MERICS Press releases, China Flash header

 

"Behind the friendly rhetoric, there are areas of tension"

 

The Chinese President  Xi Jinping will visit Berlin on July 4th and 5th before traveling to Hamburg for the G20 Summit. The agenda for the state visit is dominated by G20 Summit issues, including cooperation in world trade and climate policy as well as economic development in Africa. At the same time, Xi wants to present a positive image of his country: together with Chancellor Merkel, he will inaugurate a new panda enclosure at the Berlin Zoo. 

Questions for Professor Sebastian Heilmann, Director of the Mercator Institute for China Studies (MERICS):

China and Germany have close diplomatic ties. President Xi Jinping's stopover in Berlin comes only a few weeks after a visit by Premier Li Keqiang. Are relations between the two countries better than ever?

Germany and China are looking for collaboration, particularly in the areas of trade and climate policy. This is a reaction to major changes in US foreign policy. Relations between Beijing and Berlin are not exactly harmonious, however: behind the official, friendly rhetoric, there are areas of tension.

What are these areas of tension?

One key problem is the discrimination against foreign companies when it comes to market access. For years now, there have been growing complaints about discriminatory measures on the part of Chinese authorities. Even large companies can often only do business in niche markets due to restrictions on public tenders in areas such as infrastructure or health care.  Many German automobile manufacturers, car industry suppliers and engineering companies have been successful outside the public procurement market. However, all companies are deeply concerned about unintended technology transfer and preferential treatment of Chinese competitors in growing markets like electric mobility, environmental technology or medical technology.

 

China is currently working on a comprehensive rating and credit system to determine and evaluate the trustworthiness of companies and citizens on the basis of big data. At the same time, the legislation on cyber security will be strengthened. What does this development mean for foreign companies?

This IT-based credit system, currently undergoing rapid development, will change the competitive environment for all companies in the Chinese market. The constant exchange of data between companies, state-authorized agencies and public authorities will call into question the protection of sensitive proprietary business data. It will be a lot harder to protect data and technologies if Chinese authorities, on the basis of the new cyber-security law, demand the storage of data on Chinese servers or require unrestricted access to company computers in the course of police investigations. Since many domestic Chinese regulations for data traffic and server use are vague, it is often unclear if or how a company can comply with the rules at all.

The fact that the Communist Party has recently increased the presence of party organizations in private companies has also been a cause for concern for foreign companies in China. In some cases, these party units have had a direct or indirect influence on personnel and business decisions. For foreign managers and investors, these developments increase the risk of direct political interference in their business activities in China.

Will these issues be on the agenda when President Xi meets Chancellor Merkel?

This trip is meant to be all about harmonious cooperation, which is why more contentious topics, like the controversial recognition of China as a market economy by the EU, will not be discussed publicly. Instead, Merkel and Xi will set the stage with soft, emotionally positive issues. These include the inauguration of a new enclosure for two pandas on loan to the Berlin Zoo by the Chinese government. This so-called panda diplomacy has a long tradition in China. For Beijing, the goal is to present itself as a generous, cooperative and friendly power, at home and abroad. It is also a distraction from politically controversial topics.

As a result of the change of course in US foreign policy, there are common interests which both China and Germany want to now pursue more vigorously. Where can China and Germany make progress, despite their differences?

There are common interests in global trade and climate policy as well as in the commitment to further develop multilateral rules for international cooperation. On many issues on the G20 Summit agenda, both countries are working together. Examples of new Chinese-German efforts for enhanced cooperation are policies on Africa: Chinese companies and investors have been active there for years, and Germany has a good reputation in development aid. Beijing and Berlin want to work together on specific Africa-related programs in order to stabilize African countries economically.
The new openness in German and Chinese relations since the change of government in the USA is noteworthy. And of course, Germany needs to take advantage of new opportunities for cooperation. At the same time, however, the two countries continue to have completely different understandings of basic political order, rule of law and civil society. The treatment of non-governmental organizations in China remains a source of friction. After the new NGO law came into effect earlier this year, German political foundations were registered and approved in China after months of tough negotiations. That said, it is still unclear in which concrete are-as these foundations will be able to work. In addition, other NGOs, such as church organizations and Greenpeace, are still waiting for official approval.

 

You are welcome to use this interview or parts of it if you identify the source. For questions or further information, please contact:

Claudia Wessling, Director of Communications

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