Welcome to the 52nd issue of the CEEasia Briefing.
In this issue, we dissect the following topics:
- Chinese investments into EVs in Poland
- EU’s probes into China’s green tech subsidies
- Germany’s Olaf Scholz visits China
- Czechia investigates Chinese surveillance of Hsiao Bi-khim
- Germany-India cooperation in automotive industry
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1. Chinese investments into electromobility in Poland
What’s going on? The Chinese carmaker Leapmotor has announced its plan to start manufacturing electric vehicles (EVs) at a plant in the southern Polish city of Tychy. The plant is owned by Stellantis, which has a 21% stake in Leapmotor and a 51% stake in their joint venture.
Going deeper… The investment marks the second Chinese EV investment in Tychy, with the first announced in December 2023 by Sanhua Automotive. It is also China’s fifth such investment in Poland, including Volvo’s technology hub in Krakow. In addition, the Polish government is set to decide by summer on the previous administration’s agreement with China’s Geely, a parent company of Volvo, to supply a platform for Poland’s own EV project called ‘Izera’.
This means… Poland is becoming an increasingly attractive destination for Chinese EV investments. Indeed, among the V4 states, it comes second only to Hungary in the number of Chinese EV projects. Slovakia is also catching up, with two investments agreed and others discussed, whereas Czechia remains the only V4 state lacking any such direct investments. Based on precedent, the Chinese investments are unlikely to improve the V4s’ positions in the global value chains with the increasing dependency on Chinese EVs also running contrary to the EU’s de-risking agenda.
2. EU investigates China’s green tech subsidies
What’s going on? The EU has launched several investigations into Chinese solar panel and wind turbine manufacturers that are suspected of benefiting from China’s state subsidies. The solar panel probes concern two consortiums bidding for the development of a solar park in Romania, both involving European subsidiaries of Chinese companies. The wind turbine probe concerns Chinese wind turbines in Spain, Greece, France, Romania, and Bulgaria.
Going deeper… All three probes were launched under the EU’s Foreign Subsidies Regulation (FSR) adopted in July 2023. They follow the bloc’s first utilization of the law against the Chinese train maker CRRC that, following the EU’s probe, withdrew its bid for a contract in Bulgaria.
Further this month… The Commission has also updated its 2017 report on state-induced distortions in China’s economy that effectively serves as an anti-dumping guide for European industries when filing their complaints about such practices within the EU. The 2024 report has added new sectors (i.e., telecommunications, semiconductors, rail industry, renewable energy and EVs) to the existing steel, aluminum, chemicals, and ceramics sectors of the earlier report.
Moreover… the EU has also announced a probe into China’s procurement of medical devices, the first investigation to be launched under the International Procurement Instrument (IPI) that aims to prevent countries from unfairly favoring domestic companies. The probes also follow the EU’s highest-profile investigation into Chinese subsidies in its EV sector launched in October 2023.
This means… All of this shows the EU’s willingness to use its increasing array of trade defense tools to protect its infernal market from unfair competition . The recent raid of the Warsaw and Rotterdam offices of Nuctech, a Chinese company manufacturing baggage scanners, that was justified on the grounds of the bloc’s anti-subsidy rules, further confirms the shifts in the EU’s stance on China.
However… There is a significant difference between the investigation into Chinese EVs and the probes linked to the FSR. Whereas the former can, based on its findings, impose duties on the Chinese imports, the latter seems to focus on revealing (rather than tackling) any such distortions. Even in terms of the EV probe, it will be difficult to prove the direct relationship between Chinese subsidies and their impact on the EU competitors, which is required for the final anti-subsidy duties to be imposed. Moreover, the disagreements between France and Germany about the EV probe are likely to remain, which will likely further challenge the effectiveness of the EU’s trade defense toolbox.
3. Germany’s Olaf Scholz in China
What’s going on? Chancellor Scholz, accompanied by three ministers and an economic delegation, concluded his second visit to China on April 16. Highlighting the importance of the China-German relationship, the visit came amid rising pressure by Western countries, including the US, on China’s overcapacity in the EV sector. This seems to demonstrate that while Germany is seemingly aligned with the EU’s China policy, it also hesitates to take a firmer stance toward China.
Going deeper… Scholz’s visit addresses key concerns impacting European economic and security interests, from China’s stance on Russia to the issue of industrial overcapacity. Scholz put Ukraine on the top of the agenda during his meeting with President Xi Jinping, urging China to encourage Russia to end its military campaign. He wanted to persuade Xi to attend a June peace conference in Switzerland on Ukraine.
Moreover… China’s economic relations with the EU and US are strained. The EU is considering some protective measures and investigating Chinese subsidies to give China a competitive edge, particularly in the automotive sector. During the meeting, Scholz addressed European concerns about the overcapacity of subsidized Chinese EVs to Chinese officials and called for fair treatment of foreign firms operating in the Chinese market. However, Xi rejected these allegations. Nonetheless, Germany signed a joint declaration with China on car data sharing. This initiative follows discussions between Chinese and German ministers in Beijing, during which China expressed its willingness to boost practical cooperation in automobiles and harmonize industrial standards.
This means… The visit underscored rising cooperation between foreign and Chinese firms in the automotive industry, where European companies are losing their competitiveness. However, it also showed Germany’s existing limits when it comes to putting pressure on China, given potential economic implications this might have for German companies reliant on the Chinese market.
4. Czechia investigates Chinese surveillance of Hsiao Bi-khim
What’s going on? The Czech Republic has initiated a probe into a Chinese military diplomat over an alleged case of tailing Taiwan’s Vice President-elect Hsiao Bi-khim during her visit to Prague in March. The Democratic Progressive Party (DPP), of which Bi-khim is a member, stated that the incident represented another example of “wolf warrior diplomacy.”
Going deeper… The Czech Police Protective Service stopped the vehicle driven by a Chinese diplomat from the military section of the Chinese Embassy in Prague, which was reportedly tailing Vice President Bi-khim’s motorcade from Prague airport to the city center and to the hotel where she was accommodated. According to a Czech media outlet, Seznam Spravy, the driver disregarded traffic signals, nearly resulting in a collision at a crossroad. The incident immediately provoked a reaction from the Czech Ministry of Foreign Affairs, which summoned the Chinese Ambassador Feng Biao.
However…. The Ambassador’s explanation of the matter was, according to the Ministry, unsatisfactory, and the diplomat’s behavior could result in declaring him persona non grata. Czech Senator Pavel Fischer stated that based on the Vienna Convention on Diplomatic Relations, the diplomat could potentially be expelled from the country. At the same time, Wu Szu-yao, the secretary-general of the DPP legislative caucus, urged Beijing to cease its forceful diplomatic tactics. Additionally, Wu urged the Taiwanese government to bolster security for its senior officials during international visits to prevent the recurrence of such incidents.
5. German-Indian cooperation in automotive industry
What’s going on? German and Indian carmakers – BMW Group and Tata Technologies – agreed to establish a consortium for joint development of advanced automotive software in India. The agreement now awaits for review and final approval from the respective authorities.
Going deeper… The joint venture, will be the first joint undertaking between the two firms and plans to operate their software centers and IT development hubs in three Indian states – Tamil Nadu (Chennai), Maharashtra (Pune), and Karnataka (Bengaluru). The initial phase will employ around hundred of Indian experts and trained workforce with the outlook for steep surge in the coming years. The joint venture will focus on software development, automated driving, and automation of product development, among others. Expansion to India will, furthermore, strengthen BMW’s global software coding capacities and round the clock operations.
This means… The agreement between the two leading car manufacturers plays out as Europe is seeking to de-risk interdependencies from China. The Government of India envisions making the South Asian country a $5 trillion economy by 2025, launching several initiatives to boost the selected growth sectors – automotive among them. “Made in India, for India, for the world” is one such initiative, aiming to encourage development, manufacturing and assembling capacities and attract investment.
Quick takes on CEEasia developments
CHINA | The Chinese company Hebei Jianxin Flying Car Technology has purchased a limited license to produce and use the AirCar prototype developed by a Slovak company Klein Vision. The flying car tech was sold to the Chinese investor for an undisclosed amount.
CHINA | There is a rising pressure on the Polish government to designate the Gdynia Container Terminal, a subsidiary of Hong Kong-based company CK Hutchison Holdings, as critical infrastructure. This is due to national security risks given the terminal’s proximity to Poland’s special forces base and a dock used for unloading US and NATO military aid for Ukraine.
CHINA | The Lithuanian Parliament passed amendments to the Public Procurement Law to enable purchase of defense components from China, effective until May 2025. Since Lithuania needs to import some components to produce certain equipment (such as drones), its industry companies will now be allowed to buy Chinese hardware (not software) for the production of machines supplied to Ukraine.
JAPAN | Japan and the EU announced the launch of the EU-Japan Enhanced Dialogue on Advanced Materials in Tokyo on 2 May. The dialogue focuses on cooperation on the development of advanced materials used in critical industries, such as EV batteries and chips. This includes the development of sodium-ion batteries, where China currently leads.
INDIA | During the visit of Ukraine’s Foreign Minister Dmitro Kuleba to Delhi in late March, the two sides agreed to restore their trade relations and cooperation . Kyiv brought forward the talks to seek support for its peace plan and extended an offer to Indian companies to engage in Ukraine’s post-war reconstruction.
