Is China still alluring?
Joerg Wuttke

Editor's Note: China Talk is a global platform where policy makers, business leaders, specialists and scholars, as well as celebrities share their China story and their perspectives on China's development. With the difficult three years passed, is China still alluring to foreign enterprises? What are the advantages of the Chinese market? And how will China's institutional opening up further unlock foreign investors' huge potential? Joerg Wuttke, president of the EU Chamber of Commerce in China, shares his experiences and insights. The article reflects the author's opinions and not necessarily those of CGTN.

Hello and welcome to China Talk. My name is Joerg Wuttke, and I'm the president of the European Union Chamber of Commerce in China. We have presently about 1,800 members across China in nine offices. We have operation that basically looks into advocacy work, meaning we are giving recommendations to the Chinese government leadership, but also to our members on how to tackle reform and changes and how to cope with the challenges of the market over here.

But I'm sort of a fossil over here. I came for the first time in 1982 by train from my home country, Germany, to China. And I've lived on and off in this country for 35 years. I've seen all the changes that came along. I remember very vividly when I was doing privately a project for poor people in the Qinghai highlands, it took me about 12 hours to go from Xining all the way to the mountain up. Two or three years later, it just took two hours with a Jeep. I've experienced again and again, the speed with which China has been developing.

And in essence, that's why when people ask me, is China still alluring? Given that we had a rough, 2022, I would say, yes, because I've witnessed these changes and the speed with which they happened. I'm very optimistic about this one.

We have witnessed developments in the car industry. Again in 1982, there was the Shanghai model and one or two other cars and that was about it. Streets were empty. And now you see (over) five million cars in the streets of Beijing. But also you can see cars in my home country Germany. I just came back. I saw to my utter surprise LYNK, NIO and BYD on the streets of Germany, on the autobahn. That happens very fast because China has developed the electric vehicle industry so incredibly fast and has sponsored this also in a way that China now is battery heaven for companies. So to a new (EV) car, one third of the value is the battery and China has the edge there. Again, developing over years, certainly also with foreign investors, but also now bringing this technology to Europe.

That brings me to the point: Why are we here? Why is China still alluring? Well, the obvious is the size of the economy. It's about the same size like the United States. Some say it's the largest economy in the world, but it has also other trappings of attraction to all of us.

If you look into the chemical market, which is sort of my background, you can see that half of the global market is in China. You can see the car market again. One third of the global market is in China. And then machinery is even more pronounced. You have the Chinese machinery market as big as the U.S., Japanese and European market put together. So if you want be here, you have to be a global player. In order to succeed globally, you have to be in China.

The other advantage is the cluster. China has incredible clusters built up over the last 20 years, particular in the Pearl River Delta, the Yangtze River Delta. Clusters, where investors can find a lot of these items they need for assembly to produce their products in many folds, much more than in most other countries. These clusters will be very difficult to replicate elsewhere outside China.

The infrastructure makes a big difference. If you take your items in Cambodia, to Sihanoukville, it's one road and one port smaller as it is. If you have ever seen the port in Shenzhen, its four lanes, it's huge and very efficient. I think China has six or seven out of the busiest ports in the world and that just shows the power of the infrastructure and the clusters attached to it. That's why to European business, China is alluring.

Another advantage of the Chinese economy is its very strong labor pool. Many European companies to establish centers in China, for example, in Chengdu, in order to work on global engineering challenges. That is something which is a huge advantage by having this labor pool over here.

And then first and foremost, I think for many of us, it is the demanding sophisticated urban Chinese consumer. They are not always brand loyal which keeps us on our toes in a way that cars, for example, get developed on the concept not of moving from A to B, but as a matter of fact, to have a computer on wheel. So European companies operating in China are basically in a fitness center. They are operating here, learning from the Chinese consumer where they have to make new adjustments and amendments. And that can be replicated in their global business. So in many ways, we have to be here in order to actually grow with the Chinese consumers, in order to get the products deep into the 21st century where we think we can still make a difference and it makes better products.

We're here in China primarily to produce for Chinese customers. It's very rare that European companies are exporting. Our customers do, in electronics, in furniture, in all kinds of items that end up in Europe and it's successful. If you look into the exports coming out of China into the European Union, it's just staggering how much China is able to sell. I give you one figure. In the first 10 months of 2022, China shipped five million containers into the European Union, so you can see products all over the place and all the shopping centers.

But at the same time, we have been investing here a lot with the stock is somewhere between $160 and $170 billion in the Chinese economy. But don't forget also, Chinese companies have been rather successful in the European market. We assume that about $130 billion were invested into the European Union by Chinese companies that just shows you how interdependent we are, and how much we actually can work and learn from each other in this respect.

We have the challenges also when it comes to market access here that again would give us a lot of possibilities to do far more in acquisitions, for example. One example is BMW's takeover in billions last year in the first quarter, with nearly $4 billion, stellar performance in Shenyang by this German joint venture. It just showcases if there is a takeover of 25 percent, you get the real money in. Because in essence, I think we are still under invested in China.

Now looking into the politics of this, the European Union has been coming up with a paper, I think it was about four years ago, indicating three pillars of how they want to work with China and how they see China.

One is the partnership. That's where we link in business, the partnership that we have as business here as well as Chinese doing ventures or selling into the European Union market. But also the partnership in many other areas, such as for example, the climate change. Climate change is something where we have been coming up with a great study in May last year, indicating where European companies can help Chinese companies to grow, because that is one of the biggest challenges we have here. It's to green the energy level in order to get China to peak in 2030 and then to get carbon neutral in 2060.

Then we have the second item which is competitor. We are competitors not only here but also back home in Europe, but there are third markets where we are competing. Competition in essence is good. It keeps us on our toes. It makes our products better in order to keeps us closer to the customer. It's a good thing that we have competition. But competition has to be fair and square, and that's where our position paper comes in again. It is competition which needs to be leveled.

And then politics starts in our different systems. That's the third pillar. Europe is seeing China as a systemic rival that is something coming out from a liberal democracy and then you have a communist system over here. But that's something the politicians have to figure out how to actually manage this kind of two different systems in order to make it possible for all of us to do the other things, meaning partnership as well as competition.

Let me finish briefly by saying that again after witnessing China's growth for 40 years, having lived here for so long, one thing sure to me is that China has an incredible comeback gene. Again, 2022 was very difficult for all of us. And we are creeping back in economic activity. The borders are open again. We can fly in and out easily. And that's something which we really need in order, not only to conduct business, but also in order to have a possibility in order to understand each other much better.

So coming back to the initial phrase: Is China still alluring? Having spent more than 35 years here and having witnessed the largest economic comeback story in China. I can say definitely, it's a YES. We have to be engaged with China. We have to be embedded in the economy in order not only to help the Chinese consumer in the Chinese economy, but frankly, as Europeans also to help ourselves. Again, China is an enormous fitness center for us. 

Thank you.

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