VW boss Diess at the WEF: "China is moving in the right direction"

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It could have been a very harmonious meeting for Chinese President Xi Jinping had he traveled to the Swiss Alps this year for his opening speech at the Davos World Economic Forum (WEF).

But the business elite is meeting in online discussions because of the corona pandemic - and is holding back criticizing the increasingly authoritarian People's Republic.

Volkswagen boss Herbert Diess defended the strong commitment of his group in China and the economic policy course of the government in Beijing.

"We see that democracy is not advancing in China"

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“I think China is moving in the right direction.

Last year we were able to achieve that two of our joint ventures are now majority owned by Volkswagen.

That was impossible for over 30 years, ”said Diess in a discussion with ECB President Christine Lagarde, Minister of Economic Affairs Peter Altmaier, his French counterpart Bruno Le Maire and David Solomon, head of the investment bank Goldman Sachs.

Of course, Diess cannot ignore the fact that there are blatant human rights violations in the country, that the Uighur minority and the democracy movement in Hong Kong are systematically suppressed.

"We see that democracy is not making progress in China," he said in response to a question from the US moderator.

"But to trade with the country, to communicate with each other, to be active there is much better than to pull yourself out of China."

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He hoped the "period of isolation and polarization" would be over, he said, referring to the US-Chinese trade war under the presidency of Donald Trump.

Diess hopes "that we will come back to a more open world with free trade".

Altmaier also rejected criticism of cooperation with China in the round.

Shortly before the turn of the year, the European Union signed an investment agreement with the People's Republic that had been negotiated for years.

At that time, the German Council Presidency was in charge.

In the US, this treaty was seen as a burden for relations with the new US President Joe Biden, who was elected at the time but not yet in office.

"The China Agreement was not a mistake," said Altmaier in the Davos group.

"To a large extent, it corresponds to agreements that the USA has already concluded with China."

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It is about creating fair competitive conditions, said the minister.

"I am very optimistic that we can negotiate and sign similar agreements around the world, and I think the US will follow this path too."

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Indeed, the treaty makes it easier for European companies to invest in China, it opens the market to sectors that were previously completely excluded, and it creates advantages in some areas that are explicitly mentioned.

For example, the production of electric cars.

Volkswagen, BMW and Daimler, who are investing billions in their joint ventures with Chinese automakers, benefit from this.

Thanks to the comparatively stable vehicle sales in China, the groups were able to offset part of the dramatic losses in Europe last year.

With the result that their dependence on the market has grown even further.

German manufacturers sold 38.2 percent of their new car sales in China last year, according to calculations by Ferdinand Dudenhöffer's Center Automotive Research.

That is an increase of 3.4 percentage points compared to the previous year.

From Dudenhöffer's point of view, the companies have no other chance than to continue to bet on the world's largest vehicle market.

"The option is: Either continue to invest in China or lose market share and importance in the global auto business," says Dudenhöffer.

The head of the Volkswagen brand board, Ralf Brandstätter, is also aware of the importance of China for his company.

The VW brand alone sold 2.85 million vehicles there last year - in the USA, however, it was not even 500,000.

From the manager's point of view, this blatant imbalance is not a problem for the company.

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“I don't see it as a dependency, but as a strength of Volkswagen,” said Brandstätter in an interview with WELT AM SONNTAG.

“The Corona crisis in particular showed how important several strong pillars are for companies.

No competitor has such a significant share in the world's largest automotive market. "

It is questionable whether the Chinese leadership will accept this high market share of German car companies in the long term.

So far, almost all of their vehicles have been built in joint ventures in which local partners such as FAW, BAIC, Geely or Brilliance have a 50 percent stake.

The regime in Beijing is increasingly loosening this rigid rule of participation.

Volkswagen now holds 75 percent of its electric car company in the Anhui province with its partner JAC.

The group subsidiary Audi, together with FAW, is founding a new company in Changchun, which will be 60 percent German-owned and will also produce electric cars.

What the new strategy of the KP means for car companies is open

For two years now, BMW has had a 75 percent majority in its joint venture with Brilliance Automotive, a partner that is currently in major economic difficulties.

In the five-year plan, the CP laid out a new economic policy strategy that starts out from two circles, an internal and an external.

And it has set itself the goal of strengthening the internal market.

What that means for the car companies is still open.

Diess hopes that the world economy will find its way back to the path of globalization and multilateralism.

He rejected a return to more local production chains.

Diess called for a return to the path of globalization.

"We will continue to rely on global supply chains and the global division of labor in the future," he said.

"Open markets have great advantages for everyone."

China's head of state Xi Jinping is promoting cohesion in the corona crisis

The World Economic Forum, traditionally held in the Swiss ski resort of Davos, is a purely virtual event this year.

The focus is on recovery after the corona pandemic.

You can see the opening speech of the Chinese head of state and party leader Xi Jinping in full length here.

Source: WORLD