Sheng Songcheng, professor at China Europe International Business School and former director of the Department of Survey and Statistics of the People's Bank of China. Author's photo
Chen Xi, a researcher at the China Europe Lujiazui (600663) Institute of International Finance. Author's photo
On Nov. 4, 2022, at the invitation of Chinese Premier Li Keqiang, German Chancellor Sebastian Scholz will pay an official visit to China. This time, Scholz will lead a business delegation to visit China together, including the president of Volkswagen, the president of Siemens, the CEO of Merck KGaA, the CEO of Deutsche Bank, the chairman of the executive board of BASF Europe, and the CEO and co-founder of BioNTech, a German pharmaceutical company.
Given that Scholz is the first G7 leader to visit China since the outbreak of the Xinguang epidemic, his arrival along with the German business delegation is of great symbolic and substantive significance for both China and Germany, as well as for China-EU relations.
In the current global economic growth is facing greater downward pressure in the background, although the major economies are also adjusting their own economic development strategy, but this Scholz's visit heralds Germany's conviction that the European Union needs to maintain cooperation with China in the future in a number of aspects, not only including China and Germany in the traditional areas of cooperation in trade and investment, but also including the transition to a green economy, the fight against climate change international cooperation, supply chain The visit signaled Germany's conviction that the EU needs to maintain cooperation with China in many areas in the future, not only in traditional areas such as trade and investment, but also in emerging areas such as green economy transformation, international cooperation on climate change and supply chain diversification.
China and Germany have strong complementary economic advantages China has been Germany's most important trading partner for six consecutive years
October 11, 2022, the IMF released its World Economic Outlook, which predicted that the global economic growth rate will slow down from 3.2% in 2022 to 2.7% in 2023. The outlook for European countries caught in the vortex of the Russia-Ukraine conflict is even bleaker, mainly in the form of sharply slower economic growth and high inflation. Among them, the developed and emerging European economies GDP growth rate will fall from 3.2% and 1.2% in 2022 to 0.6% and 0.5% in 2023, 2022 inflation is expected to remain at 8.3% and 30.6% of the historical high. Also according to the latest statistics released by the German Federal Statistical Office on October 28, thanks to the resilience of private consumption, Germany's economy totaled 966.2 billion euros in the third quarter, the growth rate unexpectedly increased from 0.1% in the second quarter to 0.3% in the third quarter. However, in view of Germany's October inflation rate hit a new high since 1951 (10.4%), especially the current high energy costs have not been fully passed on to consumers, the European Central Bank is likely to continue to implement tight monetary policy, which will undoubtedly exacerbate the recession in the eurozone, including Germany. Therefore, the IMF in this forecast report will Germany's 2022 and 2023 economic growth is expected to be cut to 1.5% and -0.3%.
In recent years, China and Germany have enjoyed fruitful economic and trade cooperation. Due to the strong complementary economic advantages of China and Germany, as China continues to expand market opening and promote its own manufacturing transformation and upgrading, Germany has actively seized the opportunity to plow into the Chinese market with the advantage of global advanced manufacturing. By the end of 2021, China has been Germany's most important trading partner for six consecutive years. Eurostat data show that Sino-German bilateral trade totaled 245.3 billion euros in 2021, accounting for 10 percent of Germany's total trade and about 35 percent of China's overall trade with the EU.
The cooperation between the two countries in the field of economy and trade is stable in 2022, and German investment in China continues to climb
Since the outbreak of the Russian-Ukrainian conflict at the beginning of 2022, under the superposition of the global epidemic and the energy crisis, the new German coalition government, although there are some differences in economic policy towards China, the cooperation between China and Germany in the field of economy and trade remains stable, fully reflecting the great potential of Sino-German cooperation This fully reflects the huge potential and strong resilience of China-Germany cooperation. On the one hand, statistics from China's General Administration of Customs (GAC) show that the total bilateral trade between China and Germany increased slightly by 0.9% year-on-year from January to September 2022 to about EUR 162.9 billion; during this period, China's imports from Germany declined by 6.1% to EUR 79.5 billion, while its exports increased by 8.6% to EUR 83.4 billion. On the other hand, the scale of investment by German companies in China in 2022 continues to grow. According to the German Institute for Economic Research (GermanInstituteforEconomicResearch, DIW) study, German direct investment in China reached a record high of 10 billion euros in January-June 2022, far exceeding the peak of 6.2 billion euros in the same period in the last 22 years. Further data analysis by Deutsche Bundesbank shows that at least 50 percent of German companies' investments in the first half of 2022 were reinvestments in Chinese subsidiaries of German firms.
German investment in China has continued to heat up since 2022, opening up a number of investment projects, the most high-profile of which include BMW's multi-billion euro investment in a plant in Shenyang in early 2022, the company's largest-ever investment in the Chinese market; Audi's spending of about 2.6 billion euros to build its first new factory to produce all-electric cars in China; and the investment of Germany's BASF Group in September ( BASF invested in Zhanjiang in September, the integration base project full construction and the first set of units put into production, this is a German company in China has one of the largest single foreign investment projects, and the group plans to invest a total of up to 10 billion euros by 2030; October Germany Volkswagen announced a 2.4 billion euros investment, and China's intelligent computing platform provider Horizon *** with the establishment of a focus on the field of automated driving technology development company, the creation of a new automated driving technology development company. In October, Volkswagen announced an investment of 2.4 billion euros and Horizon***, a Chinese intelligent computing platform provider, to establish a technology development company focusing on the field of automated driving, which is the largest single investment in the 40 years since Volkswagen entered China. The landing and active promotion of these large-scale investment projects fully demonstrates the willingness and confidence of German enterprises to invest in China. However, it is worth noting that, compared with the scale of China-Germany trade, the scale of German investment in China is relatively low, and the investment projects are basically concentrated in large multinational German enterprises, with very few investment activities by small German enterprises. According to a research report released by the Rongding Group in September, the total investment in China by German chemical giant BASF and three major German car companies -- BMW, Volkswagen and Mercedes-Benz -- accounted for as much as 34 percent of Europe's total direct investment in China over the past four years alone.
China-Germany economic and trade cooperation can be deepened in many areas, especially in the field of green economy transformation
With the impact of the global epidemic not yet fully receded, and European countries struggling to fight the energy crisis and high inflation, the visit of the German chancellor and a high-level delegation from the German business community to China has released a good signal for the future of China-Germany and China-Europe economic and trade cooperation. As the world's second and fourth largest economies, China and Germany share a wide range of *** common interests, vast market opportunities and the responsibilities of great powers. Looking ahead, China-Germany economic and trade cooperation can continue to go deeper and deeper in a number of areas, and it is especially worth our attention in the field of green economy transformation, where the EU is currently facing a lot of difficulties.
At the end of 2019, the new European Commission introduced the EU Green New Deal (EuropeanGreenDeal) at the beginning of its tenure, building the most important and complete green policy framework and growth strategy of the EU so far, committing to reduce greenhouse gas emissions by 55% in 2030 from 1990 levels, and that by 2050 Europe will be the the first continent to achieve carbon neutrality. Germany, in turn, has correspondingly introduced a higher national climate target of reducing GHG emissions by 65% from 1990 levels by 2030 and achieving carbon neutrality by 2045. Compared to the harmonized targets set by the EU, Germany has moved up its timetable for completing carbon neutrality by five years. The main purpose of this move is to place more emission reduction tasks in the present rather than postponing them to the next generation. While Germany has a better foundation for advancing its green transition development, the outbreak of the Russian-Ukrainian conflict has led to a sharp deterioration in Germany's relations with Russia, forcing it to revisit its green transition strategy, especially in the energy sector.
As EU countries accelerate their search for alternative energy transition programs, future cooperation between Germany and China in this area is expected to achieve breakthrough progress due to China's increasingly important role in renewable energy technologies and supply chains. First, in the solar (000591) sector, most of the world's manufacturing chain is concentrated in China. In the world's top ten polysilicon producers, seven from China. China's silicon ingot and wafer production more than 97% of the world's total production. Currently, most German solar equipment companies assemble templates imported from China. Secondly, in terms of battery and storage technology, China can also provide raw materials such as cobalt, nickel and lithium needed for batteries. According to data from Rongding Group, China's smelting capacity for lithium and cobalt now accounts for more than 60% of global capacity, while cathode, anode, separator and electrolyte production also account for more than 60% of global output, and the global share of battery cell production is as high as nearly 80%. Once again, in the wind energy sector, China can provide Germany with key raw materials, such as neodymium, which is needed for the production of wind turbines. In addition, China also dominates the global market in the manufacture and assembly of wind turbines, providing a solid basis for further cooperation between Germany and China.
At the same time, as Germany expects to vigorously develop renewable energy, foreign investors have become more likely to receive investment subsidies and participate in investment projects in Germany. 7 July, the German Bundestag passed the "Easter package" (Osterpakkel), which is aimed at significantly accelerating the transformation of Germany's energy infrastructure to 100 percent renewable energy. "(Osterpaket) energy plan. According to the plan, by 2030 Germany's renewable energy accounted for the proportion of total energy will reach 80%. To this end, Germany has set up a clear power development path, that is, onshore wind energy should reach an annual expansion of 10 gigawatts, solar power generation up to 22 gigawatts per year. In terms of investment subsidies, the German government introduced a subsidy program "heat network 4.0" (W?rmenetze4.0). The program is mainly aimed at investment subsidies for energy-efficient buildings, and the important funding condition is to meet the building with energy efficiency and renewable energy integration. In addition to investment subsidies, the German government also wants to promote the improvement of investment conditions. For example, Germany plans to accelerate the replacement of old wind turbines by simplifying the approval process. As Germany's demand for wind turbines continues to grow, this fits in with China's strengths in wind turbine manufacturing and assembly, as mentioned above, as well as its plans to aggressively position itself in the European market.
The year 2022 will mark the 50th anniversary of the establishment of diplomatic relations between China and Germany, and the pragmatic cooperation between China and Germany in the field of trade and economic cooperation over the past 50 years is a result of the development of globalization and the operation of the market, which is not only beneficial to the enterprises and people of the two countries, but also lays a solid foundation for the healthy development of the relationship between the two countries. Combating climate change and promoting the green and low-carbon transformation of the economy are priority areas to which the two governments attach great importance and in which they will deepen their cooperation. China and Germany will continue to take advantage of their past strengths, demonstrate their commitment as great powers, and continue to add new momentum to the sustainable development of the global economy and society through openness.