WEBVTT 1 00:00:01.120 --> 00:00:04.300 Partner, systemic rival and competitor. 2 00:00:04.309 --> 00:00:07.310 That is how the German government describes its official 3 00:00:07.310 --> 00:00:08.890 stance on China. 4 00:00:08.950 --> 00:00:11.540 But what does that actually mean in practice? 5 00:00:11.550 --> 00:00:14.340 To delve deeper into the complexities of the relationship and 6 00:00:14.350 --> 00:00:17.590 how Chancellor Olaf Scholtz's visit to the country could reshape 7 00:00:17.590 --> 00:00:19.820 economic ties, I'm joined now by Holger Görg, 8 00:00:19.829 --> 00:00:23.470 director of the International Trade and Investment Research Centre at 9 00:00:23.470 --> 00:00:26.250 the Keel Institute for the World Economy. 10 00:00:26.710 --> 00:00:29.790 Holga, Scholz has brought a big delegation of German business 11 00:00:29.790 --> 00:00:34.070 leaders with him to China, including the heads of Mercedes, BMW, Siemens, 12 00:00:34.150 --> 00:00:35.900 BASF and Buyer. 13 00:00:35.909 --> 00:00:38.820 What message are they collectively hoping to deliver 14 00:00:38.830 --> 00:00:40.610 to Chinese leader Xi Jinping? 15 00:00:43.430 --> 00:00:47.310 Well, I think in, so first of all I think he has quite a balancing 16 00:00:47.310 --> 00:00:50.750 act to do because he is trying to balance the. 17 00:00:52.520 --> 00:00:56.360 Say the business needs of business interests in China. 18 00:00:56.360 --> 00:01:00.720 So there's a lot of German firms in China and they are hoping 19 00:01:00.720 --> 00:01:05.310 to increase their market access, get better market access, have 20 00:01:05.319 --> 00:01:06.869 a level playing field and so on. 21 00:01:06.880 --> 00:01:12.440 So there's a lot of business interests in China that where we see 22 00:01:12.440 --> 00:01:16.440 China as a large and expanding market, an important market for 23 00:01:16.440 --> 00:01:18.950 a lot of German firms in particular and the kind industry but 24 00:01:18.959 --> 00:01:21.179 not not exclusively So. 25 00:01:21.319 --> 00:01:25.000 And the balancing act is there because of course we're now in a time 26 00:01:25.000 --> 00:01:28.920 where for the last 2-5 years people have realized 27 00:01:28.920 --> 00:01:29.860 that China. 28 00:01:30.310 --> 00:01:35.390 Is not just a market but perhaps also as the EU calls 29 00:01:35.390 --> 00:01:36.979 it, a systemic rival. 30 00:01:36.990 --> 00:01:42.750 So there are concerns, geopolitical concerns about the the increasing 31 00:01:43.110 --> 00:01:47.350 dependency on China, there are concerns about spying 32 00:01:47.470 --> 00:01:48.460 and so on. 33 00:01:48.470 --> 00:01:51.570 So it's it's a balancing act he has to take here. 34 00:01:51.590 --> 00:01:55.830 And of course as you already said the bringing 35 00:01:55.830 --> 00:02:01.070 a large delegation of German firms, very important German firms bringing 36 00:02:01.070 --> 00:02:04.790 their CEOs sent a clear signal that he is very interested 37 00:02:04.790 --> 00:02:08.380 in strengthening these economic ties and and having China. 38 00:02:08.750 --> 00:02:11.810 As an important market for German firms. 39 00:02:12.840 --> 00:02:16.220 And one company that is not part of the delegation, though, is Germany's 40 00:02:16.230 --> 00:02:18.380 largest carmaker, Volkswagen. 41 00:02:18.389 --> 00:02:22.470 This seems like a big omission given how strategically important China 42 00:02:22.470 --> 00:02:23.740 is for VW. 43 00:02:23.750 --> 00:02:26.090 Is there anything we can read into this? 44 00:02:30.060 --> 00:02:34.860 Well, there has been a lot of discussion recently about, 45 00:02:34.900 --> 00:02:41.380 in particular, Volkswagen's VW's new investments or existing 46 00:02:41.380 --> 00:02:42.880 investments in China. 47 00:02:44.400 --> 00:02:45.340 So. 48 00:02:47.000 --> 00:02:47.150 Yeah. 49 00:02:47.160 --> 00:02:47.590 So there's. 50 00:02:47.600 --> 00:02:49.870 So there is a concern, but but this also applies 51 00:02:49.880 --> 00:02:52.430 to a lot of the other companies that are there. 52 00:02:52.440 --> 00:02:58.120 So I'm not sure I would read too much into this omission into 53 00:02:58.120 --> 00:02:59.790 the fact that Volkswagen isn't there. 54 00:02:59.800 --> 00:03:01.940 There might be a lot of reasons for this. 55 00:03:02.550 --> 00:03:05.590 I think it's clear that other car makers are there and they will, 56 00:03:05.950 --> 00:03:10.630 I'd say, also be quite happy to 57 00:03:12.360 --> 00:03:15.760 follow up on the concerns of German firms in China. 58 00:03:16.600 --> 00:03:19.150 OK, I want to talk about some research that 59 00:03:19.160 --> 00:03:20.750 Keel Institute recently produced. 60 00:03:20.760 --> 00:03:25.480 Looking at the size of industrial spending in various OECD countries, 61 00:03:25.639 --> 00:03:29.440 China comes out top, spending close to 2% of its total 62 00:03:29.440 --> 00:03:32.700 economic output on supporting domestic businesses. 63 00:03:32.910 --> 00:03:36.270 Especially benefiting companies like electric carmaker BYD, 64 00:03:36.870 --> 00:03:38.420 now industrial spending. 65 00:03:38.430 --> 00:03:42.390 It includes things like access to cheap loans, tax incentives, 66 00:03:42.510 --> 00:03:43.900 as well as direct subsidies. 67 00:03:43.910 --> 00:03:48.550 But there is also another category you call China specific factors. 68 00:03:48.590 --> 00:03:50.130 What are they? 69 00:03:53.140 --> 00:03:57.380 So I think, I mean first of all it's important to to notice 70 00:03:57.380 --> 00:04:02.020 that yeah there that China is very does very heavily subsidized 71 00:04:02.020 --> 00:04:03.280 its industries. 72 00:04:04.800 --> 00:04:09.120 And that is a potential concern, and particularly for the EU and also for 73 00:04:09.120 --> 00:04:14.120 the US, And the question is, are these subsidies there to create 74 00:04:14.120 --> 00:04:17.320 an unfair advantage for the Chinese industries or not? 75 00:04:17.320 --> 00:04:22.200 And this is going to be a big discussion in the EU and 76 00:04:22.200 --> 00:04:23.130 in the US. 77 00:04:24.150 --> 00:04:28.430 And a lot of work has to go into this to make a case for whether or 78 00:04:28.430 --> 00:04:31.370 not it is an unfair practice. 79 00:04:32.070 --> 00:04:37.470 So yes, China, it's very, very difficult to get access to data 80 00:04:37.480 --> 00:04:41.990 to actually measure how important are subsidies in China. 81 00:04:42.270 --> 00:04:47.910 It's not particularly transparent to, put it in a diplomatic way. 82 00:04:48.430 --> 00:04:51.950 And I think issues that are particular for China 83 00:04:51.950 --> 00:04:53.380 are, for example. 84 00:04:53.390 --> 00:04:57.310 So there are I guess what one might call demand 85 00:04:57.310 --> 00:05:01.950 related subsidies, so subsidies to consumers to buy a particular, 86 00:05:02.870 --> 00:05:05.770 to buy particular homemade products. 87 00:05:06.270 --> 00:05:11.910 And I think what's also important is in these China specific issues 88 00:05:12.110 --> 00:05:14.380 that there are also say if we're talking about 89 00:05:14.390 --> 00:05:17.430 the the electric vehicle producer. 90 00:05:18.589 --> 00:05:23.070 So there are of course also subsidies along the supply chain particularly 91 00:05:23.070 --> 00:05:25.570 in China that play a role here so. 92 00:05:26.120 --> 00:05:29.400 For the say for the car producer, for the electric vehicle producer, 93 00:05:29.560 --> 00:05:33.800 it's important that also the battery production is subsidized in China 94 00:05:33.800 --> 00:05:39.960 and this gives this is an indirect if you like an indirect subsidy to 95 00:05:39.960 --> 00:05:43.000 the electric vehicle producer that we. 96 00:05:43.589 --> 00:05:46.300 Try to measure, but it's difficult to to exactly 97 00:05:46.310 --> 00:05:48.650 see what's going on in the data. 98 00:05:49.670 --> 00:05:52.870 The other thing that strikes me about this research is that the numbers 99 00:05:52.870 --> 00:05:54.260 relate to 2019. 100 00:05:54.270 --> 00:05:57.750 That is before the US Inflation Reduction Act and 101 00:05:57.750 --> 00:06:02.070 the EU's Green Deal Industrial Plan, both comprising massive state support 102 00:06:02.070 --> 00:06:03.060 for clean energy. 103 00:06:03.070 --> 00:06:06.310 How different would things look if the data were updated to include 104 00:06:06.310 --> 00:06:08.090 these two spending programmes? 105 00:06:10.517 --> 00:06:12.260 It would look a bit different. 106 00:06:12.270 --> 00:06:16.990 So here again, the point really is that it's 107 00:06:16.990 --> 00:06:21.350 very, very difficult to get this kind of data for any country but it's 108 00:06:21.350 --> 00:06:23.890 particularly difficult for China. 109 00:06:24.270 --> 00:06:30.150 So 2019 was the year where we could actually get a lot of measures 110 00:06:30.550 --> 00:06:33.710 that we that we then included in this study or that my co-authors 111 00:06:33.710 --> 00:06:37.870 or my that the authors of the study included in the in this study. 112 00:06:40.230 --> 00:06:41.010 And. 113 00:06:42.070 --> 00:06:47.470 Of course, China has also, since 2019 continued subsidizing 114 00:06:47.470 --> 00:06:52.150 its industries and you you rightly point out, so have 115 00:06:52.310 --> 00:06:54.410 the US and the EU. 116 00:06:54.470 --> 00:06:59.310 So the numbers would be a bit higher I guess now for for 117 00:06:59.310 --> 00:07:00.820 the EU and the US. 118 00:07:00.830 --> 00:07:04.270 But I think we would still see that a country that China in 119 00:07:04.270 --> 00:07:10.150 particular is very, very well, far ahead of of say 120 00:07:10.150 --> 00:07:11.850 the US and the EU. 121 00:07:13.110 --> 00:07:17.630 Which of course we should keep in mind may also be because they are 122 00:07:18.890 --> 00:07:21.980 You compared it at the beginning to OECD countries. 123 00:07:21.990 --> 00:07:25.910 China is not an OECD countries and in some sense it's it is still 124 00:07:25.910 --> 00:07:31.030 an emerging economy and emerging economies do also subsidise 125 00:07:31.030 --> 00:07:34.750 their industries and have different industrial policies than 126 00:07:34.910 --> 00:07:37.140 highly developed industrial countries in the OECD. 127 00:07:37.150 --> 00:07:39.940 So that's one aspect to be kept in mind. 128 00:07:39.950 --> 00:07:44.190 But nevertheless, even I'm sure even if we looked at data from today or 129 00:07:44.190 --> 00:07:47.710 2023, we would still see that Chinais far ahead. 130 00:07:48.440 --> 00:07:51.560 Of, say, countries like the US or regions like the EU in 131 00:07:51.560 --> 00:07:53.780 terms of subsidizing industries. 132 00:07:55.190 --> 00:07:58.790 Another aspect to this is that without Chinese subsidies, 133 00:07:58.790 --> 00:08:02.830 certain products that Germany needs for its green transformation would 134 00:08:02.830 --> 00:08:04.540 actually get more expensive. 135 00:08:04.550 --> 00:08:07.590 Is it in Germany's interest to demand a reduction in state 136 00:08:07.590 --> 00:08:08.970 support from Beijing? 137 00:08:11.470 --> 00:08:17.030 Now that's a very good question and a very important issue. 138 00:08:18.590 --> 00:08:23.670 It's not really so clear what what the German economy actually or what 139 00:08:23.670 --> 00:08:27.190 the German politicians actually want and certainly what German 140 00:08:27.190 --> 00:08:28.420 industry wants. 141 00:08:28.430 --> 00:08:33.420 So subsidizing on the one hand, the the main argument is, oh, China 142 00:08:33.510 --> 00:08:35.260 subsidises its industry. 143 00:08:35.270 --> 00:08:40.030 This could potentially lead to unfair advantage in that Chinese firms 144 00:08:40.080 --> 00:08:43.830 are subsidized, can produce at lower costs and can enter other markets. 145 00:08:44.110 --> 00:08:48.030 So that's the the main argument for this. 146 00:08:48.900 --> 00:08:53.860 But on the other hand, subsidizing, so China subsidizing its industries 147 00:08:54.020 --> 00:08:59.660 and for particular goods also creates an advantage, certainly for consumers 148 00:08:59.660 --> 00:09:03.410 here in Germany or in the EU or in the US or around the world. 149 00:09:03.740 --> 00:09:08.020 So these goods, solar panels, electric vehicles, become 150 00:09:08.020 --> 00:09:09.370 cheaper through these subsidies. 151 00:09:09.380 --> 00:09:13.340 And that's a big plus, a big advantage for 152 00:09:13.340 --> 00:09:15.349 consumers in the economies. 153 00:09:17.210 --> 00:09:18.620 So. 154 00:09:19.230 --> 00:09:24.870 This is 1 particular point and then of course even car makers 155 00:09:24.870 --> 00:09:28.300 if you talk to car makers here and if you if you look at the the recent 156 00:09:28.309 --> 00:09:29.130 reports. 157 00:09:30.600 --> 00:09:33.020 They are not so sure they really would like to see. 158 00:09:34.800 --> 00:09:40.160 EU or or so the EU in particular retaliating and and making 159 00:09:40.880 --> 00:09:44.140 electric vehicles from China for example, 160 00:09:44.840 --> 00:09:47.910 more costly through tariffs because they know 161 00:09:47.920 --> 00:09:50.660 that this could then lead to a trade war between. 162 00:09:50.870 --> 00:09:52.950 The EU and China. 163 00:09:52.960 --> 00:09:55.860 And this would have negative consequences for all of 164 00:09:55.870 --> 00:10:00.230 them, because remember, the Chinese market is a very 165 00:10:00.230 --> 00:10:05.470 important market still for German car makers in particular, 166 00:10:05.470 --> 00:10:08.070 but for a lot of German companies in general. 167 00:10:08.080 --> 00:10:13.270 So relations between these two countries are important or 168 00:10:13.270 --> 00:10:15.980 good relations between these two countries are important 169 00:10:15.990 --> 00:10:17.630 for German businesses 170 00:10:18.663 --> 00:10:21.100 It is an incredibly important relationship. 171 00:10:21.110 --> 00:10:23.980 And yet Germany, along with the rest of the EU has been talking 172 00:10:23.990 --> 00:10:26.719 about de risking its ties with China. 173 00:10:26.750 --> 00:10:29.750 But if we look at direct investment in China from Germany, 174 00:10:29.750 --> 00:10:32.750 it reached a record high last year, up more than 4% and, 175 00:10:32.750 --> 00:10:33.950 crucially, that rise 176 00:10:33.960 --> 00:10:37.350 marked an increase in the overall share of its foreign investment too, 177 00:10:37.510 --> 00:10:40.380 if de Risking isn't about reducing the size. 178 00:10:40.390 --> 00:10:42.300 Or the share of investment in China? 179 00:10:42.309 --> 00:10:43.839 What is it about? 180 00:10:47.429 --> 00:10:52.990 Yes, I also noticed that so, the FDI, so investment from 181 00:10:52.990 --> 00:10:57.990 German companies into China is now at a record high 13 billion 182 00:10:57.990 --> 00:11:03.790 if I have the number right in 2023 and about 10% of German investment 183 00:11:03.790 --> 00:11:05.010 went into China. 184 00:11:05.950 --> 00:11:09.390 So it's a huge, it's of huge importance for 185 00:11:09.390 --> 00:11:10.650 the German economy. 186 00:11:13.320 --> 00:11:14.859 What about de risking? 187 00:11:16.470 --> 00:11:16.660 Yeah. 188 00:11:16.670 --> 00:11:21.350 So this is a bit of a, I suppose, a balancing act, perhaps 189 00:11:21.350 --> 00:11:27.070 a conundrum in itself, because yes, politicians in particular at 190 00:11:27.070 --> 00:11:31.230 the EU level but also at the at the German level do talk about 191 00:11:31.230 --> 00:11:37.590 de risking and that it's important to reduce the dependence on China. 192 00:11:39.280 --> 00:11:42.030 Yet you see that a lot of particularly German companies 193 00:11:42.040 --> 00:11:44.300 are still expanding into that market. 194 00:11:46.190 --> 00:11:49.910 You don't see this for the US, the US for example, if you see their 195 00:11:49.910 --> 00:11:51.700 de risking strategy is very clear. 196 00:11:51.710 --> 00:11:58.470 They were perhaps never as as dependent on China as the EU is or 197 00:11:58.470 --> 00:12:02.990 has been in the last three years and they have also managed 198 00:12:02.990 --> 00:12:06.020 to not increase FDI. 199 00:12:06.030 --> 00:12:09.630 So their their dependence on China in the last three years, 200 00:12:10.230 --> 00:12:13.100 Germany is going a very different way and perhaps this indicates, 201 00:12:13.110 --> 00:12:16.710 well there is and perhaps it's a good thing that these business people 202 00:12:16.710 --> 00:12:19.870 are with Scholtz on a long flight, so they actually have time to talk. 203 00:12:20.309 --> 00:12:23.510 About their strategies and see do they actually fit 204 00:12:23.510 --> 00:12:24.970 together because, 205 00:12:26.230 --> 00:12:28.300 to an observer like me, they don't really. 206 00:12:28.309 --> 00:12:29.460 So there's de risking. 207 00:12:29.470 --> 00:12:33.309 De risking would mean you have to reduce your dependence on 208 00:12:33.309 --> 00:12:37.510 one particular market you there are lots of ways of doing this going 209 00:12:37.510 --> 00:12:43.030 into other markets or reduce or spending or selling 210 00:12:43.030 --> 00:12:45.900 more at home and also procuring more at home. 211 00:12:45.910 --> 00:12:49.110 So there are different ways of achieving de risking but de risking 212 00:12:49.110 --> 00:12:53.390 certainly would or certainly it's very difficult to reconcile 213 00:12:53.390 --> 00:12:56.470 de risking with increasing your 214 00:12:57.280 --> 00:13:00.920 investments, increasing your activities in a country from 215 00:13:00.920 --> 00:13:02.459 which you want to de risk. 216 00:13:03.630 --> 00:13:06.710 Would it be fair to say then, that Germany is not de risking 217 00:13:06.710 --> 00:13:08.290 its relationship with China? 218 00:13:12.710 --> 00:13:15.790 Well, I certainly based on the on the overall numbers, 219 00:13:16.190 --> 00:13:21.390 I find it very difficult to to see how we have a de risking 220 00:13:21.390 --> 00:13:25.870 at the moment with yeah, Germany still expanding. 221 00:13:25.870 --> 00:13:30.710 So a lot of German firms investing and also China is still 222 00:13:30.710 --> 00:13:33.300 the main trading partner for Germany as well. 223 00:13:33.309 --> 00:13:37.309 If you consider exports and imports together it's the largest in 2023 224 00:13:37.309 --> 00:13:40.309 it's been the largest trade partner for Germany. 225 00:13:41.650 --> 00:13:44.560 There is another interesting aside to this because while the big German 226 00:13:44.570 --> 00:13:48.490 companies are still very reliant on China, the smaller and the mid sized 227 00:13:48.490 --> 00:13:51.610 companies known as the middle stand, they actually have been reducing 228 00:13:51.610 --> 00:13:53.280 their dependence on Beijing. 229 00:13:53.290 --> 00:13:55.790 Why and how have they been doing that? 230 00:13:59.420 --> 00:14:00.010 That's right. 231 00:14:00.020 --> 00:14:05.780 So I think we see a difference in how the very large 232 00:14:05.780 --> 00:14:10.179 multinational companies behave like the car makers for example, 233 00:14:10.179 --> 00:14:14.860 but also others and then the Mittelstand or the the smaller 234 00:14:15.059 --> 00:14:22.293 firms perhaps family owned and being leaders and in particular sectors, 235 00:14:22.900 --> 00:14:25.210 so niche markets as we call them or hidden 236 00:14:25.220 --> 00:14:26.600 champions as we call them. 237 00:14:28.120 --> 00:14:28.660 And. 238 00:14:29.720 --> 00:14:32.190 Of course, these companies are much smaller and have 239 00:14:32.200 --> 00:14:33.670 very different strategies. 240 00:14:33.680 --> 00:14:39.120 And of course if you just think about the sheer size of a company, 241 00:14:39.120 --> 00:14:45.960 so Volkswagen or BMW of course are heavily invested in in China, 242 00:14:46.440 --> 00:14:47.830 but they're also large companies. 243 00:14:47.840 --> 00:14:53.560 So they also are operating on on other markets in the US for example. 244 00:14:53.560 --> 00:14:56.500 And these markets are also very important to them, so. 245 00:14:58.040 --> 00:15:01.260 Whereas for a small and medium sized firm if you 246 00:15:01.430 --> 00:15:06.910 specialized into a particular product, into a particular niche and 247 00:15:06.910 --> 00:15:11.230 into a particular country like like China, then of course you have 248 00:15:11.230 --> 00:15:16.270 to reduce your dependence perhaps much more quickly than if you're 249 00:15:16.270 --> 00:15:19.530 dependent on this, on this one particular market. 250 00:15:19.950 --> 00:15:23.390 Then you need to, you need to readjust your portfolio and 251 00:15:23.390 --> 00:15:24.860 I think that's what we're seeing. 252 00:15:24.870 --> 00:15:27.380 So large companies perhaps don't care too much about 253 00:15:27.390 --> 00:15:30.430 it because they also have the other markets that are important 254 00:15:30.430 --> 00:15:31.170 to them. 255 00:15:31.640 --> 00:15:34.760 SMEs, the Mittelstand, They're much more dependent 256 00:15:34.760 --> 00:15:36.060 on one market. 257 00:15:37.400 --> 00:15:42.320 And yeah, therefore, see a much greater need to actually 258 00:15:43.200 --> 00:15:45.420 diversify into other markets. 259 00:15:46.230 --> 00:15:48.380 And where are these Mittelstand companies going? 260 00:15:48.390 --> 00:15:50.650 Are they are they going to India, for example? 261 00:15:53.250 --> 00:15:56.770 So of course that really depends on what exactly they're doing, 262 00:15:57.050 --> 00:15:57.990 I think. 263 00:15:58.130 --> 00:16:04.730 So you see quite a bit of of new trade or new linkages with 264 00:16:05.610 --> 00:16:07.920 or increasing linkages with EU countries. 265 00:16:07.930 --> 00:16:12.010 So that's so they're going back to their home region 266 00:16:12.090 --> 00:16:13.080 if you will. 267 00:16:13.090 --> 00:16:16.650 But also, yes, India is an important and increasing market. 268 00:16:17.330 --> 00:16:17.800 So. 269 00:16:17.810 --> 00:16:20.850 So we see a lot more activity there. 270 00:16:20.850 --> 00:16:25.160 But then they're also other countries like Brazil in particular I think. 271 00:16:25.390 --> 00:16:28.990 It's a growing country, Philippines, Indonesia 272 00:16:29.510 --> 00:16:30.820 are growing markets. 273 00:16:30.830 --> 00:16:36.997 So you also see these these countries gaining Mittelstand 274 00:16:37.950 --> 00:16:40.130 of smaller companies going into these countries. 275 00:16:41.230 --> 00:16:44.990 And one trend we've seen in China is that domestic demand has remained 276 00:16:44.990 --> 00:16:46.380 stubbornly weak. 277 00:16:46.390 --> 00:16:49.950 How much of a concern is this for an export reliant economy like 278 00:16:49.950 --> 00:16:50.930 Germanys? 279 00:16:55.150 --> 00:16:58.670 Yes, it's it's of course, it's of course a concern. 280 00:17:01.320 --> 00:17:07.520 But I think you you again to relate this to what's going on. 281 00:17:07.520 --> 00:17:13.000 So obviously companies in particular, so the the large companies obviously 282 00:17:13.000 --> 00:17:17.440 still see China as a large and also growing market. 283 00:17:18.320 --> 00:17:21.109 Otherwise why would you have these new investments, why don't you have, 284 00:17:21.119 --> 00:17:24.320 why would you have these strong ties with 285 00:17:24.320 --> 00:17:26.160 the with China. 286 00:17:26.170 --> 00:17:32.160 So businesses obviously still think that China is also growing 287 00:17:32.170 --> 00:17:35.129 market which it is to some extent. 288 00:17:35.869 --> 00:17:36.639 And. 289 00:17:38.200 --> 00:17:38.740 Yeah, so. 290 00:17:40.070 --> 00:17:44.750 I think even though, yes, we, we do have concerns about 291 00:17:45.510 --> 00:17:50.670 perhaps slowing demand in China, slowing local demand in China. 292 00:17:52.410 --> 00:17:56.320 It seems that companies assume that this will only be temporary and 293 00:17:56.320 --> 00:17:59.220 that we will we will see the end of this fairly soon. 294 00:18:00.670 --> 00:18:03.910 You mentioned the differing relationship that China has with 295 00:18:03.920 --> 00:18:05.639 the US earlier on. 296 00:18:05.990 --> 00:18:08.460 We have an election coming up this year. 297 00:18:08.470 --> 00:18:12.190 Relations under Biden have already been very strange on issues ranging 298 00:18:12.190 --> 00:18:14.630 from ships to a potential ban of TikTok. 299 00:18:14.640 --> 00:18:18.100 Another Trump presidency could make ties even more unpredictable. 300 00:18:18.270 --> 00:18:21.710 How does Germany intend to position itself in the context of 301 00:18:21.710 --> 00:18:23.399 this tumultuous relationship? 302 00:18:26.670 --> 00:18:31.340 Yes, I think the US China relationship is fraught with 303 00:18:31.350 --> 00:18:35.630 difficulties and to put it mildly perhaps, and I mean interestingly, 304 00:18:35.640 --> 00:18:40.859 it hasn't really changed tremendously between Trump and Biden. 305 00:18:40.869 --> 00:18:44.910 So in tone of course it has, but in in terms of what's actually 306 00:18:44.920 --> 00:18:46.540 happening, it hasn't. 307 00:18:46.550 --> 00:18:48.780 So it hasn't really eased. 308 00:18:48.790 --> 00:18:52.750 And yes, Trump would certainly make it more unpredictable. 309 00:18:54.810 --> 00:19:00.250 But I in what way I whether it would really get even tougher is a question 310 00:19:00.250 --> 00:19:03.450 we'll perhaps see in in the future. 311 00:19:03.450 --> 00:19:06.359 But but I think the relationship hasn't really changed 312 00:19:06.369 --> 00:19:10.840 in the last 5-6 years or so, irrespective of who's 313 00:19:10.850 --> 00:19:11.960 president at the moment. 314 00:19:11.970 --> 00:19:14.650 And I wouldn't expect this to change dramatically either. 315 00:19:14.660 --> 00:19:18.080 So where does Germany position itself? 316 00:19:18.450 --> 00:19:22.359 I think that's a very interesting question and perhaps we'll know 317 00:19:22.369 --> 00:19:27.840 more after the meeting between Scholz and Chinese counterparts. 318 00:19:29.590 --> 00:19:33.990 So I think what's important is first of all that I think 319 00:19:33.990 --> 00:19:36.340 the question shouldn't be where does Germany position itself, 320 00:19:36.350 --> 00:19:38.220 but where does the EU position itself? 321 00:19:38.230 --> 00:19:43.830 I think the EU, So countries like Germany, France and perhaps 322 00:19:43.830 --> 00:19:46.740 also Britain, even though they're no longer part of the EU, have 323 00:19:46.750 --> 00:19:49.220 to realise that, well, they're really too small 324 00:19:49.230 --> 00:19:50.150 to do anything. 325 00:19:50.160 --> 00:19:54.950 And so if we as Europeans want to have a clout in in dealing with 326 00:19:54.950 --> 00:19:57.450 China, it has to be at the European level. 327 00:19:57.590 --> 00:20:01.230 We're also, of course, trade policy is set at the European level, 328 00:20:01.230 --> 00:20:02.970 not at the country levels. 329 00:20:02.980 --> 00:20:07.700 So I think to really be taken seriously, this has to be at the EU, 330 00:20:07.700 --> 00:20:11.180 and Scholz should make that very clear that he's a representative of 331 00:20:11.180 --> 00:20:14.900 the EU as well as, of course, representative of Germany. 332 00:20:16.100 --> 00:20:20.850 But yeah, I think the EU certainly in the last few years has tried 333 00:20:20.859 --> 00:20:24.000 to be somewhere in the middle between. 334 00:20:27.109 --> 00:20:29.180 Shared between the US and China. 335 00:20:29.190 --> 00:20:32.950 And perhaps, if you think of it in terms of the murder mysteries 336 00:20:32.950 --> 00:20:36.470 you have the you have the bad cop, which is the US, and the good cop, 337 00:20:36.470 --> 00:20:37.810 which is the EU. 338 00:20:38.220 --> 00:20:43.330 So trying to go the route of negotiating to the route of keeping 339 00:20:43.340 --> 00:20:47.020 communications open and not escalating it into 340 00:20:47.020 --> 00:20:48.629 a trade war and. 341 00:20:49.859 --> 00:20:51.770 I would expect, and perhaps also hope, 342 00:20:51.780 --> 00:20:55.140 that this is a way that the EU would also continue to do. 343 00:20:57.160 --> 00:21:02.100 Even particularly if the presidency changes in the US and also we'll have 344 00:21:02.109 --> 00:21:06.470 to see how European elections pan out and what the majorities are here. 345 00:21:06.710 --> 00:21:11.100 But I think the EU certainly at the moment is very is reluctant 346 00:21:11.109 --> 00:21:16.470 to go the the full way or the the full way towards escalating 347 00:21:16.470 --> 00:21:20.830 relationships and keeping communicating more. 348 00:21:21.619 --> 00:21:25.940 Trying to keep communications open, keep the exchange open, and see 349 00:21:26.619 --> 00:21:29.820 that there is a business relationship or an economic relationship between 350 00:21:29.820 --> 00:21:32.170 these two countries that should be fostered. 351 00:21:32.180 --> 00:21:35.780 We were speculating earlier that Scholz could have used 352 00:21:35.780 --> 00:21:38.290 his flight to discuss economic strategy with 353 00:21:38.300 --> 00:21:40.970 some of Germany's business leaders, but it strikes 354 00:21:40.980 --> 00:21:44.090 me that that conversation was probably cut short by 355 00:21:44.100 --> 00:21:47.119 the news of Iran's attack on Israel. 356 00:21:47.670 --> 00:21:50.609 China's relations with Russia are of course 357 00:21:50.619 --> 00:21:52.490 also a source of tension. 358 00:21:52.500 --> 00:21:55.740 To what extent is it possible for Scholz to separate 359 00:21:55.740 --> 00:21:58.000 business and politics on this trip? 360 00:22:02.140 --> 00:22:04.890 That's yeah, 361 00:22:04.900 --> 00:22:06.290 I think that remains to be seen. 362 00:22:06.300 --> 00:22:14.100 I think the Iranian attack on Israel didn't make things easier for him. 363 00:22:14.740 --> 00:22:18.859 I think also what we heard in the last few days. 364 00:22:18.859 --> 00:22:24.920 So that China is also of course increasing 365 00:22:26.060 --> 00:22:30.619 its assistance to to Russia doesn't make it easier, 366 00:22:30.619 --> 00:22:35.500 I think it's going to be very, very important to make 367 00:22:35.500 --> 00:22:40.260 that point that yeah, one has to try from his perspective, 368 00:22:40.260 --> 00:22:46.933 from Schultz's perspective to talk about separate issues and contain them 369 00:22:47.453 --> 00:22:52.500 So I think the relationship between China and Iran is one aspect in 370 00:22:52.540 --> 00:22:56.140 China, relationship between China and Russia is another aspect. 371 00:22:56.750 --> 00:22:59.450 And then the relationship between the EU and China 372 00:23:00.060 --> 00:23:03.060 and here in particular, the economic or business relationship 373 00:23:03.220 --> 00:23:04.639 is another aspect. 374 00:23:06.109 --> 00:23:09.950 But of course, disentangling these different issues is going 375 00:23:09.950 --> 00:23:13.950 to be very, very tricky and perhaps we will see that. 376 00:23:15.740 --> 00:23:18.370 Yeah, particularly with recent events in the last couple of days, 377 00:23:18.380 --> 00:23:24.900 the Iran's role or Iran's attack on on Israel, this might just dominate 378 00:23:24.900 --> 00:23:29.420 the the meetings, the political meetings he has. 379 00:23:31.510 --> 00:23:35.190 So a lot of compartmentalising, if I'm understanding you right. 380 00:23:35.430 --> 00:23:38.910 Haggai, director of the International Trade and Investment Research Centre 381 00:23:38.910 --> 00:23:39.740 at the Keelan Institute. 382 00:23:39.750 --> 00:23:41.490 Thank you so much for talking to us. 383 00:23:43.190 --> 00:23:44.060 Thank you very much. 384 00:23:44.070 --> 00:23:44.990 It's my pleasure.