data, and in every case it might make sense to open the machine and see how it works.
I leave it up to the engineers to look into the technicalities (is it by accident that a German site discovers so many German attacks?). Are they missing some kinds of attacks? It puts the whole hacking discussion a bit more in perspective.

Bernanke, manipulating the US currency - Shaun Rein

Ben Bernanke via Wikipedia

Ben Bernanke, chairman of the Federal Reserve, is wrong in pumping 600 billion US dollar into his economy, writes Shaun Rein in Forbes. The dependence of the US economy on its addiction to debt in increasing its problems, not solving them. Bernanke is shifting the problems of the US to the rest of the world, including China, holding large amounts of US-dollar denominated bonds.

Global investors are rightly worried that with the U.S. money supply growing the value of the dollar will continue to drop. So what are they doing? Companies like Apple, General Electric  and Pepsi are investing in emerging markets like Brazil, India and China that are rebounding better from the crisis. The result is massive asset bubbles in those places that could create great volatility if they popped.

In other words, Bernanke is unleashing America's economic woes and bubbles on the rest of the world. America's closest allies like Germany and Brazil are protesting, sensibly, as are the Chinese. They don't want Bernanke to fob off America's problems onto them.

More in Forbes

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Shaun Rein by Fantake via Flickr

Shaun Rein is a speaker of the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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