Can German ’Climate Chancellor’ tackle Chinese green tech giants?

4 min read

Accelerated growth of Chinese green energy in Europe seems to be another area the European Union seems unable to tackle. In this respect, the situation is especially disappointing in Germany which is considered to be the EU’s main industrial power. Experience show that in recent years, Germany’s been set on an absolutely wrong track by the so-called traffic light coalition (by the colours of the parties, in German, Ampel coalition) led by Olaf Scholz and made up of social democrats (SPD), The Greens and the liberals of the Free Democratic Party – FDP). Given Europe’s specific economic structure and the way it functions, Scholz’s serial political shots in the foot have severe repercussions for the EU as a whole.

To assess the current situation objectively, it’s worth starting from the fact that Europe was once a leader in the renewable energy source, but China’s rapid development since 2018 has inflicted billions in losses on its leading wind power players, including e.g. German-owned Siemens Gamesa. When speaking about ’going green’ in Germany, it’s a must to mention legendary German automakers such as Mercedes and BMW which also try to adapt to the changing times and go green, while, to be frank, this sector faces the biggest challenges posed by China. While in 2023 the share of Chinese models in the German market was about 7 percent, this figure has risen to 10 percent in a year.

This particular trend was behind the European Commission President’s proposal in autumn 2023 concerning possible remedies against the growing number of Chinese electric vehicles distorting the EU single market through price-dumping practices. Ursula von der Leyen said that if EU investigation finds that Beijing violates WTO rules, the EU will impose punitive tariffs on Chinese vehicles. Interestingly, Germany’s ’Climate Chancellor’ Olaf Scholz dismissed the potential of market distortions induced by dumping prices for electric vehicles as hysterical (!), ignoring the fact that Chinese automakers dominate the electric car market in his home country and have lately debuted electric cars in Europe.

In October, Brussels in fact initiated an investigation into Beijing’s practice of massive state subsidies on electric vehicles, which results will likely be published this summer. In addition, the European Commission has announced a probe into state support for Chinese wind turbines being pitched for European generation projects – wind parks in five EU countries: Spain, Greece, France, Romania and Bulgaria are concerned -, which followed similar checks on rail and solar projects.All this triggered China’s anger and the Asian country accused the EU with trade protectionism.

Many things have contributed to this economically and politically complicated situation, but, above all, it’s worth highlighting the specific political situation in Germany.

In recent years, Germany has been hit by an unprecedented series of crises affecting almost every sector, particularly the economy. A massive energy crisis that followed the outbreak of the war in Ukraine, triggered by the cut-off of Russian gas supplies, was followed by a severe budgetary crisis in Germany, which caused a domestic political turmoil so deep that even the option of early elections emerged. Most recently, scandals involving the German army have raised concerns – after that in a wiretapping incident the assessment of the German Armed Forces concerning the war in Ukraine was leaked, thousands of confidential data from online conferences and meetings of the Ministry of Defence have become accessible to anyone online due to sloppy IT security.

It should be added that, according to the latest figures, German economy may soon be recovering from the crisis, but it also should be noted that, according to opinion polls by German tabloid newspaper Bild, Chancellor Scholz has reached a record low popularity in late 2023, when the crisis reached its peak – while his rating was roughly 50% when he was elected in 2021, it had fallen to 35% by the end of 2023. (Note also that, in contrast, support for opposition parties such as the CDU/CSU or AfD is steadily increasing.)

Although during his recent meeting with the Chinese leader in April 2024, Chancellor Scholz tried to avoid problematic trade issues, Xi Jinping criticised the EU over its looming war on Chinese green tech companies. In light of reality, Chancellor of Germany had good reason to avoid direct confrontation with Beijing. It’s easy to see that pushing Chinese products out of the markets means that they need to be immediately replaced, and although local production would be an ideal solution, it would be neither feasible (both in terms of raw materials and labour) nor profitable. In other words, such a manoeuvre would mean a mere lose-lose scenario for Germany.

Experience of recent years shows that Olaf Scholz and his governing coalition have played a major role in the fact that the European and German car industry and the whole green energy sector have been backed into a corner by China.

Taking into account that in the German government The Greens hold key positions such as the Federal Minister for Economic Affairs and Climate (Robert Habeck), who also functions as Vice-Chancellor, the Federal Minister for Foreign Affairs (Annalena Baerbock), the Federal Minister for Food and Agriculture (Cem Özdemir), as well as the Federal Minister for the Environment, Nature Conservation and Nuclear Safety (Steffi Lemke), there isn’t a slightest chance that Germany, recognising its own mistakes, will change its policy and take a U-turn.

Against this background, there’s no other choice but to agree with the words of Bavarian Premier and head of the Bavarian CSU Markus Söder who concluded that Germany is in crisis after voters have lost faith in Germany’s ruling three-party coalition. ’The whole ’traffic light system’ (i.e. coalition) is not working. That’s why a fundamental change is needed’, he said some month ago in a post on X.

To this criticism, however, it’s important to add one more thing namely that with their incompetence to respond adequately to China’s expansion, the politicians of the German ruling coalition endanger the competitiveness of not only Germany, but the whole EU.

The EU, in particular Germany certainly share a great responsibility for the delay in responding to Xi Jinping’s words who criticised the investigation Brussels launched last year into Beijing’s electric vehicle subsidies. ’China’s exports of electric vehicles, lithium batteries and photovoltaic products [solar panels] are a massive contribution to the world’s effort to tackle climate change’, he said. Sadly, these words were not followed by an adequate European answer.

Due to the EU’s lack of action to stop China, Chinese green tech companies could have gained a significant competitive advantage though, so far, Chinese green tech companies have only been gearing themselves up for a rapid launch at the yellow light. If German ’Climate Chancellor’ and his Greens are unable to effectively tackle the trade challenges by the Asian country, China, once given the green light, will easily overtake not only German but all other European companies and Beijing will soon grab dominance over the EU market for e-cars, solar panels, wind turbines and so on.

On behalf of the EU, this is at stake in May 2024, when China’s Xi Jinping arrives in Europe to have talks with European leaders who may find themselves in a difficult situation as EU solar manufacturers face an existential crisis with respect to China’s near-total dominance over global supply lines and European markets are flooded with Chinese e-cars. Both national and EU leaders certainly want to avoid a trade war with China while they have to strengthen their home country’s and the EU’s economic security. Are they capable to handle this complex situation? We will see it soon.

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