Part III of CCG Munich event, Feb. 19
Xiaomi GR head, Chairman of the Federal Association for Economic Development and Foreign Trade (BWA), and former German Ambassador to Luxemburg anticipate globally collaborative approach to risks.
Hi, this is Yuxuan from Beijing. On February 19, the Center for China & Globalization (CCG) collaborated with the German Federal Association for Economic Development and Foreign Trade (BWA) to organize a luncheon roundtable right after the conclusion of the Munich Security Conference.
Themed "China, Europe, and Globalization in 2024: What’s Next for Business?", the event is composed of two roundtables - one on de-risking and the other on green & digital transition. It gathered over 30 figures from German and Chinese businesses, chambers of commerce, academia, and the media.
The CCG Update will release the insights from the two roundtables held that day, following the order of their presentations at the event. Today's newsletter features the three impulse speeches by:
Johannes Hartl, Head of Government Relations, Xiaomi
Michael Schumann, Chairman of the Board, BWA; Chairman, China-Bridge
Heinrich Kreft, Professor and Chair for Diplomacy, Andrássy University Budapest; former German Ambassador to Luxemburg
For the full transcript, please refer to this Google Doc or the attached PDF file.
Johannes HARTL
Head of Government Relations, Xiaomi
So kind of a little spoiler, I've only been with the companies for 6 weeks, so don't expect too much of my answer.
First of all, since I'm kind of late in speaking, I second whatever he said. One thing that I would point out is that some of the de-risking will probably be done for us. So somebody mentioned the German Lieferkettengesetz [Supply Chain Act], which some people already call pretty hardcore, which will now be doubled or tripled by the European Union in most of the CSDDD (corporate sustainability due diligence directives). And that will actually have also social liability from individual point implications. So the European Union has kind of forced us to de-risk.
That said, Xiaomi Technology Germany will be in scope as will any other German company that meets the size criteria. So we're all kind of in the same boat. And probably following the news about the German Free Democrats trying to - I’m not sure - whether to say yes or no to the law, it would have even other implications if the European Union really decides against it because then Germany will be left apparently with the Lieferkettengesetz, which is the strongest in the most stringent in the world.
So in trying to end discord, it said over and over the level playing field on the European Union side, I see how different association articles in favor of and against it. But the reality is, I guess we kind of just have to deal with it.
But the good thing is - if you wanna point anything with that - every company, regardless of whether this company is based in Germany or a German company that will source out of China, we will have lots of stuff that we have to care about with respect to our supply chain. And that's gonna be pretty hard because I understand everyone's saying we have lots of time costs that will actually at the end of the day, make products more expensive. But that's what we have to deal with and face the realities of de-risking making its way from politicians to tangible outcomes. We have to produce formal reports, sourcing, and looking at what's happening in the supply chains in the world. So pretty tough times I would say.
Michael SCHUMANN
Chairman of the Board, BWA
Well, thank you very much. I think I can confirm what has been said before about how German corporations and company owners currently feel. I would also like to come back to what was said at the beginning about the very meaning of the word “de-risking”, which I think was a very poor choice and which I would hope that we could move the earth and discussions away from the term.
I heard quite often those who describe themselves, saying, hey, de-risking is so cool; that's not decoupling; we came up with a soft term. Has anyone thought about what it actually means to 1.4 billion Chinese being labeled “at risk”? If you look at the connotations from [the perspective of] financial industry, what does a financial institution do? It evades risk. They search for money laundering, and fraud and shut down those accounts. And I traveled China extensively last time for 42 days, this is what I have constantly heard.
So I think it is very, very poor judgment to use the term. We could have talked about resilience and I'll have a European resilient strategy. We could have talked about having a German resilient strategy. Yes, we have a National Security Strategy and a National Resource Strategy, etc. - become more resilient by reducing risk from China, from Russia, and from the U.S. And everyone has forgotten that the predecessor of Ms. Baerbock, Heiko Maas, German foreign minister from the Social Democratic Party, called that, a while ago when Trump was still in office, we need a U.S. strategy/America strategy in German foreign policy. We might need one again if he gets elected.
So it's a term right now that has actually inflated and is all over everywhere. But we have some responsibility in the language that we use, and I would hope that other institutions of the German economy would shift the debate to talk about resilience and less about de-risking.
Heinrich KREFT
Professor and Chair for Diplomacy, Andrássy University Budapest; former German Ambassador to Luxemburg
Thank you very much, Dr. Wang. Well, I'm of course not a businessman and not working in the field of the economy, but I have worked initially in the German Foreign Ministry, also in this field. I've been head of the economic section of the Embassy Tokyo and also in Washington, D.C., so two of the major economies. And I have been for 30 times to China.
I would like to echo what Prof. Mühlhahn said, that we should be careful about what we are talking because this could become a self-fulfilling prophecy. It has been set around this table that this term of de-risking is a softer term for decoupling. It was actually the reaction of Ms von de Leyen to the U.S. term of decoupling. The Commission was happy when Joe Biden and other Americans agreed that this would be a better term. But it doesn't change - we all know - what it means.
And of course, this does something with people. If you are thinking of investing in China, if you are thinking of investing in the region - maybe not in China, but in the region in general - you think twice. So we are much more careful than you would have been before.
If you look at the numbers, yes, it's true that the FDI has grown, but the decisions were taken a couple of years ago. Decisions taken this year will be seen in the figures a couple of years from now. So I think there will be some downward data.
In the end, I think it's absolutely important that we see the full picture of risks. And I found it very important - you mentioned, Dr. Wang - that China was not at the center of the Munich Security Conference because there are so many other problems, so many other challenges. And if you look at these challenges, most of them we can only tackle jointly. And if we miss this opportunity to work jointly on these issues, we will all lose.
I'm not very happy with Christoph Heusgen's choice of the motto of the Security Conference, “Lose-Lose?”, because many oversee the question mark. And in the end, it's really a lose-lose if we continue the path which some are currently looking after. Globalization has been much faster than the growth of global GDP, and now it's more or less in sync. This is good that globalization is not stopping, but it's slowing down.
And some of the reasons can be explained - the pandemic; we have seen the container carriers stuck in the Suez Canal, which had effects on German manufacturing plants; we see now the peacemaking transport via the Red Sea more difficult and more costly. If you go there anyway, the insurance prices are going up; If you don't go there, you have to go around Africa. Both ways, prices are going up. So we see already that there are many risks.
I mentioned it already a couple of times that as China is playing a bigger role in the Middle East, having brought together Saudi Arabia and Iran, many look to China now to use their influence on Iran and the Houthis not to destroy the sea lines of communication via the Red Sea.
So if you look at the big picture, yes, we have to realize that there are many more risks and many more challenges that we only can tackle together. And as some others mentioned here, it depends on where you are, what you do, where you come from, where you see your risks. Of course, for some, China might be a risk. But for others, the U.S. is to risk. And for, again, others, the risk is somewhere else. I think I should stop here.