ZEW President Achim Wambach on China

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China’s Communist Party Commemorates Its 100th Anniversary

On 1 July 2021, the Communist Party of the People’s Republic of China celebrates its 100th birthday. It governs a country whose importance for the global economy has grown enormously over the years. For Germany, the People’s Republic is a key export market. However, European companies are increasingly facing competition from Chinese companies.

The President of ZEW Mannheim, Professor Achim Wambach has been dealing with the economic importance of China for some time. He has devoted particular attention to questions of competition under ‘fair’ conditions, the difference between a social market economy and a steered economy, and multilateral cooperation between Europe, China and the USA to solve key global issues such as climate protection.

In the following, we have compiled a series of statements by Wambach on these topics from recent publications.

Importance of the Chinese economic area

“The People’s Republic of China is now the world’s largest economy in terms of purchasing power adjusted GDP. It is Germany’s largest and the EU’s second largest (after the US) trading partner. China’s transformation from the world’s extended workbench to a more innovation-oriented economy is illustrated not least by large Chinese technology companies such as Alibaba, Huawei or Tencent. Chinese companies are increasingly becoming serious competitors for European companies. This development is likely to intensify in the coming years and decades.” China: Zur Notwendigkeit eines neuen Wettbewerbsinstruments, in: Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik 100(9), 646-647 (2020) – translated from German

The economic rise of the People’s Republic of China to one of the largest economies in the world and the benefits this growth has brought to people are impressive. In just 20 years, China’s share of the world economy has risen from under 4% to over 18%. The Millennium Development Goal issued by the UN in 2000 to halve the number of people living on less than $1.25 a day by 2015 was already achieved in 2011 – thanks to China.
Im Wettbewerb mit China, in: Soziale Marktwirtschaft heute (WPCD), to be published in 2021 – translated from German

Human rights and democracy movement

“However, the People’s Republic is about to gamble away the sympathy and recognition it has gained worldwide for these achievements and the opening up of the country. Politically, through its harsh and inhuman actions against the Uyghurs and the democracy movement in Hong Kong, as well as its aggressive moves against Taiwan and in the China Sea. Economically, through ever tighter control and increased repression of foreign companies in China, while competition from Chinese companies, partly supported by their own government, is getting tougher in the world market.”
China: wirtschaftlicher Partner und Wettbewerber, in: Michael Frenzel, Matthias Machnig, Ines Zenke, Postcoronomics, Bonn, 331-335 (2021) (first published as a blog post in Dec. 2020 in the blog “politische Ökonomie bpö”) – translated from German

Competition with China

“Europe must start to take a level-headed approach to its cooperation with China. Protecting fair competition in the European Single Market is an essential part of this.”
China: wirtschaftlicher Partner und Wettbewerber, in: Michael Frenzel, Matthias Machnig, Ines Zenke, Postcoronomics, Bonn, 331-335 (2021) (first published as a blog post in Dec. 2020 in the blog “politische Ökonomie bpö”) – translated from German
 
“In addition to market access restrictions, it is particularly problematic for European companies to deal with competitors that receive active support from the Chinese government to achieve its industrial policy goals.”
Ein China-Schock lässt sich nicht beobachten, in: die WELT 09.02.2021 – translated from German
 
“The social market economy is based on competition between companies, undistorted by state intervention in individual markets. In economic relations with China, this economic system meets one in which competition is steered. European companies, which operate largely freely and without state support according to the rules of the European internal market, compete with Chinese companies, which are actively influenced by their government. This support can lead to a competitive advantage for these companies, and in the medium term to a crowding out of European companies in the respective markets.”
Ordnungspolitik 2.0: Weniger Wettbewerb, mehr Souveränität?, in: Der europäische Weg in Zeiten des Umbruchs (BDI), to be published in 2021 – translated from German

Investment agreement between the EU and China

“In its economic relations with China, the EU thus has its own unique interests, and must pursue them accordingly. However, the EU–China Comprehensive Agreement on Investment must be viewed as just one element of a much broader multilateral relationship that encompasses the world’s three largest economies (the US, China, and the EU). The issues in need of attention – from environmental protection and human rights to labour standards, fair trade, and security issues – are numerous. Biden’s election as US president would appear to offer a special opportunity for stronger joint action, given his avowed commitment to multilateralism.”
Ein China-Schock lässt sich nicht beobachten, in: die WELT 09.02.2021 – translated from German

“From an economic perspective, it is therefore to be welcomed that a basic agreement for an EU–China investment agreement was reached last year. Such an agreement would help to put the economic conditions of European companies in China on a more solid footing. It provides for easier market access for European companies in certain sectors of the Chinese market, such as the financial and health sectors. However, due to the political tensions between China and the EU, it is unlikely that this agreement will be ratified in the near future.”
Im Wettbewerb mit China, in: Soziale Marktwirtschaft heute (WPCD), to be published in 2021 – translated from German

Security issues in infrastructure projects

“When it comes to China, security issues are often raised. This is the case, for example, when Chinese companies invest in infrastructure in Europe, as seen in the Chinese state-owned company State Grid Corporation of China (SGCC), which plans to acquire a stake in the transmission system operator 50Hertz, or in Huawei’s involvement in the expansion of the 5G network in Germany. To better meet Europe’s legitimate interest in protecting security and order, an EU framework regulation has been created and investment controls in Germany have been tightened. In addition, sector-specific regulations, such as in the telecommunications sector, can set specific criteria for investments in critical infrastructure.”
Im Wettbewerb mit China, in: Soziale Marktwirtschaft heute (WPCD), to be published in 2021 – translated from German