China – Competitor or Partner?

The significance of the People’s Republic of China has risen significantly over the past years. China’s engagement in global policy issues – ranging from the international economic system and the economic development of African economies to the challenges associated with environmental and climate protection – plays a crucial role for Germany and Europe. In the #ZEWPodcast “Wirtschaft • Forschung • Debatten”/“Economy • Research • Debates”, ZEW President Professor Achim Wambach provides insight into the influence of the Chinese economic model on the European economy. He sheds light on how competition with Chinese companies impacts on European firms and the role Chinese state capitalism plays in this context, and offers suggestions on how to regulate trade relations and business activities between Chinese and European firms. While this edition was published in German, there are plans to produce English editions of the podcast as well.

Should China be regarded as a partner or rather as a competitor for the German and the European market? “China is both. It is one of our most important business and trade partners. Both exports to China and Chinese imports have increased in the past 20 years. It is safe to refer to China as a partner in this regard,” said Achim Wambach in the #ZEWPodcast. At the same time, however, Chinese companies are also in competition with European companies, explained Wambach. Chinese firms are our competitors, making China both a partner and a competitor.

According to Wambach, the fact that Chinese companies can sometimes be fierce competitors is a result of the characteristics of China’s economic model. Chinese state interference has increased continuously in the past years. And as some Chinese firms have received considerable subsidies over the years, this has given them an advantage over their European competitors in several areas.

In order to ensure stable trade relations and fair competition on both the European and the Chinese market, we need political regulations. In this regard, Wambach mentioned the planned investment agreement that aims to regulate investment in the Chinese market and an instrument for third-country subsidies. “This could ensure fair rules in Europe,” concludes Wambach. With regard to the ongoing climate change and the associated global challenges, Wambach warned against focusing solely on domestic markets. Instead, Europe should cooperate with China. “Can we create technologies that can effectively compete with coal – in such a way, that they are able to ensure sustained growth instead of causing a slowdown, while at the same time creating wealth and producing less CO₂? This will be our major common task.”