The German economics minister's attempts to ensure equal conditions of competition between China and Germany are right but will not succeed, says DW's Frank Sieren.
The German economics minister was thoughtful and rather quiet on Tuesday in Beijing. He had just found out what it means to play "tit for tat" with an 800-pound heavy gorilla. At first, his Chinese interlocutors were shocked that Germany thinks it can behave like the US. Then they made it clear to Gabriel that he was on the way to harming Sino-German relations for good. Gabriel would prefer not to, so his tone later on that day at a reception at the German embassy in Beijing was conciliatory, even full of understanding.
He said that he understood that China does not want to be the factory of the world forever and that Chinese companies are already providing competition to German companies. He said that he understood that China cannot open up its markets from one day to the next because Beijing has to ensure that there will be no social upheavals. Finally, as economics minister he made it clear in relation to Chinese companies in Germany that he is not only a minister for the German economy but a minister for the economy in Germany. Nonetheless, he said that problems had to be talked about in the open.
Gabriel's demands are justified
The fact that there are problems is not denied by Beijing. It is more difficult for German companies to access the Chinese market than it is for their Chinese counterparts to access Germany's market. Gabriel is right in believing that this has to change. Therefore, the European Union should give clearer indications about when European companies can sell, to whom and in what conditions. "We need a new industrial policy," said Gabriel. But he knows from party politics that people do not always get what they want. Being right does not always mean being vindicated. It's not very different when it comes to China.
Gabriel is going through a tough time at the moment. The election campaign has begun. He is vice chancellor and economics minister and as head of the SPD he has to bring his party into position. He has to differentiate himself from Chancellor Angela Merkel. He has to feed those on the left of his party whether he runs for chancellor or not. He also has to be seen as a man with integrity by the electorate. In such a situation, it must be particularly galling that the CIA was making him jump through hoops ahead of his trip to China. A Chinese investment fund wanted to take over the German chip equipment maker Aixtron but Washington does not want China and Germany to join hands in this area and put up strong competition to US companies.
Therefore, it was not that surprising that it seems to have just clicked with the CIA that the systems can be used for military purposes, even though since its founding in 1983 Aixtron has sold over 3,000 of them for the semi-conductor industry all over the world, including to South Korea, Taiwan and China. Without anyone in the West ever having complained in the past. But this argument did not help Gabriel. He was forced to withdraw the approval that he had given for the takeover in September.
But out of this emergency situation it seems that he has done something virtuous. So as not to appear like a lackey of the US he circulated plans in the press to push for more EU regulation of foreign investment to prevent foreign takeovers of certain technology companies unless the same rights were given to EU companies. He particularly made it clear that this should be the case if a state was behind a deal, tactfully not mentioning China. However, the fact that his plans will not be easy to implement became abundantly clear when he arrived in Beijing. It seems from his circle that Gabriel's personal views on state involvement are different. Qatar has shares in Volkswagen but this apparently is not so bad.
No unified EU position
It is also not surprising that reactions in Brussels were mixed. EU commissioner for the digital economy Günter Oettinger even "liked" it. But he will not be dealing with this matter in future since he is going over to budget and human resources. The Commission's message was that nothing in this direction was currently in the pipeline. Of course, nobody wants to make too much effort considering there was no united position even in the question of China's role in the South China Sea and there is no united position on China's status as a market economy.
Some East European EU members seem to think that Beijing is more useful to them than Brussels. Gabriel's understanding of legal matters seems too limited for a one-man attempt. In other cases, affected companies have sued and mostly won. It does not look as if the law will be changed, which does not make it easier for him.
China is an important country for the German economy. China's economy is worth some 700 billion euros a year and last year foreign investment amounted to 132 billion euros. VW makes most of its profits from the Chinese market even if it cannot be a majority shareholder in a joint venture. There is pressure from Germany therefore.
Often the best takeover bids are from China
Unfortunately, the companies in Germany that are being sold to China are not necessarily those that can pick their buyers. Besides the fact that private companies often like to decide to whom they are selling or not, takeovers do not usually involve companies that can get ahead on their own. They cannot find the offer made by the Chinese elsewhere. Usually there is no other potential buyer. Every Social Democrat tools operator knows that a company needs orders. These often come from China which alone contributes a third to the world economy. If a Chinese company takes over then the orders become a piece of cake.
This creates and secures German jobs. Apart from the automotive industry supplier SaarGummi there is no known case in which a takeover by a Chinese company worked out against the interests of the workers.
Therefore, it looks as if after Gabriel's trip everything will remain the way it is. Unfortunately, there will not be the same competitive conditions for German companies in China apart from a few cosmetic improvements in certain isolated cases. It is more likely that German companies will have even more difficulties on the Chinese market. However, China will remain lucrative for German companies for some time to come. The world can be a very unjust, contradictory place. This is true for China as well as for the SPD. Gabriel knows this. That's why he moved on quickly and stopped provoking the gorilla.
DW's Frank Sieren has lived in Beijing for over 20 years.