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

DPA

Part 4: Warning Signs for German Industry


But the Chinese solar cells are by no means of poorer quality. Only a few years ago, Chinese modules had the reputation of being more prone to failure and more harmful to the environment, but now the quality has improved dramatically. In fact, a recent study by the Stuttgart-based bank Landesbank Baden-Württemberg (LBBW) concluded that the productivity of Chinese producers is now higher than that of their German competitors. And according to TÜV Rheinland, a technical inspection agency, Chinese solar cells are of high quality.

China owes its rapid rise in the solar industry partly to German energy policy. About 70 percent of its total production is exported, and about half of that goes to Germany, a country known for its generous subsidies for solar electricity.

At Risk

What's happening in the solar industry should be a warning sign for Germany's most important sector, the automobile industry. Even strong sectors are at risk when China goes on the offensive.

The country is pursuing a dual strategy. On the one hand, China gains access to state-of-the-art technology through joint ventures. On the other, it is developing the technology of the future: electric cars. Chinese companies are already world leaders in battery technology, which could give the newcomer a decisive competitive edge over established European and Japanese carmakers.

VW, Daimler and the like are still benefiting from the China boom more than companies in most other industries. In fact, German carmakers are having trouble producing enough cars to meet Chinese demand. The most popular German cars in China are the large luxury sedans, like the Mercedes S Class and BMW's 7 Series, for which China is now the biggest market worldwide.

VW, Daimler and BMW are building new plants and intend to at least double their production in China. However, these new plants are not VW, Daimler and BMW plants, but joint venture operations between the German manufacturers and Chinese companies.

The Concubine Economy

This form of cooperation has been dubbed the "concubine economy." Just as the Chinese emperors once selected their concubines, China's current leadership selects foreign companies and grants them the right to produce goods locally in cooperation with a domestic partner.

The People's Republic compels the German carmakers to enter into these joint ventures. By imposing high import duties, the government prevents the Germans from simply exporting German-made cars to China. Any company interested in selling large numbers of its products is required to build factories in China with a Chinese partner, thereby giving the country access to their technology.

Beijing began upping the pressure on Western companies to transfer technology to the Chinese partners about five years ago. At the time, the business magazine Zhongguo Caifu published a story titled "Germany as Role Model." According to the article, cooperation with the Germans in the coming 20 years would be the "ultimate weapon" for the "rebirth of China's manufacturing industry."

A campaign by the Chinese company Shanghai Automotive Industry Corporation (SAIC) illustrates what this means in practice. SAIC is involved in joint ventures with both VW and General Motors. When the US carmaker was fighting for its survival last year, SAIC took advantage of its partner's weakness. It gained a controlling interest by increasing its share of the joint venture to 51 percent. The business publication Jingji Cankao Bao wrote triumphantly: "A new model of cooperation between Chinese and foreign automakers has been established."

Self-Confident

The Chinese have also become far more self-confident lately in their joint venture with VW, reports a senior employee. In the long term, says the employee, Beijing will hardly tolerate one of the country's most successful companies being run by managers in Wolfsburg.

VW CEO Martin Winterkorn is convinced that the Chinese will remain dependent on German technology for vehicles with classic gasoline and diesel engines. But Beijing intends to extricate itself from this dependency by focusing on new technologies.

The company that is expected to make a key contribution to this effort is called BYD, or "Build Your Dreams." BYD has only been making cars since 2003, but it is the world's second-largest manufacturer of batteries for mobile phones. Its research division has 10,000 employees and has just developed a new type of electric cell designed to power electric cars.

Whether the BYD dream will come true is still up in the air. Daimler, at any rate, is intrigued. The Stuttgart-based company, where the automobile was invented more than 100 years ago, is developing an electric car together with BYD. In doing so, it is testing a new form of cooperation, in which the Chinese partner is responsible for a substantial portion of the innovative technology.

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lakechamplainer 08/28/2010
1. German People Should Learn from American People
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.
Norberto_Tyr 08/30/2010
2. China is not a danger, it is an opportunity with one caveat,
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
Norberto_Tyr 08/30/2010
3. China is implementing a regional organizational structure in a pragmatic manner
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
brunom 08/31/2010
4. technology transfer
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!
BTraven 09/02/2010
5.
Zitat von lakechamplainerThe 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.
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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