Prof. ST Hsieh
Director, US-China Energy Industry Forum
626-376-7460
November 10, 2022
Germany offers a case study on global politics vs business interests. Germany is an advanced economy means it is a market-based economy or business interests should be the guiding principle contrasted to planned economy such as China. Unfortunately, more and more government interventions are eroding the market-based economies lately.
The main challenge is that many elected political leaders do not command the support of the majority. As such many democracies are governed by a coalition of large and small political parties. In order to hold on to power, the main political party often yields to the wishes of small political parties. The so-called key minorities can dedicate extreme positions for the government. Compromises without principle usually result in “horse trading!” Government policy lacks principle and consistency.
Further, parties in a coalition government do not speak in one voice and every party often talks to the public about their political positions without intra-party consciousness. It is very dangerous in global politics or negotiations because a foreign nation will receive a few contradictory messages. Based on their national interests and agenda, any nation may take a public position on these contradictory messages that essentially render official diplomatic negotiation channel useless. As a result, nations focus on grand standings in the news media without resolving any real issues.
For businesses, government interventions can be devastating. Because now a days, governments make “real time” decisions on trades based on the perceived national interests’ threat and the rules can be changed anytime without warning. For example, German blocked the “Chinese-owned firm’s chip factory deal” in the “eleventh hour” while these companies have been negotiating for 11 months. What a waste of time, energy, and money for the business world.
It is good that German is drafting a “comprehensive China strategy.” “China strategy” seems to be very fashionable now as Canada and the US are also developing some kind of “China strategy” respectively. The issue is that any reasonable “China strategy” should have a clear understanding of China and Chinese society. It should not be drafted by a bunch of western “China Hands” or a “Government Appointed Commission” inside a building at a foreign capital.
A major component of Biden’s approach to contain China includes building a global anti-China alliance. It is a clear sign that US alone can not contain China anymore, not to mention Germany or Canada. It will be interesting to see how all these “China strategies” are coherent. Otherwise, none will be effective in blocking the rise of China.
German business leaders warn against pulling out of China
Thu, November 10, 2022 at 12:04 AM
BERLIN (AP) — A group of top German business executives is warning against withdrawing from China, while acknowledging that it’s right for Germany to redefine its relationship with Beijing.
The intervention by eight chief executives in an article Thursday for the daily Frankfurter Allgemeine Zeitung comes as Germany grapples with its future relationship business and political relationship with China. The authors included the CEOs of industrial conglomerate Siemens, chemicals manufacturer BASF, technology company Bosch, auto parts supplier Schaeffler and the port of Hamburg.
They said German companies’ sites in China and elsewhere in the world contribute significantly to their competitiveness, and that China has become the world’s second-biggest and most dynamic market — “so our presence there is particularly important in the interest of German economic strength.”
The potential of the Chinese market offers an opportunity to scale up faster and to be more successful in other markets, securing jobs in Germany, the authors argued.
They said that, given China’s increasingly assertive behavior and the human rights situation in Xinjiang province, “it is right for Germany today to define its relationship with China in a more nuanced way, in the three dimensions of competition, cooperation and systemic rivalry.” But, they added, “in the current public discussion, we perceive an almost exclusive emphasis on systemic rivalry, in words and concrete measures.”
“Despite all the challenges of China and with China, we are convinced that its fundamental growth dynamic will remain,” the authors wrote. “A withdrawal from China would cut us off from these opportunities.“
In recent weeks, Chinese investments in Germany have been in focus as officials seek to balance strong business relations with a desire to avoid repeating mistakes made with Russia, which once supplied more than half of Germany’s natural gas and now supplies none.
Last month, Chancellor Olaf Scholz’s governing coalition argued about whether to allow Chinese shipping company COSCO to take a 35% stake in a container terminal at the Hamburg port. The Cabinet eventually cleared COSCO to take a stake below 25%, ensuring that it wouldn’t gain the ability to block company decisions.
On Wednesday, the Cabinet blocked the sale of a chip factory in Germany to a Swedish subsidiary of a Chinese company and a second planned investment, which the government didn’t detail.
Scholz is encouraging companies to diversify but not discouraging business with China. He said before his trip that “we don’t want decoupling from China” but that “we will reduce one-sided dependencies in the spirit of smart diversification.”
In Thursday’s article, the CEOs concurred that “we must diversify risks,” for example in chips, batteries and raw materials.
Germany blocks Chinese-owned firm’s chip factory deal
GEIR MOULSON Wed, November 9, 2022 at 1:45 AM
BERLIN (AP) — The German government on Wednesday blocked the sale of a chip factory to a Swedish subsidiary of a Chinese company, a decision that comes as Berlin grapples with its future approach to Beijing.
Although the deal announced in December wasn’t very significant financially and the technology involved apparently wasn’t new, it raised concerns over the wisdom of putting German IT production capacity in Chinese hands.
“What is important is the political message that we are an open market economy, that foreign investments — including from countries outside the (European) Union — are wanted and welcome here, but an open market economy is not a naive market economy,” he told reporters.
The company said it would analyze the decision “with regard to whether there is a material violation of the parties’ rights, and decide whether to take legal action.”
Scholz’s nearly year-old government has signaled a departure from predecessor Angela Merkel’s firmly trade-first approach to China. It plans to draw up a “comprehensive China strategy.”
Members of two junior parties in the governing coalition opposed that deal, while Scholz, a former Hamburg mayor, downplayed its significance. The Cabinet eventually cleared COSCO to take a stake below 25%. Above that level, an investor can block a company’s decisions.
Scholz is encouraging companies to diversify but not discouraging business with China. He said before his trip that “we don’t want decoupling from China” but that “we will reduce one-sided dependencies in the spirit of smart diversification.”
Germany stops Chinese chip firm’s acquisition bid
Political meddling to impact Berlin’s global competitiveness: expert
By Ma Jingjing and Tao Mingyang Published: Nov 10, 2022 01:53 PM Updated: Nov 10, 2022
The German authorities on Wednesday took a sudden U-turn by stopping a Chinese chip firm’s acquisition bid in Germany. Experts said the move reflected internal political discord in the German government, and they urged the German side to increase its understanding of China and the Chinese market so as to elevate Germany’s global competitiveness.
Chinese chip company Sai MicroElectronics said on Thursday that its Sweden-based wholly-owned subsidiary Silex Microsystems AB had received an official document from German authorities that prohibited its acquisition of Elmos Semiconductor SE’s auto chip line in Dortmund, Germany.
Sai MicroElectronics deeply regrets the decision of the German Federal Ministry of Economics and Climate Action, but it is “still optimistic” about the prospects of the auto chip industry and will continue to attach importance to the industrial layout, it said.
The result came as a shock to the companies involved, as the ministry had indicated an approval subject to conditions and submitted a draft version of the approval after about a 10-month review process, according to a separate statement by Elmos.
China always encourages its businesses to conduct mutually beneficial investment cooperation overseas in accordance with market principles and international rules as well as local laws and regulations, Chinese Foreign Ministry spokesperson Zhao Lijian told a regular press conference on Wednesday.
“We hope that Germany and other countries will provide a fair, open and non-discriminatory market environment for Chinese companies doing business there, and refrain from politicizing normal economic and trade cooperation, still less using national security as a pretext to practice protectionism,” he stressed.