Beijing's High-Tech Ambitions: The Dangers of Germany's Dependence on China

Part 6: War of Nerves

Photo Gallery: China Fuels the German Upswing Photos
DPA

Beijing had promised that once the test route had been built, a consortium would be formed, with Chinese participation, to install the revolutionary technology on other routes in China. But the promised contracts, which would have been worth billions, have not been awarded to this day. Instead, a war of nerves erupted between the Chinese and German partners that continues to rage today. The conflict revolves around the Germans' suspicion that the Chinese were merely interested in copying their technology.

Videotapes show how Chinese engineers went into the assembly buildings at night to secretly examine parts of the Transrapid. Nevertheless, the Germans still have no clear proof of the supposed technology theft.

Three years ago, the Chinese unveiled their own maglev train on the grounds of Tongji University in Shanghai, and they have unveiled other, more sophisticated trains since then. Some are said to be capable of traveling at speeds of more than 500 kilometers per hour (311 mph) and be more than 30 percent cheaper than the German technology. So far, the new trains are only prototypes.

Last year, the Germans negotiated an agreement under which the Chinese could be granted licenses to operate the Transrapid on Chinese routes. But the memorandum of understanding has yet to come into effect.

ThyssenKrupp executives in Düsseldorf are not ruling out the possibility that the Chinese are still speculating that they will ultimately be able to acquire the entire Transrapid technology at a bargain. The war of nerves continues.

Feeling of Déjà Vu

Many German companies have had similar experiences. At the auto shows in Shanghai and Beijing, visitors are routinely confronted with a feeling of déjà vu when they see Chinese imitations of German products -- or at least parts of them. The Lifan 320, a tiny Chinese city car, is the spitting image of BMW's Mini. The Chinese have also cloned Daimler's Smart, calling it the Noble and giving it two seats more than the German original.

Daimler once tried unsuccessfully to obtain an injunction against Chinese carmaker Shuanghuan and thereby prevent it from exporting its Smart copy to Europe. CEO Zetsche has even tried to approach Chinese plagiarism with humor, saying that stealing car designs is ultimately "a way of paying homage." Seen in this light, the Chinese must also have tremendous respect for Germany's capital goods industry.

Chinese competitors copy German machines and their components and then sell them at low prices in other markets, like India, the United States and Russia. According to the German Engineering Federation (VDMA), two out of three German machine-building companies are victims of product or trademark piracy, which translates into €6.4 billion in annual lost revenues. China, which is responsible for 80 percent of these losses, is the "uncontested world-champion plagiarizer," says the VDMA.

German companies often hesitate to take the East Asian plagiarizers to court. They have little confidence in the Chinese legal system and fear reprisals.

As a result, some business owners are so frustrated that they withdraw from the Chinese market. Manfred Wittenstein is CEO of the engineering company Wittenstein, as well as being president of the VDMA. His company planned to build a plant for precision transmissions in China five years ago. But when Chinese officials demanded that he disclose technical plans and product details, Wittenstein abandoned the project. "The Chinese market has many hidden snares, which shouldn't be underestimated," says Wittenstein.

Misunderstandings and Mutual Incomprehension

The incident shows how disparate the two cultures still are today. The shared history of the Germans and the Chinese is filled with misunderstandings and mutual incomprehension.

The image many Germans have of China is still shaped by the horrific pictures of Mao Zedong's Cultural Revolution. But those days are long gone, and besides, the Cultural Revolution was never in keeping with the country's great traditions. Throughout the Middle Ages, the Chinese empire was technologically superior to the European powers. As recently as 1820, the country's economic output was well above that of the old continent.

But there was little trade and communication between Europe and China, and when there was contact, it was often ill-fated. The German astronomer Johann Adam Schall von Bell (1592-1666) was a case in point. He was made a court official and director of the imperial observatory in Beijing, but after the death of his patron, the emperor Shunzhi, Schall was sentenced to death.

German interest in China was only revived in the 19th century, when the German Reich established its "model colony" at Qingdao. The Boxer movement arose in part from local resistance to the German colonial masters and, in 1900, led to an attack on the diplomatic district in Beijing and the death of the German envoy. In a famous speech known as the Hunnenrede ("Hun speech"), Kaiser Wilhelm II said that the Chinese should "never again" be permitted to dare "to even look askance at a German."

Reviving Relations

But despite this animosity, the Chinese to this day admire imperial latecomer Germany for having caught up with Britain and France. After World War I, German officers and representatives of heavy industry came to the aid of the Chinese nationalist general Chiang Kai-shek.

Economic relations were eagerly revived in the 1980s. In 1984, VW signed a joint venture agreement with the state-owned Shanghai automaker. Even after the bloody suppression of student protests on Tiananmen Square in 1989, German industry was unwilling to spoil its cozy relationship with Beijing's leaders. Only three months after the massacre, Otto Wolff von Amerongen, chairman of the German East-West Trade Committee, became the first foreign official to pay a visit to then-Prime Minister Li Peng. During the administrations of former Chancellors Helmut Kohl and Gerhard Schröder, the Germans were viewed in Beijing as docile partners who were more interested in their business deals than in questions of human rights.

The first major rift happened in 2007, when Merkel received the Dalai Lama, the spiritual leader of Chinese-occupied Tibet, in Berlin. The furious Chinese cancelled scheduled diplomatic meetings and threatened to suspend contracts. German business leaders, like BASF CEO Jürgen Hambrecht, argued that it would be preferable to settle differences with China on the quiet.

But Merkel was unimpressed at first, noting that as German chancellor, she would decide with whom she was to meet. It's debatable whether Merkel would get away with such a gesture today. China has become stronger and more powerful since then, and unnecessarily provoking the country is probably not a good idea.

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1. German People Should Learn from American People
lakechamplainer 08/28/2010
The German people should learn from what the relationship between China's rulers and America's elites have brought the vast majority of Americans: Goods of all types of low quality, and a vastly reduced industrial base. Germany is a country rightly known for the quality of its goods - quality of goods made in China will inevitably be of poorer quality than those made in Germany. Also, the German people will find German firms fighting amongst themselves to take advantage of China's cheap(some would say slave) labor, which will lead to shuttered factories in Germany. Many times when I go shopping, I hear a voice in my head saying: Cheat me on the price, not the quality.
2. China is not a danger, it is an opportunity with one caveat,
Norberto_Tyr 08/30/2010
China is not a danger, it is an opportunity with one caveat, you must understand the principle of regionalism. Contrary to what is intended with the cacophonic euro system, a contradiction in terms, China is implementing a regional organizational structure in a pragmatic rather than a deliberate manner. If we turn the TV off and we put-on our common sense glasses we would be able to clearly see where China stands and what her principles are regarding foreign policy. In the first place China demands security like everyone else. Now security is a relative term since it is relative to threats. The threats for China are immense: 1- USA-UK-Israel (NATO by extension albeit not a rational one); 2- India-Israel; 3- Japan-USA; 4- Russia (a region in itself since regionalization not always means aggregation, sometimes means the opposite) In the second place we must understand her major strategic foreign problems: 1- Taiwan; 2- India; 3- Korea (USA's intervention). Now, by REGIONAL organization I mean two cardinal principles granted to your neighbors: 1- sovereignty; 2- jurisdiction and one condition: territorial contiguity (neighbors). China, Latin America, Middle Eastern Asian and African countries perceive that USA-UK-Israel (to some extent NATO members) violate these two principles fundamental to REGIONALISM. This force, in my view, will shape the world in the XXI century. Why REGIONALISM will rule the XXI century world ? In the first place the vast majority of territorial disputes have been solved, despite of some more or less small adjustments (for example Taiwan, Gibraltar, Malvinas, and others), most countries broadly accept the territorial 2010 status quo. On the other hand, regional (in the broad sense of the word) artificial entities such as the European Union I do not consider as ‘regional’ in the proper sense since they violate the principle of jurisdiction between neighbors; and of course, the UN, the most extravagantly global, ineffectual and the most ignored organization of all constitute the paradigm of the anti-region. Regionalism, contrary to the euro experiment, is spontaneous and natural, it is taking shape in South America and South East Asia in force, to a lesser extent in the Middle East and in Africa it is in its infancy but growing. Regionalism opposes globalization; it exposes a soft political coupling between nations rather than a tight coupling as in the artificial EU system. Regionalism does not impose political systems to regional nations, much less that entity the ‘west’ calls democracy, in reality ‘representative democracy’ (lets be precise, a sea-lion is not a lion) tightly coupled with a monopolized mass media apparatus violating every single nation’s sovereignty. For example, South America accepted the idea of Venezuela ‘Chavista’ despite of USA’s rhetoric’s regarding the ‘purity of democracy’ in the REGION, not USA’s region though; USA is becoming more and more antagonistic and alienated in the true region; for example consider the recent racist laws in Arizona, not very ‘region sensitive’ to say the least. The South American region, without much fanfare, recently made the Colombian and Venezuelan Presidents to shake hands. The region, contrary to the ineffectual global apparatus ruing from New York or Brussels, works behind the scenes in the same way hormones control our body. Now, is anyone expecting China to change her political system in the near future? Are any of her neighbors attempting to impose a change on China’s political system apart from the alienated regional South Korea which is considered by her neighbors a traitor for inviting predator powers into the region, a regional anathema ? Why would they ? Most Chinese politicians are engineers; they know what they are talking about, while most ‘western’ politicians are either lawyers (“poor the countries that fall in the hands of the lawyers” Lee Iacocca) or are nothing at all, mere entertainers and charlatans, or even expert ‘public relationists’ (‘relacionistas publicos’, yes as bad as it sounds in any language, as I read in an Argentinean yellow press publication, La Nacion) Regionalism implies that regional countries have the right to choose their type of government, and that government can be any or a combination of the three ideal forms of government identified by Aristotle: aristocracy, monarchy and democracy (principle of sovereignty), regional nations do not have the power to interfere within the territory (and electromagnetic space) of their neighbors (principle of jurisdiction). Regionalism is the implicit Chinese approach that the ‘western’ media complains about regarding investment in Africa, for example. Norberto
3. China is implementing a regional organizational structure in a pragmatic manner
Norberto_Tyr 08/30/2010
Get used to it, it will happen more often, none wants foreign powers lecturing or imposing conditions on commercial deals, besides, ‘charity’ or ‘aid’ will decline precisely due to the ‘regionalization’ phenomenon (neighbors will help their neighbors as Germany does in Greece even against the euro law), therefore, one of the last weasel tricks to help infiltration and indoctrination, pseudo charities, will disappear. Lets think about, imagine selling cars only to people that attend mass every week just because you are Catholic, does this make any sense ? Well, keep on complaining, since this is going to be the future world’s political organization you like it or not, this is natural, is evolutional it is unstoppable, waste your energy or join the trend. Off course, by now you must have noticed that is the opposite of ‘globalization’, yes, artificial entities relying on globalization will perish, no doubt about that. Now, regions are going to be eternal like Roma ? No, lest talk about that when we reach the XXII century. Region organization will be good or bad in the very long run ? We do not know but it is certain that they are here with US right now. Nations will rely on their regional neighbors for their survival in the near future, not on abstruse artificial agreements, the one without regional neighbors will be in trouble, nations will form tightly coupled economic structures, and in some cases financial as well, as will happen in the Far East region when China start utilizing her reserves. Other regions might take longer, such as South America, due to the interference from competing internationalizing entities embedded in the social fabric attempting to break the natural and unstoppable political evolution. Are there some organizations incompatible with regionalization ? Yes, they are, but that proves how artificial and weak they are, but true nations will not perish. Summarizing, under this framework, namely the world regionalization under two loosely coupling political principles: 1- sovereignty; and 2- jurisdiction, China is so unstoppable that even Japan and Taiwan realized that they belong to the same region. Turkey is another country 'regional alert', while USA, Israel, South Korea and perhaps Vietnam, they are not, at their own peril, of course. Corollary: I can predict, based on above facts, the dismissal of both giant and miniature dinosaurs crushed by the law of evolution, you can believe it or not, nevertheless, whatever you might think wont change the situation a bit. Norberto
4. technology transfer
brunom 08/31/2010
I used to live in Germany in the 70's and the picture of Helmut Kohl meeting Deng Xiao Ping in 1984 struck a chord with me! Deng's famous quote about the colour of the cat can be interpreted in the following way: In order for China to become a "superpower" it has to go through an economic and technological "Great Leap Forward". Deng wanted technology transfer from the West Russian communism wasn't helping the Chinese economy too much!) Well, in the 90's, many people in the West (especially CEO's and people on Wall Street in the US) are so naive that they thought they can make a "quick buck" out of the huge Chinese market and labour force, but look, who's got all the US T-bonds now, China! That's actually not the main thing for China. What they really wanted was technology transfer and they got it big time (through cheap manufacturing). Perhaps they would have gotten that (by hook or by crook) someday anyway, but the faulty economic and political decisions made in the West expedited those Chinese goals. China is a very big and ambitious dragon and we will have to wait and see what the economic, political and environmental effects will be of this immense amount of technology transfer for the rest of the world, including Germany. After giving away valuable and fundamental know-how and technology for short term gains (for little nano-blips in the stock market), it is hard for the capitalists in the West to complain that the Chinese are now capable of cloning any high-tech product (including weapons) from the West!
5.
BTraven 09/02/2010
---Quote (Originally by lakechamplainer)--- The German people should learn from what the relationship between China's rulers and America's elites have brought the vast majority of Americans: Goods of all types of low quality, and a vastly reduced industrial base. Germany is a country rightly known for the quality of its goods - quality of goods made in China will inevitably be of poorer quality than those made in Germany. Also, the German people will find German firms fighting amongst themselves to take advantage of China's cheap(some would say slave) labor, which will lead to shuttered factories in Germany. Many times when I go shopping, I hear a voice in my head saying: Cheat me on the price, not the quality. ---End Quote--- Even Apple let assemble its products in China therefore I can not reflect your that most of the goods produced there would be of low quality. I think it’s a pity that so many workers lost their jobs because of the relocation of production to countries which cheaper labour costs. It is not good for the soul of a country when school leavers have only the choice between studying in order to work later in the service sector or working there just after the end of their school time. It’s a fairy tale that they could all take creative jobs or could work in the researching departments of big companies.
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