German media: The cost of China’s economic model and the game of public opinion between China and Germany

(Deutsche Welle Chinese website) Germany's Handelsblatt published in Dusseldorf published a guest commentary by two German scholars who have been paying attention to China's economic issues under the title "China's economic achievements actually come at a high cost." Authors Max Zenglein and Schindowski believe that although China's achievements in key industries are admirable, Germany cannot copy them all and can only copy them selectively.

"Chinese manufacturing dominates many industrial fields, which puts Germany under tremendous pressure in its traditional core areas of strength such as automobile manufacturing, mechanical engineering, and chemical industry. This situation is increasingly shaking Germany's self-perception as an industrial power. For example, Volkswagen CEO Oliver Blume recently praised China's "Five-Year Plan" structural design as "extremely optimized." However, before this communist planned economic model is regarded as a guideline, it is necessary to conduct a more in-depth analysis, because there are also huge costs and risks hidden behind these successes."

The author points out that China's industrial policy for decades has been to accelerate the commercialization process of key technologies such as artificial intelligence and green new energy, thereby promoting cross-industry technological synergies: a large number of traditional industries have been able to use these commercialized new technologies to realize their own modernization, which not only produces economies of scale, prevents the relocation of traditional industries, but also paves the way for future industrial transformation.

"However, this success has also been accompanied by obvious negative effects, and in some cases has even brought huge economic costs. China's industrial policies are mainly implemented at the local level, which has intensified vicious competition among local governments, and local governments are competing to promote local enterprises to become industry leaders."

The article believes that this vicious competition at the local level has resulted in loss-making companies often receiving high subsidies and not going bankrupt or exiting the market. Instead, it intensifies the "involutionary competition" criticized by the central government in Beijing, and further transmits the pressure of involution to the export market, thus worsening economic and trade relations with other countries.

The author then changed his tone and pointed out that Germany can still learn from some practices in China's industrial policy and learn from China's lessons.

"For example, the European Union has been considering forcing foreign investors to transfer technology. In fact, China did not achieve much with this policy. Although Chinese automakers have cooperated with foreign brands for decades, they have never been able to build world-class internal combustion engines. In contrast, forced localization policies are much more effective. For example, when Tesla entered China in 2018, it was required to establish a supply chain in China. This move contributed to a highly competitive industrial ecosystem, and Chinese automakers later benefited greatly from it."

"Therefore, as long as appropriate measures are taken, Chinese companies investing and building factories in Germany can completely promote the modernization of German industry. Of course, China's willingness to cooperate in this area is not unlimited. Not long ago, Beijing introduced measures to restrict the external transfer of key technologies and production capabilities with strategic value."

"In the long term, Germany will have no choice but to redouble its own efforts to improve the business climate, mobilize investment, foster innovation and modernize its industrial base."

China.Table, a German online media that specializes in China issues, published an analysis article titled "Why China Wants to Speak Down on the German Economy". The author points out that Chinese state media, which have long admired the German economic model, have recently been talking down the German economy. This is probably to prove that Beijing's own economic development path is correct.

"'The rise in the east and the fall in the west' has long been a philosophy believed by Xi Jinping. The Chinese media's analysis of the German economy also serves this conclusion. This is particularly evident in the statement of 'big changes unseen in a century' mentioned in the official Qiushi magazine article. This statement refers to the current geopolitical turmoil, and from China's perspective, this is an opportunity for its own rise and to reach the pinnacle of the 'post-Western' world order."

"The EU is currently preparing to take a tougher stance on relations with China, and a trade conflict seems imminent. So far, China has not backed down: last week, China's Ministry of Commerce expressed its firm opposition to the EU's request to reduce electric vehicle exports to Europe. As early as July, the WeChat public account 'Yuyuan Tantian' associated with China Central Television claimed that China was ready to completely freeze relations with the EU if necessary. However, China's actual leverage is not as strong as it claims."

"In fact, China's economy is now facing stagnation, and China's population is aging. 'Germany' in some analytical articles can be replaced with 'China', and the conclusion is still valid. China's economy is facing huge challenges. Michael B. Froman, Chairman of the Council on Foreign Relations. Froman recently wrote in Foreign Affairs magazine that China’s production capacity has exceeded the total digestion capacity of the global market; but at the same time, the Chinese government is still hesitant to establish a sustainable economic system. Froman believes that in the long run, China’s huge trade surplus will collapse due to a lack of buyers.”

"Ho-fung, professor of political economics at Johns Hopkins University in the United States Hung once pointed out that the West’s view of China oscillates like a pendulum between admiration and disgust. At present, the situation seems to be moving more towards ‘admiration’, which coincides with Beijing’s ‘Decline of the West’ narrative that often appears even in Western media. It is important to bluntly point out the structural flaws of the German economy, but we Europeans must also look at this issue critically: How does the so-called ‘Decline of the West’ narrative play into Xi Jinping’s hands.”