Is Volkswagen alone putting tens of thousands of employees on short-time work because China is blocking the delivery of a certain microchip? It is not yet clear whether this will happen, but the number of crisis calls in business and politics regarding the Nexperia case is increasing day by day. The supply stop imposed by China on this company’s chips clearly shows how dependent the European economy is on China, even after years of debate about “de-risking”. “The truth is, we are at the mercy”: With these words, a manager working in China summed up the situation to the F.A.Z. together.Germany and Europe are being crushed in the major trade conflict between the USA and China. Both countries cite national security interests. It’s about the delivery of semiconductors and rare earths, but also about exchange rates and a mounting trade deficit between Germany and China. Above all, however, it is about negotiating leverage and threats before the summit between Presidents Donald Trump and Xi Jinping, which is planned for the end of November. European heads of state and government are currently primarily concerned with the issue of rare earths. At the beginning of October, China drastically tightened export restrictions on the raw materials that are needed for almost every technical product. Production in Europe depends even more than before on Xi’s goodwill. At the EU summit in Brussels on Thursday, the Europeans want to discuss various measures on how the EU can defend itself against China. The last resort is the use of the anti-coercion instrument, a package of measures against blackmail in trade policy that is actually only intended as a deterrent. Additional tariffs and more difficult access to public contracts would be conceivable. EU Trade Commissioner Maroš Šefčovič called Chinese export controls “unjustified and harmful.” He wants to look for “urgently needed solutions” at a meeting with Chinese Trade Minister Wang Wentao in Brussels in the coming days. Nexperia chips are comparatively simple in design. The most politically explosive issue in Germany is the shortage of Nexperia chips. The chip manufacturer supplies all car manufacturers or their suppliers – or rather: supplied. Because there is no supply, manufacturers like VW are preparing production stops and short-time work. Nexperia is based in the Netherlands, but has Chinese owners. Since the USA has expanded the sanctions for Chinese companies to include subsidiaries, Nexperia has now also been included. The Chinese government then sanctioned the company. Nexperia’s chips are comparatively simple and inexpensive. The industry had not expected that such a product would become a geopolitical football, as the conflict had so far focused on high-tech products. The federal government has remained tight-lipped about the dispute. “We are monitoring the situation with concern, particularly with regard to possible supply chain problems for German industry,” said a spokeswoman for Economics Minister Katherina Reiche (CDU). Ministry employees have been exchanging ideas with business representatives about the delivery bottlenecks for days, and a crisis meeting was also planned for Wednesday evening. Japan as a role model? In the short term, politicians will hardly be able to help car manufacturers and suppliers. In the long term, the recently adopted microelectronics strategy is intended to reduce dependency. However, previous governments had already tried this, with limited success. The failed Intel factory in Magdeburg is considered a prime example of exaggerated industrial policy expectations. The efforts of the EU and Germany to become more independent of China in the supply of raw materials have so far only existed on paper.More on the subject Show more The business associations in Berlin do not see their members alone as having a responsibility when it comes to diversification. “De-risking is ultimately a question of costs,” says Ferdinand Schaff, China expert at the Federal Association of German Industry (BDI). “This affects companies, but also consumers and the state budget. If we want to consistently reduce dependencies, everyone will have to pay more.” Maximilian Butek, head of the German Chamber of Commerce Abroad in Shanghai, also says: “This is not a task for the German economy alone – politics and business are equally in demand here.” With a view to the policy in Japan, which is often cited as a model, Melanie Vogelbach, head of international economic policy at the German Chamber of Commerce and Industry (DIHK), points out: “It took Japan 15 years to reduce its dependence on China for rare earths from 90 percent to 60 percent. We are only at the beginning of this process.” Activate external content In addition to chips and rare earths, those responsible are also concerned about the development of foreign trade. This year, China overtook the USA again as Germany’s most important trading partner because exports to the USA fell sharply and Germany imported more and more goods from China. Chinese products are pushing into Europe not only because of high American tariffs, but also because of exchange rates. The state-controlled renminbi exchange rate is based on the dollar. Since Trump took office, the euro has appreciated by a tenth compared to the renminbi, meaning Chinese products have become cheaper. “We have no leverage” There is now a lot of discussion in Germany and Europe about whether and how one should limit steel imports from China, for example, in order to protect one’s own industry – and at the same time ensure that the desired imports of chips and rare earths come back more strongly. Foreign Minister Johann Wadephul (CDU) is traveling to China on Sunday with a business delegation. The trip is considered preparation for a visit to the Chancellor. Armand Zorn, the SPD parliamentary group vice-president responsible for economics, warns of possible EU sanctions against China: “A sanctions race would harm both sides. What is important now is constructive dialogue and reliability.” “We have no leverage,” says Alicia Garcia Herrero, the Asia chief economist at the French investment bank Natixis, who also works for the Brussels think tank Bruegel is active. The EU says everywhere that it has the largest internal market in the world. But Europe is not in a position to use this leverage. “A global economy dominated by Trump is terrible. If it is dominated by the Chinese, it will be even more terrible for Europe.” And then she says a sentence that sums up the situation of many Europeans who are involved in world politics: “As a European, I feel terrible.”
Go to Source