In Systemic Competition with China
Opinion
This summer, the German cabinet will propose its new National Industry Strategy 2030.
Federal Minister of Economic Affairs Altmaier has placed great emphasis on the industrial strategy and elicited a great deal of controversy. While the proposed instruments and one-sided attention to industry and large firms has drawn some criticism, underlying justification for the industrial strategy has received less attention: How should Europe, with its market-based orientation, position itself against state capitalism in China, marked by a large proportion of state-owned enterprises and a high density of government control of the private economy? In trying to wrestle with this question, it makes sense to divide the discussion into three strands.
The question whether or not the use of Huawei technology in the 5G network or the purchase of shares of the network transmission operator 50Hertz by a Chinese firm represents a security risk for Germany cannot be assessed from a purely economic perspective alone. However, it is striking that in the public debate – and not only in the USA – economic and security policy arguments are constantly being interwoven. The German government has responded by adjusting the Foreign Trade Ordinance so that for shareholdings by foreign purchasers of 10 per cent or greater, it can verify the extent that such interests compromise national security. It would be good if economic experts were involved in making this risk assessment, since the issues involved also touch upon economic aspects. Is Chinese investment in an Autobahn section acceptable on security policy grounds? How about a harbour? Without an analysis of the value creation chain, these questions cannot be fully addressed.
China as a trailblazer in artificial intelligence and digital companies
In a remarkably brief time, Chinese companies have taken on a trailblazing role in digital companies and in the application of artificial intelligence. In addition, German firms have partially displaced their research and development departments in the area of machine learning to China, because there are so many highly trained computer professionals working there, and data access is better. By now, digital companies such as Tencent and the Alibaba Group have become among the world’s richest firms and are now forging ahead in Europe. Congratulations China! This economic dynamism, primarily attributable to the private economic activity of these digital companies and the good educational level of young Chinese professionals is equalled nowhere else. German policy-makers must respond to this change more rapidly than they have until now, in order to make sure that Germany is not asleep at the wheel during digital development. The agenda here includes broadband expansion, investment in training, including new professorships of artificial intelligence and improved advanced training possibilities and the expansion of the European internal market. Competition law must also continue to adapt. The ongoing discussion about the further development of the EU and German competition law is on the right track. Thus, the Commission “Competition Law 4.0”, is occupied, among others, with the question of how collaborations between companies in data exchange or in building platforms can be reconciled with greater legal certainty in the EU.
