Is China Systematically Buying Up Key Technologies? Chinese M & A transactions in Germany in the context of “Made in China 2025”. Bertelsmann Stiftung GED Study 2018

“Made in China 2025” (MIC 2025) is the Chinese central government’s main industrial policy strategy aimed at turning China into the global leader of the fourth industrial revolution. Chinese M & A transactions abroad explicitly belong to the instruments for implementing MIC 2025. Germany is an attractive location for Chinese M & A transactions and offers tailor-made know-how for MIC 2025 due to its large number of “hidden champions”, i. e. technological world market leaders in highly specialized niches. 64 percent or 112 of the 175 analyzed Chinese M & A transactions with a share of at least ten percent in German companies between 2014 and 2017 percent can be assigned to one of the ten key sectors in which China aims to assume global technology leadership with the help of MIC 2025. On the one hand, there is a clear focus on the MIC 2025 sectors of “energy-saving and new-energy vehicles”, “electrical equipment” and “high-end numerical control machinery and robotics” – i. e. sectors in which Germany can in part demonstrate significant competitive technological advantages. Even before the introduction of MIC 2025 in 2015, however, these sectors were already a focus of interest for Chinese investors in Germany. On the other hand, key sectors that played little or no role for Chinese M & A transactions in Germany have also become increasingly important since the introduction of MIC 2025. This is particularly evident in the MIC 2025 sector of “biomedicine and high-performance medical devices”. The majority of the 112 Chinese M & A transactions (just under 60 percent) that are relevant for MIC 2025 are distributed across only three German states: Baden-Württemberg (26), North Rhine-Westphalia (22) and Bavaria (18) – the very regions in which the majority of the German “hidden champions” are located. State-owned investors make up 18 percent of the Chinese M & A transactions examined, and are therefore a minority. However, taking into account only the M & A transactions that can be assigned to the MIC 2025 sectors, their share rises to around 22 percent – a possible indication of state stakeholders’ greater interest in acquiring know-how abroad for the implementation of MIC 2025. However, the formal type of ownership of Chinese companies does not show the full picture of potential state influence due to the complex interplay between the state and companies in China. Therefore, the great challenge for Germany consists in the forms of state influence that are not or only insufficiently reflected in the majority ownership type of Chinese investors

Conference Report The 16th Asia Europe Economic Forum. EU-Asia trade and investment connectivity

Global economic trends over the last decades have steadily increased the links between Asia and Europe. For both regions, a growing economic interdependency represents an opportunity to build strong, fair and sustainable relations. Nonetheless, constant global economic disruptions, political uncertainty and a rapid change in economic dynamics make cooperation no easy task for policy makers. With strong recognition of this challenge, the Asia Europe Economic Forum (AEEF) contributes to interregional cooperation with the diversification and consolidation of the links between Asia and Europe. The AEEF was established in 2006 by Jean Pisani-Ferry, the then-director of the Brussels-based think tank Bruegel, as a high-level forum to bring together Asian and European senior policy makers and experts. As such, the Forum is a platform for research-based exchange and discussion on global issues and mutual interests. It is here where Asian and European policy experts can learn from each other, thereby gaining a deeper understanding of the economic and political ties between Asia and Europe. The AEEF is all about bringing countries together and building partnerships with regard to shared interests—the AEEF is all about connectivity (see Box 1).

Globalization Report 2018: Who Benefits Most from Globalization? Bertelsmann Policy Brief #2018/02

There is growing uncertainty in industrialized countries as to whether globalization means more opportunity or more risk. Trump, Brexit and increasing populism are direct consequences of this development. However, our Globalization Report 2018 shows for the third time in a row, as in 2014 and 2016, that: when measured in terms of per capita gross domestic product, industrialized countries in particular continue to be the biggest winners as a result of increasing globalization

Don’t Go Protectionist! Trade and Investment Relations between the EU and China. Asia Policy Brief 2012/1, June 2012

The European Parliament has proposed the creation of a body to monitor foreign – in particular Chinese – investment in the EU. The initiative, driven by fears of unfair competition and a hidden political agenda behind Chinese investments, should be rejected. There are better ways to promote openness and transparency in Sino-European economic relations

Economic Impact of Foreign-owned Firms in the EU and Germany. Bertelsmann Policy Brief #2020/02

In times of Trump and Brexit, protectionist tendencies seem to be a global trend. The advantages that economic interconnectedness implies are increasingly receding into the background. Foreign-owned firms in the EU and Germany, however, make a considerable contribution to employment and gross domestic product (GDP). Nowadays

How Hidden Protectionism Impacts International Trade. Bertelsmann Policy Brief #2017/09

Tariffs impede trade. They are the most visible instrument for protecting domestic companies against foreign competition. So-called non-tariff barriers to trade (NTBs) are less visible. NTBs include restricting import quantities, registration formalities for imports or state aid for domestic suppliers. Our study shows that NTBs implemented worldwide between 2010 and 2015 have been responsible for roughly 16 percent of missing global trade in 2015, amounting to about USD 512 billion. German exports could have been at least USD 43 billion higher in 2015 if these NTBs had not existed. The value of German imports in 2015 would have been at least USD 34 billion higher than the actual volume of imports

Asian Middle Classes - Drivers of Political Change? Asia Policy Brief 2014/06, November 2014

Asia watchers have been kept exceptionally busy by recent political developments in the region. An unprecedented landslide victory in India’s general elections, pro-democracy protests in Hong Kong, close elections in Indonesia, a coup in Thailand – the list goes on. As unrelated as these events appear, analysts may find a missing link among a social group that is currently exploding in numbers: Asia’s middle classes. Often discussed simply in terms of its economic potential, Asia’s middle-income population is also flexing its political muscle. A closer look at its influence throughout the region in recent months seems to confirm for the field of politics what economists have known for some time: The rise of the Asian middle classes constitutes one of the most fundamental transformations of our time. The consequences remain to be seen

Learning from Trump and Xi? Globalization and innovation as drivers of a new industrial policy. Bertelsmann GED Focus 2020

Technological innovations are essential drivers of longterm and sustainable growth. Accordingly, there currently is a debate in Germany and the EU as to whether a new, strategic industrial policy can be an answer to the complex dynamics of digitization. Products of this discussion are, for example, the Industrial Strategy 2030 published by the Federal Ministry for Economic Affairs and Energy in November 2019 and the Franco-German Manifesto for a European Industrial Policy for the 21st Century. The focus here is on the question of how the EU and its member states can maintain their innovative and thus competitive ability in the face of diverse challenges. However, there is no standard recipe for building and expanding the innovative capacity of an economy. Different countries rely on different strategies that can be equally successful. An important distinguishing feature is the role of the state. A clear example of divergent innovation models are China and the USA. Although both countries have completely different approaches to an innovation-promoting industrial policy, both models are characterized by major technological successes. With an analysis of the Chinese and American innovation system, this study highlights the main features and success factors of both innovation models and discusses whether and to what extent these factors are transferable to the European and German case. Five fields of action for an innovation-promoting industrial policy in the EU and Germany emerge from this analysis • Implementation of a long-term innovation strategy • Expansion of venture capital • Expansion of cluster approaches at EU level • Thinking and strengthening of cybersecurity at EU level • Creation of uniform and fair conditions for competition In addition to these fields of action, which are relevant both for the EU and for individual member states, industrial policy measures in the following three areas could be useful for Germany. In particular: • Improvement of framework conditions for research and development • Gearing the education and research system more strongly towards entrepreneurship and innovation • State as a pioneer and trailblazer in new technologies In their implementation, however, strategic European and German industrial policies face a trade-off between the protection and promotion of legitimate self-interests on the one hand and the defense against economically damaging protectionism and ill-considered state interventionism on the other. The so-called “mission orientation” can make a significant contribution here: Accordingly, industrial policy should serve to address specific societal challenges (e. g. globalization, digitization, demographic change, climate change) and be coherently targeted towards these objectives. Furthermore, industrial policy is to be driven in parallel by different actors. Above all, it is a joint task of business and politics to enable a competitive business location where the state ensures good competition- promoting framework conditions and the private actors implement concrete actions