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17.11.2022
ZVEI China Theses
China is the most important market for the German electrical and digital industry. Nevertheless, a clearly perceptible reconsideration in the assessment of China has been taking place for some time.
China has developed into a self-confident, politically ambitious and economically strong world power. China's success is based on a different system of rights and values than those of Western industrialised countries. Europe's model of success and prosperity, on the other hand, is based on free world trade and access to other markets. Through its entrepreneurial activities, industry contributes to improving the working and living conditions of citizens in many parts of the world as well as human rights and thus makes a significant contribution to prosperity in Germany and Europe.
The German electro and digital industry is facing up to competition with China on the premise of seizing opportunities - accepting challenges - managing risks.
ZVEI presents its positions on China, which focus on the proactive strengthening of Germany's own competitiveness, diversification as the key to a secure and reliable future, and a coordinated, self-confident and consistent attitude towards the country.
These must be part of a German China strategy, the elaboration of which the ZVEI strongly supports, but which requires unconditional coordination with the EU and international partners. A unified European policy towards China is needed in order to be able to represent our positions on an eye-level basis.
The Theses
Our Positions and Recommendations
China is the most important market for the German electrical and digital industry
- Our claim for dealing with China: Use Opportunities – Accept Challenges – Manage Risks!
- Preserving the entrepreneurial spirit: German and European companies have been involved in China for many years (some for decades). Most companies do this, as everywhere else in the world, at their own entrepreneurial risk. Such companies should not be restricted in their entrepreneurial freedom (not even in their freedom to take risks). It is important that free entrepreneurship and economic activity can continue to be exercised freely and not be impaired by state regulations.
Diversification of global supply and customer networks to reduce one-sided dependencies. Opportunities arise above all in the Asia-Pacific region.
- The European Raw Materials Policy (Critical Raw Materials) must be geared towards reducing unilateral dependencies on China. In the case of the so-called "rare earths", 86% of the quantities mined today come from China, and 98% are processed in China. Alternatives can be found in Canada, the USA, South America and Africa. So far, only a few countries besides China are willing to extract these raw materials and process them until they are ready for industrial use. In the European interest, raw material cooperation should be promoted within the framework of FTAs and other initiatives. This must be ensured through political framework conditions, for example also in the case of EU punitive tariffs and EU investment programmes such as the Global Gateway Initiative.
- Supply chains and networks of European industry can be diversified in the medium term, especially in the Asia-Pacific region. The electrical and digital industry is currently analysing the potential and infrastructure situation in South Korea, Singapore, Vietnam and Indonesia, among others. However, there is no "substitute" for a market as large as China.
Consistent industrial, trade and foreign policy "from the same cast" is the key to a competitive future
- Making Europe and Germany fit for the future: Offensive strengthening of own competitiveness - China policy must be part of a globally oriented EU foreign, industrial and trade policy. Europe and Germany must concentrate on strengthening their own international competitiveness. The focus on strategic sovereignty, the promotion and expansion of technologies and ecosystems and a strengthening of resilience are right and should be continued by the next EU Commission (from 2024/25). IPCEIs offer good opportunities to bundle private and public investments. In addition, we need competition law to take greater account of the global competitive situation. We need international standards and state support for the strategically important standardisation work.
- European trade policy should be geared towards creating and ensuring access to other markets. We need more targeted Free Trade Agreements (FTAs) and should swiftly conclude current ratification processes (e.g., CETA, Mercosur and India) and seek new cooperation and investment opportunities with the Global South. The EU-China Investment Agreement CAI has failed, but there must be no vacuum. A new attempt for an EU-China Trade Agreement should be made within the framework of a trade policy dialogue between the EU Commission and the new leadership in China.
No national solo efforts, develop a multi-pillar strategy at EU level. Germany and France must move forward together and develop proposals. EU strategy should be coordinated with the most important Western partners, first and foremost the USA.
- ZVEI supports the German Federal Government in developing a forward-looking China strategy. This must include the European perspective and closely involve important partners in Europe (especially France) and be discussed with the USA. German and European policymakers should think through various scenarios of what policies China can be expected to pursue in the coming years and what this means for Germany and the EU. We will have to live with conflicting goals in our dealings with China and find pragmatic solutions.
“Sing the same song" must be the guiding principle on all levels
- China's strategic goals and initiatives must be given greater attention and viewed from a global and geopolitical perspective. This applies to the Belt and Road Initiative with its many small projects throughout Europe - and to the Shanghai Cooperation Organization, in which numerous countries participate under China's leadership - an organisation without a common basis of values but with interest-driven joint activities that bind many states to China.
- Avoid competition with multilateral organisations, increase attractiveness and strengthen like- minded partners within multilateral organisations. Include China in these organisations to avoid migration to their own organisations, according to Chinese values, with the inclusion of countries that are (e.g. financially) dependent on China. This applies, for example, to the WTO, BRICS, etc., as well as to the international standardisation organisations and initiatives.
A self-confident electrical industry does not shy away from competition, demands a level playing field and strict adherence to reciprocity
- EU policy must be geared towards creating a level playing field, equal, free and fair market access and be solution oriented. Platforms for exchange with China are needed at all levels: political, economic and social. The ZVEI expressly supports the two current trade and climate policy dialogues between the EU Commission and China. Climate and environmental policy projects in China (with a view to China's goal of CO2 neutrality in 2060) are creating a great demand for European solutions. We must take advantage of these opportunities. Contacts and trips of business delegations to China should be resumed after the end of the Chinese COVID restrictions to counteract further polarisation.
- The EU single market is an asset. Access to the single market offers great economic opportunities to countries like China and its industries. German and European companies, as sought-after and reliable business partners, are in turn part of many international value-added networks. Especially in times of decoupling and economic uncertainties, the EU internal market is of great importance for growth and prosperity for Chinese companies (state and private). Therefore, the demand for a level playing field and strict reciprocity is essential.
- A self-confident electrical industry does not shy away from competition, demands a level playing field and strict adherence to reciprocity, not only in relation to China, but in general, i.e., also for business in the Global South. Turning away from a defencive strategy against China towards a strategy of strengthening our industry and economy/competitiveness.
Turning away from a defensive strategy against China towards a strategy of strengthening our industry and international competitiveness
- The German government and the EU Commission must assert their interests more strongly. To protect EU interests, a clear regulatory framework is needed at EU level, not a patchwork of different national approaches. The Anti-Coercion and International Procurement Instrument as well as the Foreign Subsidies Regulation are important EU tools that should be used when necessary. EU Investment Screening has already proven its worth in numerous cases by creating transparency for foreign investment in Europe and providing more clarity for member states on the impact. When assessing foreign investment in Europe, a distinction should be made between greenfield and brownfield - impact assessments should be undertaken for acquisitions and investments in critical infrastructure.
- The primacy of politics applies: the federal government and the EU Commission must assume greater responsibility in creating a regulatory framework that supports the market. Regulations must be designed in such a way that companies can also meet the requirements. The state can create transparency about political, economic and social developments and evaluate them.