China to Europe

Bumps on the New Silk Road

  • Why it matters

    Why it matters

    If a trade war breaks out between China and the E.U., then both economies will suffer.

  • Facts

    Facts

    • China ranks fifth as an investor in Germany.
    • For the first time in 2016, China became Germany’s most important trade partner, with over 5,200 German companies active there.
    • In 2014, Chinese investments in Germany totaled €1.6 billion ($1.75 billion). In 2016 it was €11.8 billion ($12.9 billion).
    •  
  • Audio

    Audio

  • Pdf
China silk road image dpa Picture-Alliance-90519535-HighRes Kopie
Europe versus China: The course of free trade never did run smooth. Source: DPA

This weekend everybody expected Germany’s Economics Minister Brigitte Zypries to praise the “One Belt, One Road” initiative to create a new silk road trade route at a forum in Beijing.

Instead she made a plea for trade. “Protectionism must be fought,” she said at the event attended by 30 national leaders invited by President Xi Jinping, “erecting new trade barriers is dangerous and endangers global growth.”

Her heartfelt comments came after EU nations refused to sign a joint statement about trade supporting the new silk road link. They refused because China had not accepted any of Europe’s calls for free trade and equal conditions. On Monday, when the forum ends, leaders are still expected to publish a communique supporting the huge infrastructure project which sees billions invested into building roads, harbors and railway lines to link Asia, Europe and Africa.

Ms. Zypries’ plea is part of a broader concern in Europe about equality of conditions and access in China. German government officials say conditions are unequal and unfair, a complaint echoed by companies who complain they have to do business by different rules than their Chinese counterparts.

China is now Germany’s most important trade partner and in 2016, there were 5,200 German companies active there. China is busy buying up German companies, from robotics expert Kuka to light maker Osram and waste company EEW. In total, Chinese companies took over 68 Germany companies last year, making Germany the preferred destination for Chinese investors in Europe.

But Berlin fears the Chinese plan to buy companies that make key technologies will weaken Germany’s international competitiveness. Germany now wants to reshape laws so the government can intervene if extremely important firms might be sold, if the purchasing company receives government money back home. Current laws allow the government to step in only if the German company being purchased is vital to national security. A report on this issue is due this spring.

“It’s difficult to imagine the Commission saying to a company: You’re not allowed to sell your company because you’re successful.”

Jyrki Katainen, European Commission Vice President

These concerns are shared throughout Europe but many European countries depend on Chinese investments and the EU is shying away from direct conflict with China. The European Commission is holding back on an initiative to give member states more rights to intervene in takeovers. Indeed sources say Brussels has not yet decided whether even to prepare such an initiative.

The European Commission is aware of the problem that Chinese companies often purchase European company secrets using state funds, but it is hard to prove. “It’s difficult to imagine the Commission saying to a company: You’re not allowed to sell your company because you’re successful,” said Commission Vice President Jyrki Katainen on Wednesday.

European companies also worry that Europe could be accused of protectionism itself. “We should never question our economic openness – especially not when we’re calling for that from others,” warned Eric Schweitzer, chief of Germany’s chamber of commerce and industry. “Putting up barriers would be the wrong way to go.”

There are no easy answers. Now some are hoping that new French president, Emmanuel Macron, will call for more rights for governments to intervene in takeovers in strategic sectors.

 

Handelsblatt’s Till Hoppe is a Brussels correspondent, Stephan Scheuer covers China for Handelsblatt. To contact the authors: hoppe@handelsblatt.com, scheuer@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!