News Column

Analysis Is China worth the expense?

July 5, 2014

Philip Oltermann in Berlin



An exhibition called Evidence by Ai Weiwei, the Chinese artist and human rights activist, that is drawing the crowds at a gallery in Berlin, features a collection of Han Dynasty vases covered with the kind of gleaming car finish favoured by Mercedes-Benz, BMW and co. As the German chancellor, Angela Merkel, heads to China today with a delegation of business chiefs in tow, it is a poignant reminder of the People's Republic's appetite for luxury goods made in Deutschland.

Economically, the two industrial giants have never been more reliant on each other. Since the economic crisis diminished demand for German exports in Europe, China has become the most important emerging market for Siemens and Volkswagen, both of whose CEOs are on Merkel's trip.

Audi announced yesterday that it had delivered more than 50,000 cars to China in a month for the first time in June - for VW and Mercedes' S-Class, China is already the biggest export market. Total trade reached euros 140bn last year, making China a bigger trade partner for Germany than the US.

Political goodwill has been crucial in paving the way for these deals: Merkel's three-day trip, which starts with a visit to a VW plant in Chengdu tomorrow, will be the seventh of her leadership, her meeting with president Xi Jinping on Monday one of three this year alone.

Yet the German delegation will travel to Asia more sceptically than in the past. On Friday, Ai Weiwei told German press that he hoped Merkel would draw attention to his situation - he has been freed from jail but is unable to leave China - in the hope that he can visit his Berlin exhibition before it closes on 13 July. But while German officials said the chancellor still saw "many deficits" in China's human rights record, they also made clear that criticism would not be made in public. When a delegation of German politicians and industrialists visited Beijing in the wake of Ai Weiwei's arrest in 2011, a German journalist asking critical questions was loudly booed - by German businessmen.

But just as the standoff over Ukraine has revealed Germany's over-reliance on Russian gas, there are also growing concerns over German industry's dependency on the Chinese export market. While only 6% of Germany's overall exports may be China-bound, some companies, particular in the machine tool sector, sell as much as 40% to the Chinese market. "That figures does worry me," Klaus Meyer of the China Europe International Business school told the Guardian. "It's never a good idea to be too reliant on one country."

The scenario of an "Asian Crimea", such as a standoff with Japan over the Senkaku/Diaoyu islands in the East China Sea, was discussed in German government circles last month, according to Hans Kundnani of the European Council of Foreign Relations. "There is an increasing sense that Germany's close ties with China could become very problematic," he said.

While growth of the Chinese export market looks certain, concerns over the profitability of Chinese-German joint ventures persist, with Chinese companies accused of reverse- engineering foreign technologies. Shanghai's high-speed Maglev train, just like Ai Weiwei's Han Dynasty vases, may have the glossy look of German-style engineering. Underneath the surface, however, lies a home-made Chinese product.

"The Chinese approach to trade deals is very instrumental," said Steve Tsang of Nottingham's China Policy Institute. "Siemens have exported a lot to China, but will their profits outweigh their expenses?"


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Source: Guardian (UK)


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