27 April 2024
Welcome to China-EU Dynamic! Recent interactions between China and the EU in economic and trade field have shown the flow of two currents moving back and forth: the cold current of the EU’s de-risking from China, and the warm current brought by the European business community to enhance China-Europe cooperation. In today's edition, we will explore these currents through a series of truths and facts. Enjoy reading.
Scholz in China together with senior representatives of renowned German companies
Clear message: No protectionism. When meeting with German Chancellor Olaf Scholz in Beijing, Chinese President Xi Jinping noted that the industrial and supply chains of both sides are deeply intertwined, the two markets are highly interdependent. Mutually beneficial cooperation is not a “risk,” but the guarantee for a stable bilateral relationship and an opportunity for the future. Both sides should stay vigilant against the rise of protectionism, adopt an objective and dialectical view on the issue of capacity through a market and global perspective and based on the laws of economics.
Chancellor Scholz emphasized that the German side opposes protectionism and supports free trade, and is ready to play a positive role in promoting the sound development of EU-China relations. He was particularly impressed by the close and sound cooperation between German and Chinese businesses.
Right direction: Be competitive. Mercedes boss Ola Källenius firmly opposed the increasing barriers to trade. "The best protection is to be competitive, if you start putting up barriers to trade, first one and then the other, then that leads in the wrong direction." BMW's CEO Oliver Zipse shared the view, pointing out that his group doesn't feel threatened by Chinese companies. "Once again, we should not exaggerate our fear of foreign manufacturers."
China: An opportunity. Both Mercedes and BMW bosses described China as an opportunity rather than a risk. "Withdrawing from such a large market is not an alternative, " said Ola Källenius. Roland Busch, CEO of Siemens AG also believed in Chinese market, adding that "a new level of quality collaboration is ahead of us".
▶️Tips: Why foreign leaders prefer other Chinese cities over Beijing as first stop of China trip? Chancellor Scholz chose Chongqing as his first stop in China. As an economic engine in the inland region, Chongqing is the core city of China-Germany cooperation in the field of hydrogen technology. As the world's third-largest country by territory with a rich diversity, China is home to a myriad of vibrant cities, each offers its unique characteristics. By immersing themselves in different Chinese cities, foreign leaders can get firsthand experiences and develop a more comprehensive understanding of China's multifaceted geographical, economic and cultural landscape, thereby enabling them to refine their policy decisions and improve relations with China.
Why does China remain attractive?
Encouraging economic performance: During the first quarter of 2024, China's economy has continued to show a trend of recovery and improvement with the GDP growth by 5.3% yoy, which goes far beyond the prediction of many international organizations. Goldman Sachs revised its forecast for China's GDP growth rate for the year 2024 from 4.8% to 5.0%, while Citigroup has made a similar upward adjustment from 4.6% to 5.0%.
Strong growth momentum by new quality productive forces: China has sped up industrial upgrading, laying a solid foundation for strengthened recovery momentum this year and beyond.
▶️For emerging industries, the high-tech manufacturing sector registered a growth of 7.5% in Q1, accelerating by 2.6% from Q4 2023. Investment in high-tech industries increased by 11.4% yoy. NEVs output saw a yoy increase of 28.2%.
▶️For new infrastructure, the number of 5G base stations had risen to nearly 3.65 million by the end of Q1. The value added output of the digital economy's core industries accounts for 10% of China's GDP.
▶️For new services, the high-tech services maintained rapid growth momentum. The combined value added output of information transmission, software and information technology services grew by 13.7% in Q1. Online retail sales jumped 12.4% yoy in Q1.
▶️For new energy, the proportion of coal consumption decreased by 1.1% from the same period last year, non-fossil energy consumption increased by 0.8%.
Brighter prospect of China's development: Experts from ING point out that China’s economy is not in a great decline but a great transition. Famous economist Nicholas Lardy believes that China is still rising, and people should get rid of misconceptions and never underestimate China’s economic potential. Bloomberg predicts that from 2024 through 2029, China will account for about 21% of the world’s new economic activity, while 20% for the G7, and 12% for the US.
At the same time...
More barriers created: While the European business community shows its enthusiasm to deepen its relationship with China, the EU Commission has launched 5 investigations targeting Chinese companies one after another since the beginning of the year. The "dawn raid" carried out on April 23 was indeed a clear signal of further deterioration of the EU's business environment and sends an extremely negative signal to all foreign companies operating in the EU.
"Overcapacity" narrative crafted: Recently, a number of EU officials blamed China continuously for the so-called “overcapacity” in new energy sector, and initiated anti-subsidy investigations on this ground. In fact, this is not the first time the West is using "overcapacity" as a pretext to suppress China's manufacturing sector. As the spokesperson of Chinese Foreign Ministry points out, the “overcapacity” rhetoric is just an excuse for protectionism. The world doesn’t want less of China’s capacity, but more funding and products to speed up energy transition and reduce poverty. Neue Zürcher Zeitung also revealed that western whining about China's "overcapacity" is hypocritical and short-sighted. The insightful views inside the EU are indeed not to be neglected.
But but but....: It seems that EU's protectionist actions did not manage to win the hearts of the business and industrial communities. Bloomberg pointed out that, according to the latest statistics, a trade war aims China’s EV would finally harm European car makers themselves. More of it, Chinese automobile producer Chery is to manufacture electric cars in Barcelona from the end of this year. It will be the first-ever Chinese car manufacturer to set up in Spain and one of the first in Europe, creating 1,000 jobs.
As Minister Peng Gang of our Mission points out in his op-eds, mutual benefit holds the key to bilateral trade. Even if the EU wishes to prevent risks, it should return the initiative to enterprises and not let “political decisions” replace “commercial decisions”, otherwise enterprises will only vote with their feet.
Finally, let's follow the steps of a French blogger to feel the passionate atmosphere on the 4th China International Consumer Products Expo held in Hainan, which was another big move of China's high-level opening up.
Disclaimer: The views and opinions expressed in the newsletter are those of the authors and do not necessarily reflect the official policy or position of China or our Mission, except those from the official website of the Chinese Foreign Ministry, our Mission and other Chinese governmental websites.
Please let us know if you have any suggestions or comments about this newsletter. You can also easily unsubscribe if you do not want to receive it anymore.
