WORLD OF INDUSTRIES 5/2019
WORLD OF INDUSTRIES 5/2019
WORLD OF INDUSTRIES 5/2019
- TAGS
- industries
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Author: Sushen Doshi,<br />
International Correspondent<br />
for World of Industries<br />
China: a strong partner and also a fierce<br />
competitor for German industries<br />
NEWS AND MARKETS<br />
For so long, Germany and the E.U. have been handling<br />
China with caution, as it was too important a market<br />
for exports. But now, various industry sectors have<br />
been complaining openly about restrictions and unfair<br />
treatment to foreign companies. Even the Federation<br />
of German Industries (BDI) now defines China as<br />
a systemic competitor. China as a market is<br />
indispensable, but there is a major shift in approach<br />
from Germany and the E.U.<br />
For the third consecutive year, China has managed to maintain its<br />
position as Germany’s most important trading partner with a total<br />
trade volume nearing € 200 billion in 2018, according to preliminary<br />
figures published by the German Federal Statistical Office.<br />
China accounted for the largest share of imports into Germany with<br />
goods worth € 106 billion, followed by the Netherlands with € 98<br />
billion and France with € 65 billion. Germany’s trade surplus was<br />
highest with the United States, totaling € 49 billion, followed by the<br />
UK € 45 billion and France € 40 billion. Germany’s trade deficit with<br />
China amounted to € 13 billion in 2018. It is worth noting that Germany’s<br />
trade with China is almost balanced, and mutually beneficial<br />
for both the countries. For Germany’s mechanical and plant<br />
engineering sector, China has been the most important export market<br />
and second most important foreign investment destination. The<br />
interest in this market is uninterrupted and a further expansion of<br />
business activities in China is expected. A positive factor for German<br />
engineering companies is that the Chinese demand for automation<br />
and digitization will increase in the coming years. The modernization<br />
efforts of China’s industry in particular offer good business<br />
opportunities in the short term. But what about the medium and<br />
long term?<br />
The China’s economy started to blossom after the strategic reforms<br />
of 1978 that led to opening of the Chinese economy. Since<br />
then there was a belief that China would gradually move towards<br />
being an open market and integrate into the global economy. It<br />
looks like this convergence is no longer possible as China is in the<br />
process of consolidating its trade and economic model. At the same<br />
time, China’s economic and industrial strength remains one of the<br />
key driving forces of the global economy and is shaping international<br />
markets. From Germany’s perspective, it is also one of the<br />
important sales and procurement market for German industry. As<br />
such, German industry wants to engage and create more opportunities<br />
in China, but the Chinese state controlled economic model<br />
creates systemic unfair competition with open market economies,<br />
which poses challenges that the EU simply cannot ignore.<br />
Foul, but play on!<br />
China has a hybrid economic system that has a mix of state and<br />
market elements. Despite considerable liberalization of the economy,<br />
the state still continues to play a strong role in the allocation of<br />
resources. Its influence on prices of land, energy, capital, labor and<br />
indirect or direct subsidies for companies or entire industry sector<br />
have led to production overcapacities and global market distortions,<br />
like in the steel sector. In future, overcapacities can be expected<br />
in areas of robotics and electric vehicle batteries. Also, while<br />
Chinese companies have enjoyed relatively free access to the EUs<br />
internal market, this does not apply equally to foreign companies in<br />
China. Even today, many industry sectors attract investment bans,<br />
caps or obligation to set up joint ventures. Along with this, China<br />
also has high levels of industrial tariffs and also multiple non-tariff<br />
barriers for foreign companies.<br />
8 <strong>WORLD</strong> <strong>OF</strong> <strong>INDUSTRIES</strong> 5/<strong>2019</strong>