At first glance, everything looks fine in China, the European Chamber of Commerce in China introduced its annual position paper presented on Thursday.

European companies would have set new records for sales and profits in China in the 2020 pandemic year.

In the short term, the country's growth prospects for the foreign economy remained good.

Hendrik Ankenbrand

Business correspondent for China based in Shanghai.

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The chamber fears, however, that this will not stay that way in the longer term.

More than ever, the most important representative of European companies criticized the isolation course of China's President Xi Jinping in its assessment.

The fact that the country and its leadership is turning “more and more inward”, as in the new five-year plan published last year, is arousing concerns among European companies as to whether and to what extent they will still do business in the country in the future are allowed to do.

Will China lose the race with the US?

The government is increasingly strengthening the state economy because it sees it as "safe, predictable and, above all, controllable". With regard to the harsh crackdown by Beijing regulators against Internet companies such as Alibaba, Ant Financial, Tencent and Didi since autumn last year, the chamber writes that China's leadership is trying to "increase control over the dynamic private sector in order to achieve political goals" .

This means that state leader Xi Jinping wants to force private companies like Alibaba and Tencent to stop investing in profitable businesses with Chinese consumers such as e-commerce, delivery services and video games.

Instead, according to Beijing's will, companies should increasingly invest their billions in the development of semiconductors, artificial intelligence, robots, autonomous driving and other technologies, which the leadership wants to have fully manufactured in its own country in the future, so as not to foreign powers like them To be dependent on United States.

Long term expensive strategy

The Chamber of Commerce writes that this form of planned economy could lead China to lose the race with the US.

The rise to an economic superpower is "anything but certain".

It does make sense, in the age of the virus, to relocate the supply chains more at home and thereby make them more resistant to shocks such as the lockdowns in many production countries.

But in the long term, this strategy will be expensive for the country because it requires a steady flow of government subsidies and the maintenance of tariffs.

Because China's competitiveness is falling at the same time, the country's goal of achieving international technology leadership and, as Xi Jinping promised, to become carbon-neutral by 2060 is also in danger.

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