Let me start with you.
You've been on the ground, of course, in many years in China, and just perfect
person to really set this up for us. Initially, my thought when I heard the
news was why France and Germany? But maybe you could answer the
significance of that. Why France?
Well, first of all, we have chants of France and China just about two weeks
ago. So it doesn't really make sense that
Schultz and Xi Jinping beat again two weeks.
Nothing really happened. As a matter of fact, the shots visit was
not really very fruitful. So it really makes sense to look up the
biggest other nation in Europe, which is France.
And my call placed it quite well. He has invited EU Commission President
von der Leyen to join him. And so it's a good sequence.
And of course then he moves on into Serbia to the anniversary of the bombing
of the Chinese Embassy in Belgrade in 1999.
And then, of course, to the closest friend they have in the European Union,
which is Hungary. So it's quite a very symbolic visit.
Work chime in here. I mean, do you think there's anything
that the Chinese president can do to avoid its relationship with Europe, to
deteriorate the way that it has with the US?
Well, China just needs to put its own best foot forward.
China will advance its own interests and its own perspectives on what is in the
mutual interests of all concerned. And ultimately, it'll be up to other
parties as to how they respond to that. China has made it very clear for a long
time that it seeks win win, cooperative relationships with other countries.
And certainly I don't think fundamentally there are any conflicts of
interest between these countries. So the objective material foundations
for solid relationships are there. It's just a question of whether
psychologically and emotionally the Europeans and the transatlantic powers
are able to come to the party of a changing, multi-polar world.
Yeah. And, you know, work just to follow up on
that, I mean, these meetings are taking place not in a vacuum and certainly a
lot of geopolitical events. Of course, you have the war in Ukraine.
You what's taken place, of course, between Hamas and Israel.
It's a it's an election. We're in the US.
And I'm wondering, Warrick, what role does each one play or give the other as
far as their geopolitical strategy is concerned?
So what does France offer China and vice versa?
Yeah, I think it's important to take a step back and probably not look at these
issues so much in transactional terms, but look at them in broad historical
transitional times. And what's going on is that globally,
the the the epicenter of economic power, if you will, and economic growth is
shifting towards Asia and it's concentrating in Asia and the European
and transatlantic countries in general and need to adapt to that changing
environment. Now, in terms of the conflicts, in some
ways they're symptomatic of a changing global order and they're symptomatic
because we're starting to see the traditional powers.
I'm fighting tooth and nail to hold on to what they think they've got.
Your you've worked in in China for decades.
You've worked in the auto industry. So you maybe you know what what's really
happening on the ground. Is there a growing sense of frustration
now of these concerns about China's overcapacity and exporting too
aggressively? Or is there still some sentiment out
there that still thinks that China is a market of plenty of opportunities?
Well, first of all, I guess Charles has mentioned this.
Michael will mention it as Janet Yellen said.
So going Joe. China has huge overcapacity problems,
which of course are challenging as trading partners, not just Europe and
the U.S., but also, of course, Brazil and other countries.
But China doesn't deny that, says there is no overcapacity.
So she just has to bear this and listen to it all over again.
I think that also she has to realize that Europe is basically using the new
toolbox they built up. There has been new anti-dumping cases.
There has been a subsidy case going on on EVs, which possibly will come to a
conclusion in June already. And then you have also procurement that
they're more less skilled to the Chinese and in Bulgarian trade.
So China has to realize that Europe has its own policy, its own trade policy,
and will actually use its new toolbox. So the time of good voice and warm voice
is over. China has to do something about more
opening up in order to balance the kind of trade that we wish we would have with
China. Warwick Let me get your thoughts in the
same topic. I know you have some views here on
overcapacity. Well, whether or not there is
overcapacity, whether or not it's a relevant topic to a conversation to be
had. Just give us your thoughts there where
the idea of overcapacity is a furphy. It's raised largely by countries with
incumbent industries that have failed to adapt to technological change, and
they're obviously facing competition. The fact is, is that trading nations
around the world have under capacity and overcapacity in different areas,
depending on what they're capable of and what they're good at.
The fact of the matter is, is that the European Union needs to find ways to
adapt to the changing technological and market landscape.
And one of the ways in which it can actually do that is to welcome foreign
investment, to build up its own productive capacity so that it can be
competitive. Your What about you?
Tariffs on Chinese exports. Is that a real risk now?
How close are we really when it comes to a possible trade war between the EU and
China now? We are not very far away and
overcapacity is an issue as China produces 2.5 times global demand to in
the sort of solar panels. For example, China can produce 50
million cars. It itself consumes 23 million actually.
What I was also telling Janet Yellen and Gwangju is that overcapacity is already
a huge problem within China because everybody produces stuff and nobody
makes money. And Europe is the last big market open
for cars and for other items. And China should be very interested to
actually maintain that trade imbalances as an all time high.
We had three years ago 3.4 ships, containers going to Europe for only one
came back. This year we will face 4 to 1.
China is indeed an export powerhouse, but it has to realize that Europe is not
going to stay open forever. Yeah, and you're the other side of the
other side to that same coin is, you know, the lack of FDI into China in
recent years or the drop off we've seen from trend.
Do you think that is a function of overcapacity in sectors that were
actually magnets for FDI? And if you think so as well, what
opportunities do you have? Do you see for foreign capital to play a
part in it? In Chinese, which sectors do you see the
most runway ERG? Well, first of all, in the equities
side, as I said, nobody makes fun of very few companies make money.
Actually, China in many ways just on investable, the market has been
underperforming quite a bit. But in the real economy, China remains
extremely interesting. And the car industry, you see European
in particular German companies pouring billions into this economy.
Still, the chemical industry is pouring billions into this economy.
So when it comes to real investment into concrete and steel, Europe is not
letting go. Actually, they are doing more in order
to actually catch up with China. And as I was saying, we actually in
Europe are very keen to have Chinese investors putting up shop in Europe.
The Seattle has two plants, one already running in the East Germany, one
building in Hungary. We want Biden to operate there.
So unlike in the US, Europe is very keen in order to have the Chinese investors
actually helping us to bridge the gap, because in many ways the Chinese have
gone already much more ahead of us, particularly the car industry.
So work it from the China perspective. Is there any sort of room for
concessions in this trip? And is it more going to be on the trade
side? Or what about the strategic partnership
with Russia? Is there any sort of leeway there
either? Well, on the trade side, I think the the
objective is to maintain open trade. And open trade will drive the the
allocation of capital, hopefully with the ability for the new capabilities to
augment European production systems. I mean, over the last 10 to 15 years,
European production systems have in terms of some of these new areas, the
new energy areas have fallen be fine. Having said that, you know, European car
manufacturers continue to export substantially into markets like China,
particularly in the internal combustion engine space.
So, you know, we haven't had a lot of complaints about overcapacity in
European manufacturers for the last 15 years.
So, you know, let's be fair about this. And what we've what we're witnessing at
the moment is just transformation, industrial transformation that requires
upskilling and the adoption of new technologies and know how.
And by working together, there's actually a much better chance of
achieving that and achieving the investment and trade flows that deliver
better living standards for people all across the Eurasian continent.
Warwick Just if you could elaborate on that, that's an important point, I
believe. Do you.
Well, let me rephrase it simply. Do you think the Chinese are coming
are coming into this conversation from a perspective, you know, from, from a
position of expertise in bringing in that technology?
And you're like, I want you to respond to that just after that.
But yeah, go ahead, Mark. Well, certainly in some of the areas
that have been identified as a particular concern, it's incumbent
industries in the traditional markets that have fallen behind, and yet that is
the direction of the world. Green development, decarbonisation, new
energy technologies, whether it's in transportation or energy storage or
energy generation, are going to be critical to achieving the climate change
objectives that pretty much all nations have agreed to.
Now, if we're serious about those transitions and the least cost.
Fastest way is the way that people should be going.
And if we can do that, it will actually catalyze downstream industrial
development opportunities, taking advantage of low cost, cleaner energies.
Yeah. Your your thoughts on that and and also
how, you know, how does Macron sell that domestically that, you know, the Chinese
are coming in with good stuff? Yeah, well, first of all, China has 60%
of global manufacturing capacity. They are standing for 31% of global
manufactured added value. So virtually every product worldwide
being produced is made in China. But China stands for only 40% of global
consumption. So there's a serious mismatch in what
they are pushing through the international markets and they actually
want to consume. And that will be mentioned by my call
clearly. And the fact of that is we have under 26
car companies in China, which already China finds not sustainable.
So something has to give for China has to actually let market forces rate
companies have to go bankrupt then or get off the market in order to also let
the top players get a little bit of more price margins.
And that's going to be very, very difficult in the process.
But it has to be done also for the sake of the Chinese domestic economy.
And let's see if Xi Jinping is listening.
Obviously remains to living denied, but overcapacity.
When you live in France, you are maybe your last question now, if
Donald Trump returns to office, does it change the game in any way, the
relationship between the EU and China? I don't think so.
I mean, we have Trump one and we really have both suffered tremendously from the
Trump administration. We had to trade more Europeans with the
US, and China didn't give us anything. I don't think that actually China took
advantage of that in many ways. I think, yes, we are both in the
doldrums. If Trump gets elected and Lighthizer is
going to implement what he has been outlining in his book, which is
interesting to read, they are still free trade.
Chapter 11 is all about what you will do to China, and he has also reserved a
chapter for Europe. So we are going to be in a hotspots
together, but I think there will be no alliance building between Europe and
China in that circumstances. Worry.
Final thoughts. If it's a Trump 2.0, how does this
change things are not Well, I think one of the problems is, is
that it's largely anticipated to be somewhat unpredictable and rocky.
So it is a little bit hard to put on the crystal ball and and see it clearly into
the future. But let me just say one thing about this
question of capacity, because I don't think that the description has been
accurate. Chinese manufactured outlets have grown
substantially over the last 30 years. But the fact of the matter is, is that
87% of outputs are consumed by the domestic economy, 13% are exported.
So this idea of overcapacity is actually an absolute nonsense.
There is exports, of course, but the majority of Chinese manufactures,
including the growth across all sectors, is being consumed by domestic industry
and domestic households.
