“Europe has to become faster and more effective”

Dr. Nicole Hoffmeister-Kraut, on industrial partnership and competition with China

Dr. Nicole Hoffmeister Kraut, what were your impressions of your trip to China at the end of February? Are growth and opportunities the same as before or are geopolitics making prospects bleak?

Five days are of course far too short a time to be able to deliver a substantive economic assessment of China’s capabilities. But I have to say that my delegation and I were in some respects quite impressed. China’s dynamism and willingness to take risks, particularly as far as new technologies like artificial intelligence are concerned, as well as its promotion of start-ups are exceptional.

We need to be aware of the fact that we are competing against China in a contest of the systems. China has formulated clear objectives in its “Made in China 2025” and “Belt and Road Initiative” strategies aimed at achieving market leadership in a wide range of technologies, where our companies are very successful. I have no reason to believe that China will not emphatically pursue these goals. China and its huge market provide our companies with massive opportunities. That is why I therefore hope that China and the USA will soon be able to settle their trade dispute.

AI and electromobility are new challenges: is the advantage that Baden-Württemberg’s automotive and mechanical engineering industries have acquired over the course of many years now at risk from Chinese competitors?

At least the traditional allocation of roles has clearly changed. We are observing an explicit transition from quantity to quality and China is increasingly becoming a competitor. China’s dynamism, speed and willingness to take risks have impressed me.

Even if China has caught up in the automotive sector, I still see our companies as being better positioned. We benefit from our unique structure involving a strong medium-sized business sector with many hidden champions and powerful clusters – all coupled with an excellent R&D environment. Another asset is our dual education system, which provides us with superbly trained professionals. But for all that we must be conscious of the fact that Baden-Württemberg’s competitiveness is not to be taken for granted. It’s high time we press further ahead with our innovation policy and invest in education, R&D and infrastructure. That’s the only way we will be able to compete on the international stage in the longer term.

As far as government support for key areas of industrial research and safeguarding the future are concerned, can an individual federal state or even the Federal Republic itself compete effectively on their own against the People’s Republic? In this context what role do EU programmes play?

The key fundamentals are boosting your own strengths and putting your own innovation policy centre stage. Back in the summer my ministry developed an economic strategy for AI. This includes an AI innovation park – a key project for commercialising AI in Baden-Württemberg. This is designed to model the entire value chain from research/development through to testing/utilisation. A 5G transfer centre for SMEs is already being implemented. But in fact, we need to re discuss several issues, like how Europe can pack a more powerful punch, how we become faster and more effective, whether our competition law needs to be reformed and how we can provide the data required for new business models. I am convinced that we won’t be successful if we copy China. Our drivers of innovation are the European fundamentals of market, competition and competitiveness.

Equal treatment of domestic and foreign companies plays an important role in the trade policy discussion with China. Have you raised this issue? What are your expectations?

I felt it was very important to use the visit for constructive political dialogue as well. Political contacts are a fundamental prerequisite for providing targeted support to companies and addressing problems openly. Our long-established relationships with our partner provinces in particular play an important role here. Of course, I have broached the subject of a level investment playing field as well as protection of intellectual property and implementation of the cyber security law. It’s only when we keep on addressing these issues and do so at all levels, are we able to win support for our ideas.

What do you regard as being the most important areas for closer cooperation between German and Chinese industry – areas that will generate genuine, substantive win-win situations?

Germany and Baden-Württemberg in particular have technology know-how at their disposal in all key areas of the “Made in China 2025” strategy. That is why China has a major interest in cooperating in these areas in particular. China, as Asia’s most important market, plays a key role as far as our companies are concerned. Long-term cooperation can therefore benefit both sides.

How would you formulate your invitation to potential Chinese investors in Baden-Württemberg?

Overall Baden-Württemberg benefits from foreign investment. This also applies very explicitly to Chinese investment. Baden-Württemberg represents open markets, free movement of capital and reciprocal investment. In turn this is what we expect of the investment climate for European companies in China. What we won’t accept is a targeted, state-controlled outflow of key technologies. Those who accept these rules are most welcome.

 

Hans Gäng
21.10.2019
von Global Business Magazine