Competition expert Adrian Emch + Asian Oscars successes

Dear reader,

Brussels is working on a raft of new directives and regulations to strengthen its own economy and the EU’s single market against China. With the regulation against market-distorting foreign subsidies, the EU plans to prevent – among other things – Chinese companies from benefiting from financial aid from Beijing.

In principle a good idea, according to Swiss antitrust/competition law expert Adrian Emch. However, he believes that Brussels has not fully thought it through. “The effort will probably be greater for EU companies than for non-European businesses,” explains Emch in an interview with Frank Sieren. The term “financial contribution” is broadly defined in the wording of the law and could thus also affect EU companies, the business lawyer warns.

Michelle Yeoh was the shining star at the Oscars in Los Angeles. With her portrayal of a Chinese-born laundromat owner in “Everything Everywhere All At Once“, Yeoh also made an impact in China – even though the movie was not released in cinemas. On Weibo, female users in particular celebrated the success of the 60-year-old and other cast members. Gregor Koppenburg took a closer look at what the movie means to Asian immigrants in the United States and why it was not shown on the big screen in China.

Your
Amelie Richter

‘The EU regulation against state subsidies has flaws’

Kartellrechtler Adrian Emch über Kartellrecht in China.

Mr. Emch, what do you think of the new EU regulation against distortion of competition through foreign state subsidies?

What Brussels is doing is understandable. The EU is extending what already applies within the EU, i.e. the ban on state aid, to the whole world. However, the effects of the regulation, as it is formulated, have not been thought through to the end. It has significant flaws. The compliance burden will probably be greater on EU companies than on non-European companies.

For a start, is the underlying idea not correct that the EU wants to protect its single market from companies that benefit from market-distorting subsidies from non-EU countries?

This certainly makes sense. The regulation introduces a sort of subsidy ban, as we already know from the EU state aid rules. Starting in July, the EU Commission can investigate whether a company has accepted subsidies from foreign governments and thus distorted competition in the EU. From October, a declaration obligation will then apply to certain merger-and-acquisition deals (M&A) and public tenders. In both cases, however, the obligation lies with the companies.

What does this include?

If a company has received so-called financial benefits from foreign states that exceed certain limit values, it has to declare them. The EU Commission then investigates whether the state aid is an unfair advantage.

That sounds reasonable at first. Where are the disadvantages?

The declaration thresholds are based on the concept of financial contributions received by a company from all governments outside the EU over the past three years. So in order to determine whether the thresholds have been exceeded, companies first need to know what financial contributions they have received in the first place. This is a problem.

In what way?

The term “financial contribution” is defined extremely broadly. It includes not only subsidies in the stricter sense but in principle all transactions with the state or state-affiliated organizations. The electricity bill from a state-owned company in Argentina and a large order from a state-owned company as a customer in China fall under this just as much as a tax deal in a Swiss canton. At least that is what the EU Commission seems to think.

And now?

The companies should exert pressure so that the scope of the financial contribution is limited and, for example, only high financial contributions or only actual, beneficial subsidies have to be declared.

That will take some time. What options do companies have until then?

Until then, companies must set up a system worldwide that records, analyzes and quantifies the numerous transactions with the state and state-affiliated organizations. The way the regulation is designed now will primarily mean a great deal of additional effort for all multinational companies.

But why do the rules also apply to European companies?

The EU wants to avoid discrimination based on nationality. This also makes sense in principle.

You said European companies are even more affected?

Most likely. Indeed, the disclosure obligations for M&A deals and tender offers only apply to M&A transactions with a target or joint venture in the EU with more than 500 million euros in turnover and only to public tenders in the EU with more than 250 million euros. However, EU companies participate in such EU tenders and M&A far more often than Chinese companies and therefore have to disclose their international state linkages more often. ‘Is it worth the effort?’, EU companies must now also ask themselves.

What does this regulation mean for Chinese companies?

Some Chinese companies will not play along. State-owned companies, for example, may refuse to disclose information about financial relations with the Chinese state to the EU Commission. In any case, Chinese companies should consider granting their EU subsidiaries a great deal of autonomy in order to allay any suspicion that the latter are benefiting from subsidy payments to the company headquarters.

So will Chinese companies withdraw more and more from Europe?

Not entirely. Some companies will refrain from certain M&A deals and from participating in some EU tenders while maintaining or even expanding their core business. But in the end, the anti-subsidy law, together with other regulatory initiatives from Brussels, such as the planned EU Corporate Sustainability Due Diligence, helps promote decoupling. Whether this is in the interest of the European economy is a different story.

Are such laws actually already common elsewhere in the world?

No. The EU is a pioneer. True to the saying: China produces. The USA innovates. The EU regulates. Brussels is proud of this regulation and hopes to change the market order for the better. However, they have obviously reckoned without the host. The EU companies’ skin will crawl. So far, at least the China teams of EU companies have interpreted “level playing field” as receiving the same subsidies as Chinese companies. But instead of getting more from the Chinese state pot, EU companies now face much greater compliance obligations at home.

Swiss national Adrian Emch is one of the leading experts on European and Chinese regulatory law in China. He is a partner at the British-American law firm Hogan Lovells, one of the ten largest in the world. He has lived in Beijing for over 15 years and advises German and EU companies.

Oscars success encourages Asian community

The cast, producer and directors are glowing at the Oscars.

By

Gregor Koppenburg

The movie “Everything Everywhere All At Once” won big at the Oscars. The film scooped seven out of a total of eleven nominations. “For all the little boys and girls who look like me watching tonight, this is a beacon of hope and possibilities,” said Michelle Yeoh, who became the first Asian to win the award for best actress. Ke Huy Quan won an Oscar for best supporting actor.

Directors Dan Kwan and Daniel Scheinert (Oscars for Best Director and Best Original Screenplay) set out to make a film inspired by their favorite movies and Hong Kong action flicks. And so “Everything Everywhere All At Once” joyfully quotes Jackie Chan action movies or arthouse movies by Hong Kong filmmaker Wong Kar-Wai. But it also draws from Western classics like “The Matrix”, “2001 A Space Odyssey” and various superhero movies.

The best of both worlds

In many ways, the film combines the best of both worlds. The narrative is similar to Chinese comedies with their absurd, extremely physical humor. At the same time, however, it manages to retain the strengths of US cinema, such as a renowned cast or strong special effects and excellent editing, which also won an Oscar.

But even though the film emulates Asian movies and excels with comedy and good actors, it has not been shown in Mainland China so far. Besides zero-Covid, one reason may be that the film is not a classic blockbuster from which distributors in China hope to earn big revenues. The Chinese authorities only allow about 35 revenue-sharing movies to enter the Chinese market each year.

Distributors, therefore, prefer to jump on blockbusters with greater chances of full cinemas. For all its critical success and awards, “Everything Everywhere All At Once” is nevertheless a rather small film with a low budget.

History of overseas Chinese not welcome

The film also has a few things in terms of content that make it difficult for it to find its way onto the Chinese market. The very fact that the story revolves around a family of Chinese living overseas is a problem. “Stories about Chinese living abroad are not very popular with the censors,” a Beijing film producer told Table.Media.

The main roles reflect the issue of immigration. Michelle Yeoh is Malaysian with Chinese roots, but learned Mandarin at a late age. Ke Huey Quan is a US-American born in Saigon to Vietnamese parents of Chinese origin. Stephanie Hsu and James Hong are US-Americans of Chinese origin.

Politically incorrect with a serious core

The film also plays with stereotypes, Asian traditions and Hollywood clichés. In the process, the film crosses many lines of political correctness. The main character’s husband is called “Waymond Wang” instead of “Raymond” – an allusion to the supposed inability of Asians to properly pronounce the letter “R”. When the main character Evelyn (Yeoh) is born, the doctor apologizes to her parents that she is a girl. There are also jokes about wrong pronouns, poor English skills, and fights involving sex toys.

But even though the film is an absurd comedy on the surface, at its core it deals with things that usually don’t make it into Chinese cinemas, like homosexuality, divorce and dysfunctional families.

A statement for Asians in the US

Many see the film as a success for Asians in America, as also reflected by the emotional speeches of Michelle Yeoh, Ke Huy Quan and Dan Kwan at the Oscars. The situation for Asian immigrants has not become easier in recent years – Covid and the poor relations between the US and the People’s Republic make Asian Americans and immigrants repeated targets of racism.

At the same time, great career successes by Asians cause them to be repeatedly slandered as “white adjacent” (white neighboring, “almost white”). They are supposedly just as racist, oppressive and privileged as the white majority.

The president of the Academy, Janet Yang, herself a US-American with a Chinese background, has already dealt with topics of Chinese immigrants in her career as a producer. Films such as “The Joy Luck Club” or “Shanghai Calling” deal with the lives of Asian immigrants in the USA or their return to China.

Streaming platforms follow suit

The seven Oscars are an encouraging sign for Asian immigrants in the USA, perhaps also a message against racism that Hollywood wanted to send. But perhaps they are also proof that the times of the dead-serious and politically correct approach to the subject of race are coming to an end.

Other planned productions show that the subject is still topical: For example, part of the cast of “Everything Everywhere All At Once” is joining a series at US streaming giant Disney Plus. The title: “American Born Chinese”. The series is based on the graphic novel by Gene Luen Yang and is set to premiere at the end of May.

Beijing warns of dangerous alliance over nuclear sub deal

The government in Beijing has accused Australia, the UK and the US of taking a “dangerous path” with their joint submarine deal. The three countries “have gone further down the wrong and dangerous path for their own geopolitical self-interest, completely ignoring the concerns of the international community”, criticized Foreign Office spokesman Wang Wengin in Beijing on Tuesday, according to AFP.

Australia announced on Monday plans to buy up to five nuclear submarines from the US and, in the longer term, jointly develop a new generation of “SSN-Aukus” class nuclear submarines with the US and the UK. According to Reuters, a British design with “cutting-edge technologies” from the USA is planned. The submarines are to be built in the UK and Australia. A representative of the Australian government stated that the project would cost a three-digit billion dollar sum by 2055. The United Kingdom is scheduled to receive the first submarines in the late 2030s, with Australia to follow in the early 2040s.

During a top-level meeting with Australia’s head of government Anthony Albanese and British prime minister Rishi Sunak, US president Joe Biden stressed that the deal would not provide Australia with nuclear weapons. “These boats will not have any nuclear weapons of any kind.”

According to AFP, Wang nevertheless accused the three Western allies of instigating an arms race and called the agreement “a typical case of Cold War mentality”. The sale of submarines poses a “serious risk of nuclear proliferation and violating the object and purpose of the Treaty on the Non-Proliferation of Nuclear Weapons”. As expected, criticism also came from Moscow: Russian Foreign Minister Sergei Lavrov accused the “Anglo-Saxon world” of advancing the “NATO infrastructure” in Asia. flee

Beijing reluctant about Biden’s offer for talks

The Chinese government has reacted evasively to remarks by US President Joe Biden that he expects to talk with President Xi Jinping soon. China and the US were maintaining necessary communication, said Foreign Ministry spokesman Wang Wenbin in Beijing. “We believe that the value and significance of communication lies in enhancing mutual understanding and managing differences.” Relations between the two countries have been strained for some time.

On Monday, Biden told reporters he would be speaking with Xi soon. However, the US President did not specify a date. In mid-February, Biden already stated that he expected to talk to Xi about what the US refers to as the spy balloon over US airspace. Last week, US National Security Advisor Jake Sullivan said his country wanted to re-establish regular communication with China. Biden expects to speak to Xi on the phone after the People’s Congress. rtr/flee

Government wants to raise retirement age

According to a media report, the government in Beijing is planning to gradually increase the retirement age in light of the rapidly aging society. The People’s Republic is aiming for a “progressive, flexible and differentiated way to raise the retirement age”, the president of the Chinese Academy of Labor and Social Security Sciences, Jin Weigang, was quoted as saying by the state-run Global Times newspaper on Tuesday. “People nearing retirement age will only have to delay retirement for several months.” Young people might have to work a few years more. But there will be a long adjustment and transition period, the senior government adviser said.

China has not yet announced any formal changes to the retirement age, which is one of the lowest in the world. It is currently 60 for men, 55 for female employees in office jobs and 50 for women working in factories. “The most important feature of the reform is allowing people to choose when to retire according to their circumstances and conditions,” Jin is quoted as saying.

However, the one-child policy from 1980 to 2015 is now responsible for too few young people entering the job market. This places increasing pressure on the pension system. The National Health Commission expects the number of people over 60 to rise from 280 million to more than 400 million by 2035.

At the same time, life expectancy has increased rapidly in recent decades with the economic rise of the country. While it was still 44 years in 1960, it was already 78 years in 2021 – a higher value than in the USA. According to studies, it will probably exceed 80 years in 2050.

Currently, each pensioner is covered by the contributions of five earners. The share of contributors is only half of what it was a decade ago. Experts say it could be as low as 4:1 by 2030, and as low as 2:1 by 2050. According to demographers and economists, the current pension system is no longer sustainable as it draws on a shrinking labor force to fund a growing number of pensioners. The state-run Chinese Academy of Sciences predicts that the pension system will run out of money by 2035. rtr/flee

The planned China strategy is the wrong approach

By Holger Goerg, Katrin Kamin, Rolf J. Langhammer and Wan-Hsin Liu

China has risen to become the most important geopolitical player alongside the US. With numerous infrastructure projects worldwide, it is creating strong market positions and continuously expanding its economic and political influence. For the EU, this engagement inside and outside Europe has implications. Not least because China is the EU’s most important trading partner.

The EU and Germany are both now striving for a foreign and security policy-motivated strategy vis-à-vis their systemic rival China. At the same time, they are avoiding creating economic policy tools that explicitly constitute a “Lex China”, in order not to come into conflict with the ban on discrimination in the multilateral economic order.

Focus on one country is counterproductive

Does Germany need a foreign policy-motivated strategy focused on a single country? For a variety of reasons, the answer could be “no.” First, because Germany would be doing exactly what China is often accused of doing, i.e., applying significant state requirements and protectionist interventions to private-sector decisions and activities. This is done on the assumption that companies are acting purely in a business sense and underestimating the macroeconomic risks of close economic ties with China. The subtext conveyed is that companies should be better guided by the government. Furthermore, questions could quickly arise about strategies aimed at other countries, such as the US. That apart, it is not apparent why Germany should have a strategy of its own if the EU is already working on one and has a much stronger hand in its dealings with China.

However, the argument in favor of a clear strategy for the coming years, equipped with goals and instruments and a detailed inventory of mutual economic dependencies, would be that it could serve as a guideline for businesses, prompting them to give greater weight to the business and economic risks and to behave in a manner desired by the government. Moreover, such a strategy could send an important political signal to China. In order to ensure that it is really a strategy but not just a catalog of short-term measures against the interests of companies, it would have to consider the major economic challenges and changes in Germany and China.

It is becoming clear that what has been presented by the German government so far still has too many gaps to be considered a strategy. In particular, there is still a complete lack of discussion of Germany’s long-term challenges and goals.

Clarifying how to deal with autocracies

More generally, the question arises as to whether a more broad-based strategy is needed to deal with not just one single country. The issues that Germany encounters with China are due in particular to an autocratic system prone to erratic behavior. Thus, dealing with all autocracies would become the linchpin of a strategy preferably coordinated at the EU level, rather than focusing on just one – albeit large – autocratic country. Calls for diversification likewise support a strategy aimed at dealing with all difficult trading partners-as the search for new sources of natural gas has demonstrated. Implementing sustainability goals is also not a problem specific to China.

Of course, one should not ignore the fact that the multilateral order, which would be curtailed by country-specific strategies, is facing its most severe crisis to date as a consequence of geoeconomic power strategies, creating a need for adjustments to both foreign policy and trade policy. Autocracies are particularly capable of initiating erratic course changes without regard to laws, voters, markets, or global rules, exposing supply shocks to market economies and neglecting sustainability goals to a greater extent. This fact also argues in favor of a wider strategy for managing relations with autocracies. Such a strategy should clearly define how to deal with these countries and issues and at the same time work to build greater solidarity among countries that share democratic values.

As part of this effort, we must also explicitly address our own weaknesses- for example in terms of technological progress and innovative capacity of our ageing democracies. Only in this way will it be possible to succeed in systemic competition where autocracies are weak, such as in the international financial markets and in the manufacture of advanced IT products and environmental technologies. Clearly positioning Germany as an attractive location for investment and innovation, in conjunction with other democratic countries should be a major goal of a future-oriented strategy. That would obviate the need for a response that is narrowly focused on a single country.

Holger Goerg is Acting President at the Kiel Institute for the World Economy and Managing Director at the Kiel Centre for Globalization.

Katrin Kamin is a PostDoc and Co-Head of the Geopolitics and Economics Initiative at the Kiel Institute for the World Economy.

Rolf J. Langhammer is a Senior Researcher at the Kiel Institute for the World Economy. He was also Vice-President at the Kiel Institute until 2012.

Wan-Hsin Liu is a Senior Researcher at the Kiel Institute for the World Economy and Coordinator at the Kiel Centre for Globalization.

This article was written in the context of the Global China Conversations event series of the Kiel Institute for the World Economy (IfW). On Thursday (11 a.m., CET), Katja Leikert, Member of the Bundestag and Member of the Foreign Affairs Committee & the Committee for Family Affairs, Senior Citizens, Women and Youth, and Holger Goerg, Acting President of the Kiel Institute for the World Economy, will discuss the topic: “Does Germany need a China Strategy?“. China.Table is the media partner of this event series.

This article is an abridged version of a Kiel Focus Publication by Goerg et al. (2023).

There are no limits to creativity – the important thing is that they fly: At the kite festival in Jinhua, Zhejiang Province, enthusiasts present their new flying and stunt kites. But the rule is by no means: the higher, the better. Because then this yellow monster would stand no chance. What counts is originality.

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Amelie
Richter

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Grzanna

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Peltsch

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Fiedler

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Köckritz

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