“A More Open China, Not a More Closed EU”

The DRC Liangmaqiao Diplomatic Office Building in Beijing, housing the German Centre and the Representative Offices of the BDI. © Du Yusen

The Chinese President Xi Jinping recently expressed his strong support for free trade and open markets in a widely discussed speech. At the opposite rim of the Pacific, in the USA, the current rhetoric sounds rather different. In these exciting times, BDI-President Dieter Kempf recently travelled to China for talks. In the context of his visit, Hanna Müller, Head of the BDI-Office in Beijing, explained the current state of affairs of the German industry in China.

What do you demand most urgently from the Chinese government?

We want to establish a partnership of equals. A key issue for the BDI is therefore that China dismantles the current asymmetry in market access in both trade and investment. There are still many market access barriers in China that have no equivalent in Europe. That is not acceptable, especially now that Chinese investors are increasingly benefiting from the openness of our markets. It is therefore absolutely right that Germany is clearly communicating its interests, for example concerning the joint venture obligation. At present, German companies in many industries are obliged to enter into joint ventures with Chinese partners when they invest in China, and in many cases the state even assigns the partner. That would be unthinkable here. Another example is the way foreign companies are disadvantaged in public tenders, often due to a lack of transparency in administrative and review processes.

What are the main challenges facing German companies in China?

The competitive pressure from domestic competitors is growing. Many Chinese companies have stepped up their investments in research and development in the last few years and have become more efficient in response to the tougher economic climate. This makes a fair business environment for German companies more important than ever. The Chinese government should ensure that conditions for foreign companies already based in China do not deteriorate further. We have been following recent developments very closely and with some concern, for example the national security legislation and the abrupt announcement of an impending e-vehicle quota. Other problem areas include inadequate cyber security, China’s Overseas NGO Law that sharply increases the monitoring of foreign non-governmental organisations, and internet censorship.

Over the past two years, the number of Chinese investments and takeovers in Germany has been skyrocketing. How do you see these developments?

We welcome Chinese investments in Germany. But we would like to see the same open terms and conditions that we offer be applied to foreign companies investing in China. There are still considerable barriers to access in several sectors such as financial services, healthcare, insurance, logistics, media and telecommunications.

What are the framework conditions for Chinese companies looking to invest in Germany?

In Germany we have a very open investment climate for foreign investors, particularly compared to China. And we want to keep it that way. Our baseline principle now and in future is that we do not want Europe to isolate itself. And we want China to open up. Open markets are the foundation for the success of German industry. What we need is not more market protection at home but more freedom of goods, services and investment in China. Scepticism has been growing recently in Germany about Chinese takeovers. There is much talk in this context about a technology drain and even about tightening Germany’s foreign trade act.
Chinese companies are indeed very interested in German expertise. A few years ago, the focus was more on penetrating the market and buying up traditional and well-known brands. This has certainly changed. Concerns about a technology drain should be taken seriously, but the debate should be based on facts. If a serious Chinese investor makes a solid offer that complies with the provisions of foreign trade and competition law, then there is no reason to prohibit the takeover. Experience with Chinese investments in Germany so far has been very positive on the whole. The growing scepticism about Chinese investments is often nurtured by uncertainty. For example it is frequently unclear whether private investors or state investors are involved. Our Chinese partners should offer more transparency and openness here to counteract this scepticism.

Where do you see potential for cooperation in trade relations between Germany and China?

There is still great untapped potential for cooperation, particularly in areas such as digitalisation and Industrie 4.0, environmental technologies and also in the service sector – once it is opened up further as China announced a. We would be well advised to keep a close eye on developments and to learn from the country’s highly dynamic pace in some areas, for example e-commerce and non-cash payment systems. In Beijing, I can get through the whole day without cash. It is commonplace to pay everywhere with your smartphone, whether you’re at the local grocers or the public authorities. And of course you can order everything online. If I want to pay with my phone or even just with my card at a newsagent’s in Berlin or get in a taxi without cash I’m often told that’s not possible or get strange looks.