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

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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• Part 1: The Dangers of Germany's Dependence on China
• Part 2: Risky Symbiosis
• Part 3: Growing Demand for German Consumer Goods
• Part 4: Warning Signs for German Industry
• Part 5: Optimizing Imported Technology
• Part 6: War of Nerves
• Part 7: Cultivating a Difficult Relationship