In a recent diplomatic incident, Germany’s Foreign Minister, Annalena Baerbock, referred to Xi Jinping as a “dictator” during an interview with Fox News. This statement has ignited tensions between Germany and China, leading to China’s strong reaction. This article delves into the details of this diplomatic spat and its implications for international relations.

Germany’s Label for Xi Jinping:

During her interview, Baerbock questioned the consequences of Russia’s actions in Ukraine and made a comparison between Vladimir Putin and Xi Jinping. She used the term “dictator” to describe both leaders, which immediately caught international attention.

China’s Response:

China swiftly reacted to Baerbock’s remarks by summoning Germany’s ambassador, Patricia Flor, and expressing strong dissatisfaction with her comments. The Chinese Foreign Ministry denounced Germany’s statements as “absurd” and a “political provocation.”

The Omitted Details:

Interestingly, the Chinese Foreign Ministry omitted the exchange between Baerbock and their response from the official transcript of the briefing. This practice of leaving out sensitive content is not uncommon in China’s diplomatic communications.

Sensitivity Towards Descriptions of Xi Jinping:

This incident isn’t isolated. Earlier, in June, U.S. President Joe Biden also referred to Xi Jinping as a “dictator,” provoking a similar reaction from China. This shows China’s sensitivity regarding the characterization of its leader.

Historical Perspective:

Xi Jinping’s predecessors, like Jiang Zemin, have also reacted strongly when labeled as “dictators.” Jiang, in particular, famously objected to this term in an interview with Mike Wallace.

Germany-China Relations:

Germany’s relationship with China is complex, primarily due to their significant economic ties. However, recent events, such as Russia’s invasion of Ukraine, have strained these relations, forcing Germany to reassess its stance towards China.

Germany’s Strategy:

Germany has outlined a new strategy that recognizes China as both a partner and a systemic rival. This strategy aims to reduce Germany’s economic dependence on China in critical sectors.

Baerbock’s Stance:

Foreign Minister Annalena Baerbock has been an advocate for a tougher stance on China, particularly concerning human rights and Taiwan. Her views have drawn criticism from China’s state-run media.

Takeaway:

The incident involving Germany’s Foreign Minister labeling Xi Jinping as a “dictator” reflects the delicate nature of international diplomacy and the importance of word choice in diplomatic discourse. It highlights the evolving dynamics in Germany-China relations and the challenges both countries face in maintaining a balanced partnership.

Rising Imports Raise Concerns for European Auto Manufacturers

The European Union Initiates a Probe

The European Union (EU) has initiated an official investigation into China’s extensive support for electric vehicle (EV) manufacturers. This move comes as imports of Chinese EVs continue to surge, prompting concerns about the future of European auto manufacturers.

Concerns About Unfair Competition and State Subsidies

Addressing the European Parliament

During her address to the European Parliament, European Commission President Ursula von der Leyen emphasized Europe’s willingness to embrace healthy competition. However, she expressed reservations about descending into a “race to the bottom.”

Artificially Low Prices and Anti-Subsidy Investigation

Unveiling the Investigation

Von der Leyen highlighted a growing issue: the global market has been inundated with more affordable electric cars, thanks to substantial state subsidies, which have artificially lowered their prices. Consequently, she announced that the European Commission is commencing an anti-subsidy investigation targeting electric vehicles originating from China.

Tariffs and Market Impact

Comparative Import Duties

It’s important to note that Europe imposes a 10% duty on cars imported from China, a significantly lower rate than the United States’ 27.5% duty. This discrepancy has allowed Chinese manufacturers to establish a substantial and rapidly expanding presence in the European market.

Surging Chinese Exports and Future Projections

Chinese EV Exports on the Rise

Data from the China Passenger Car Association reveals a dramatic surge in Chinese electric vehicle exports to nine European countries in the first half of the year. The numbers exceeded the total exports for the entire year of 2022. Over the last five years, European Union imports of Chinese cars have quadrupled.

Projected Market Share Shifts

Potential Impact on Market Share

A recent estimate by UBS suggests that by 2030, Chinese carmakers may double their share of the global market, increasing from 17% to 33%. European firms are expected to bear the brunt of this market share loss.

The Consequences of the Investigation

Tariffs and Market Response

The European Commission’s investigation may result in the imposition of tariffs on Chinese EV imports. The announcement of this investigation had an immediate impact on the stock prices of China’s major EV companies listed in Hong Kong. BYD, backed by Warren Buffett, saw a 2.8% drop in stock price, while Xpeng and Nio both experienced declines of 2.5% and 0.9%, respectively.

Expanding Presence in Europe

BYD’s Ambitions

China’s largest EV manufacturer, BYD, has ambitious plans to double its number of dealer partners in Europe to 200 within the current year. Furthermore, the company aims to boost overseas sales to 250,000 vehicles in 2023, a substantial increase from the 55,916 sold in 2022.

The Significance of Europe’s Auto Industry

Europe’s Auto Industry and Employment

Europe’s automotive industry plays a crucial role in the continent’s economy, providing jobs for approximately 13 million people, accounting for about 7% of all employment. In Germany, well-known brands such as Volkswagen, Audi, BMW, and Mercedes-Benz are central to the country’s economic landscape.

German Support for the Investigation

Positive Response from Germany

German Economy Minister Robert Habeck expressed his support for the European Commission’s investigation, emphasizing that it is primarily about addressing unfair competition rather than keeping efficient, affordable cars out of the European market.

Industry Concerns and Competitive Pricing

Growing Concerns About Chinese EVs

Prominent figures in the German and French auto industries have voiced concerns about the increasing threat posed by Chinese EVs. These vehicles are approximately 30% cheaper than their European or American counterparts, according to research firm Jato Dynamics.

European Automakers’ Challenges

Challenges on the Horizon

BMW CEO Oliver Zipse warned about the combined impact of the EU’s ban on new conventional vehicles starting in 2035 and the growing competition from China. These factors could potentially force European automakers out of the mass-market car production segment. Renault CEO Luca de Meo also acknowledged that Chinese rivals are currently “a generation ahead” of European manufacturers.

Acknowledging Asymmetry and Urgent Consideration

Industry Reaction

ACEA director-general Sigrid de Vries welcomed Ursula von der Leyen’s announcement, recognizing the increasingly asymmetric situation facing the European auto industry. She emphasized the importance of a level playing field, fair trade, and market entry rules for all competitors in the industry.

Ensuring Fair Competition

A Foundation of Success

De Vries stressed that free and fair trade has been instrumental in the success of the European automotive sector on a global scale. However, to maintain these principles, a level playing field with reciprocal trade and market entry rules must be upheld by all market players.

Takeaway

In conclusion, the European Union’s investigation into China’s electric car subsidies underscores the complexities and challenges in the global automotive market. As the investigation unfolds, it has the potential to reshape the competitive landscape and impact the future of electric vehicle production.