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Chinese PM Li hunts for hi-tech in Europe

Chinese Prime Minister Li Keqiang Reuters/Damir Sagolj

German Chancellor Angela Merkel met Chinese Prime Minister Li Keqiang in Berlin on Wednesday. Li Keqiang’s visit to Germany is part of a trip that will also bring him to Europe’s capital Brussels where he will meet with EU leaders.

Li Keqiang’s visit comes as the traditionally strong relations between China and Germany are under some strain.

The trip started with auspicious news.

German car-parts supplier Continental said it would join forces with China’s equivalent of Google, Baidu, to construct driverless cars.

And Deutsche Bank announced that it will underwrite 2.7-billion-euros-worth of construction projects, together with the China Development Bank. The projects will be part of the Belt and Road project, the ambitious, 850 + billion-euro project that is planned to link China to South Asia and Europe.

But there are doubts.

“The EU is expecting from China that it opens more its economy to investors and outside companies,” says Jean-Pierre Cabestan, of the Baptist University in Hong Kong. “China is witnessing an economic slowdown and I don’t think that the trade and commercial relationship between China and Europe are going really to improve in the coming months.”

China, Germany and technology transfer 01/06/2017 - by Jan van der Made Listen

In spite of that, Chinese companies are increasingly moving into Europe.

Infrastructure projects include massive investments in a container terminal at the Greek port of Pireaus. And, more recently, controversial plans to open up a 350km high-speed rail link between Budapest and Belgrade.

The European Commission is currently studying the latest project to see whether it is in accordance to EU laws that demand public tenders for large transport projects.

Eventually, the railroad is to be extended to Athens, as part of the larger One Belt-One Road plan.

China wants European hi-tech

Apart from extending its Eurasian dream, Beijing wants to lay its hands on Europe’s latest technology.

“They see it as a place to get new technology in buying companies that have developed hi-tech and now China and a lot of Chinese companies have the means to buy such companies,” says Cabestan.

“Now the question is whether there will be some screening in the future, in order for the European economy to keep their best technology for themselves instead of selling them to China.”

A turning point in especially relations between China and Germany was the purchase by China's Midea Group, an electrical appliance manufacturer, of Kuka AG, a top-of-the-line manufacturer of robots, for 4,5 billion Euro.

“This was conducted against the will of federal government of Germany,” says Konrad Poplawski, a Senior Fellow with the Center for Eastern Studies OSW in Warsaw, who studied the issue.

“They didn’t expect that China could take over one of the leading robotic companies in Germany and the federal government even tried to block it. But they failed to do that, they didn’t have laws to block it.

It was the starting point of the decrease of political relations between Beijing and Berlin. Germany started to notice that China would become a competitor.”

German companies keen investors in China

The trend started in the 1990s, when China opened up to foreign investors.

Foreign companies could only operate as joint ventures with a Chinese partner and the condition for opening a joint venture was the transfer of the latest technology.

Germany was quick to go to China and companies such as Volkswagen, Audi and Siemens started to massively invest in joint-venture projects. Transfer of technology was not seen as something that would backfire.

“Germany perceived this model as a starting point,” says Poplawski. “They felt for now, for the 1990s, it was OK, they thought [China] would liberalise later on."

Those expectations failed to materialise.

Restrictions on foreign investment are still tight, says Poplawski. “For example, German carmakers have to hand over data of their electric cars to one Chinese public institution. And therefore they are afraid that the Chinese government can get some precious data of the cars and of the technology by doing so.

“So this partnership starts to be even less equal than it was in the past."

During the EU-China summit on 1 June in Brussels Li Keqiang will meet EU leaders.

But it remains to be seen if Brussels will be able to design a concerted policy that will slow down Beijing’s quest for European technology that it uses to try to beat European competition.