As of: January 29, 2024, 8:23 a.m
By: Sven Hauberg
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Electric vehicles destined for export await transport at the port of Yantai in northeast China.
© AFP
The EU is heading towards confrontation with China.
She accuses Beijing of flooding the European market with subsidized cheap cars.
The start of a trade war?
China's electric car tsunami seems pretty harmless on this cloudy January morning.
Only three customers found their way into the Munich branch of Lynk & Co.
But instead of being interested in the hybrid car that the Chinese manufacturer wants to sell here for 46,000 euros, they sip cappuccinos and stare into their notebooks.
The shop right next to the Viktualienmarkt doesn't look like a branch of a car dealer anyway.
Only a single vehicle is on display, hidden in the back corner.
Fine luggage and yoga books are stacked in the displays at the front, and a barista offers coffee and appetizers.
A few steps further, at the competition from Polestar, there is no emotional hipster atmosphere, but the rush for the three vehicles on display is limited here too.
A young couple is snogging around in a fully electric Polestar 3 (available for 105,700 euros), while a bored saleswoman lounges in the corner.
And that’s what Europe should be afraid of?
In any case, Ursula von der Leyen is alarmed.
In September, the EU Commission President declared that world markets were “flooded with cheaper Chinese electric cars”.
She announced an investigation in front of the EU Parliament because: “The price of these cars is artificially depressed by huge government subsidies.
This distorts our market.”
Of course, von der Leyen is likely to not only have luxury manufacturers like Polestar in mind, but above all car manufacturers like BYD: In the last quarter, the company from Shenzhen in southern China sold more electric vehicles worldwide for the first time than the previous top dog Tesla.
In its Chinese homeland, BYD has several models on offer for a price equivalent to just around 10,000 euros.
A manufacturer like Volkswagen cannot keep up with such cheap offers.
The truth is that China sometimes has to be used as a scapegoat for the mistakes of European suppliers who have relied on the combustion engine for too long.
“China needs the European market, also for its electric cars”
Wan-Hsin Liu from the Kiel Institute for the World Economy believes that the government in Beijing is taking von der Leyen's threatened investigation "very seriously."
“China needs the European market, also for its electric cars,” says the economist.
“In addition, given the rising geopolitical tensions, China may ask itself whether other Chinese products, companies or investments are being targeted after electric cars and how all of this could affect China’s access to the European market.”
The Chinese solar industry, in which huge overcapacity has built up, is increasingly causing headaches for Europeans.
“China’s production capacities are sufficient to supply the entire world with solar panels 2.5 times,” the former President of the EU Chamber of Commerce in Beijing, Jörg Wuttke, recently calculated in the
Handelsblatt
.
Economist Liu also sees “very great potential for disputes” here.
The problem: According to Federal Economics Minister Robert Habeck, 90 percent of solar systems come from China, while only a small proportion come from the EU.
Massive subsidies from the Chinese government are, among other things, responsible for the extreme imbalance.
While some of the local industry is now demanding financial help from Brussels, others recall that European tariffs on solar modules from China killed the domestic industry around ten years ago instead of helping it.
At that time, demand had fallen due to increased prices.
In any case, China denies that it subsidizes individual sectors too much.
The fact that goods
made in China
are so cheap is simply due to their own efficiency.
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“Conflicts between China and the EU could worsen significantly in the coming years”
Either way: the problem is on the table.
Together with other contentious issues - such as the EU's planned supply chain law, which wants to oblige large companies to comply with environmental and human rights standards along their entire value chain and is particularly aimed at the Chinese problem region of Xinjiang - a lot of frustration has built up in Brussels and Beijing.
Added to this is the Europeans' gigantic trade deficit, which EU Council President Charles Michel recently estimated at around 400 billion euros.
At the beginning of January, according to European observers, China took precautionary retaliation for the EU's announced investigation into subsidized electric cars by initiating anti-dumping proceedings against French brandy.
China has also already restricted the export of rare raw materials.
Kiel expert Wan-Hsin Liu does not want to believe in a trade war like the one that has been raging between the USA and China since Donald Trump's presidency.
“However, tensions and conflicts between China and the EU may worsen significantly in the coming years,” she says.
Liu also points to the Europeans' de-risking strategy, i.e. the attempt to become more independent of China in key areas.
On Wednesday, EU Trade Commissioner Valdis Dombrovskis presented a corresponding package of measures, which, among other things, provides for stricter scrutiny of investments from abroad in the EU.
We should also take a closer look in the future when states like China want to take over companies in the EU.
In an initial reaction, China's trade mission to the EU called for its own companies to have "the same fair industrial opportunities, the same market access and the same business environment" as those enjoyed by European companies.
Beijing accuses the EU of having an “anti-Chinese stance”.
Beijing's state media repeatedly accuses the Europeans of having an "anti-Chinese attitude" because of such measures.
For example, the
Global Times
wrote that “China-EU relations should not be hijacked by ideology and geopolitics.”
Sentences like these reflect the widespread attitude in Chinese politics that the EU is not an independent actor, but is allowing itself to be drawn into the systemic conflict with China by the USA.
China's Prime Minister Li Qiang also seems to see it that way.
At the World Economic Forum in Davos last week, he complained that some countries were trying to “contain” other states.
This was probably aimed at the USA and the EU equally.
Li, on the other hand, tried to sell his own country as a counter-model to the protectionism of the West: “China is a country that deserves the world’s trust.”
Wan-Hsin Liu believes the Chinese prime minister's commitment to the free market economy is not very credible.
China is dependent on foreign investments, for example in the high-tech sector.
In addition, “due to weak domestic consumption and large overcapacity in many sectors, the country needs the foreign market more than ever.”
Nevertheless, the People's Republic does not open itself sufficiently to foreign countries - but only to the point at which Beijing sees its own interests at risk.
This is the case, for example, when China's “national security” is affected – and this is the top priority for state and party leader Xi Jinping.
“China is more willing than ever to accept weaker economic development in the long term,” says Liu.
And Europeans have long been feeling this too.