President Xi Shapes China’s Destiny…And Germany Is On The Agenda
October 13, 2017
By FTI Consulting
The Communist Party of China rolls out its agenda at the National Congress. Could Germany face an impact due to the remaining appetite of Chinese investors for German companies? The German economy demands equal treatment and reciprocity with respect to Chinese investments in Germany, and the German government has fired off new regulation to have a say on such deals. But there is more than one side to consider.
The date is set: China’s 19th Communist Party Congress (NPC) will start on October 18. One would think that German media is going crazy about the most important milestone in China’s political calendar. However the topic has not yet really arrived on the political and economic pages of German newspapers – let alone front pages. Maybe the German media is still far too occupied with the general election’s aftermath. Or maybe the NPC is not yet a stand-alone story. Regardless, the Congress should be considered as an event with massive impact, not only for the People’s Republic.
Xi’s agenda will be relevant – for all of us
The NPC will kick-off president Xi Jinping’s second five-year term and consolidate his power. It is likely that five of seven members of the Standing Committee of the Politburo will be withdrawn for reasons of age and could be replaced by Xi’s confidantes. The president will also present the political agenda until 2022, which could contain his own “thoughts”, similar to the ones of former presidents Mao and Deng Xiaoping. Besides excessive reflections on Leninism and Marxism the agenda traditionally contains political goals of the Communist Party with respect to the upcoming five years as well as indications for potential policy changes of the country.
Looking back the past five years, a continuing anti-corruption campaign and the fight against poverty within the country’s borders will continue to be important issues. A remodelling of China’s economic model also seems likely to occupy Xi’s interest within the next legislative period.
Is the giant willing to compromise?
China’s successful economic growth of 6.9 per cent between April and June (surpassing the forecast of 6.5 per cent) can already be seen as an indicator of its future performance. This growth was also caused by China’s aggressive expansion strategy. Companies and investors from the People’s Republic are buying assets across industries, and around the globe. Germany’s Mittelstand happens to be one of the most delicious items on the menu. Just a few examples from the last 18 months: Energy service provider Ista, Osram’s lamp division or industrial robot producer Kuka. Especially the state of North Rhine-Westphalia is attractive for investors from the Far East due to the high density of innovative small and medium-sized businesses.
In order to obtain a certain degree of reciprocity, the German economy demands a further opening of the Chinese market towards Western investors. But China’s latest efforts show the contrary. In several sectors from automotive to insurances the country is still acting to bring potential investors from outside under Chinese control.
Germany has started to take precautions
Lately the German government issued new regulation to protect critical infrastructure from foreign investors especially with state ownership and to prevent an excessive drain of know-how. German-Chinese business relations already suffered in the wake of this. One can be quite sure that president Xi will avoid any comments on this issue in his opening speech. However the tonality of his elaborations on China’s economic agenda and the efforts of becoming the global technological leader by 2050 could give a hint on the degree of aggressiveness with which the Chinese government seeks to reach this aim. Absurdly, German companies might suffer more from a lack of potential buyers and investors than China is affected by Germany’s protection of critical infrastructure.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting LLP, its management, its subsidiaries, its affiliates, or its other professionals, members or employees.
About Mr. Brenner
Simon is a Consultant at FTI Consulting Strategic Communications. He advises clients from various industries in Corporate and Financial Communications. Simon holds a B.A. in Sociology and law as well as a M.A. in Cultural and Social Anthropology. Due to the focus of his studies Simon is passionate about cultural, political and economic developments in Central and South Asia.