Chinese leaders believe overcapacity across industries including automotive is a cyclical problem that fresh growth will solve. Foreign investors with experience in the PRC see things differently. To them, overcapacity is a direct result of China's planned economy. Not only does massive overcapacity spark price wars inside China, it also threatens to spur an avalanche of exports into markets worldwide, undermining industries and killing jobs. Joerg Wuttke led the China operations of BASF, the German chemical giant for 27 years. Mr Wuttke knows China like few people on the planet. In the summer of 2024, he became a partner at the Albright Stonebridge Group based in Washington DC. Mr Wuttke is considered one of the world's leading experts on Europe-China trade and investments. Today, we talk about what Mr Wuttke calls China's "breaking point" when it comes to overcapacity. How soon will it arrive? What will it look like?
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Speaker 1 (00:02):
As a longtime foreign correspondent, I've worked in lots of places,
but nowhere as important to the world as China. I'm
Jane Perlez, former Beijing bureau chief for The New York Times.
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(00:23):
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Speaker 2 (00:35):
Where top executives and crazy entrepreneurs gathered to talk about
the future of electric vehicles. This is the Driving with
Done podcast.
Speaker 3 (00:46):
Hello and welcome to the Driving with Done podcast. I'm
your host, Michael Dunn. Now go to any China related gathering,
whether it's in Asia, United States, or Europe. I just
got back from Spain mention the word over kapacity, and
there's bound to be controversy. Chinese leaders, on the one hand,
believe overcapacity across industries, including the automotive industry, is just
(01:09):
a cyclical problem that can be solved with fresh growth.
Foreign investors, on the other hand, with experience in the
People's Republic, see things differently. To them. Overcapacity is the
direct result of China's planned economy. And not only does
massive overcapacity spark price wars at home, they say it
(01:31):
also threatens to spurren avalanche of exports into markets worldwide.
What does that do? It undermines industries and kills jobs.
No wonder it's so controversial this topic. Well today joining
us is Yorg Wudca. He knows China and he has
a view on over capacity. He led the China operations
(01:54):
of Basf, the German chemical giant, for twenty seven years.
In the summer of twenty twenty four, he left Basf
to become a partner at the Albright Stonebridge Group based
in Washington, d C. Mister Wuka is considered one of
the world's leading experts on China trade and investments. Today
(02:16):
we talk about what mister Wuka calls China's breaking point
when it comes to the big old word over capacity.
You're going to love this episode because mister Wuka takes
us deeper into understanding exactly how overcapacity comes about in
China and why it's so intractable. More importantly, he paints
(02:37):
a picture of what happens in twenty twenty five when
we reach that breaking point. What does it mean for China.
What does it mean for markets worldwide? Here we go
with Jorg Wutka partner albright Stonebridge Group on the Driving
with Done podcast. Your Goodka, thank you so much for
(03:11):
joining me today on the Driving with Done podcast.
Speaker 4 (03:13):
It's welcome and greetings from DC.
Speaker 3 (03:17):
Now you're, as I understand you originally from Germany, lived
many years in China, now in d C. How do
you get around DC? Just curious?
Speaker 4 (03:25):
Well, it was a tough start, you know, after thirty
five years in Beijing and working for two multinationals, the
US was a new country for me. Not that I've
visited before, but I've never lived here before, and consulting
is very different from working in huge multinationals. But I
must say I have I had a very steep learning curve,
(03:45):
and I have great colleagues.
Speaker 3 (03:46):
I'm finding my feet right, finding it very fantastic. Speaking
of finding your feet, you found feed for all of
us this week in a very powerful and compelling opinion
piece that was published in the Wired China where you
talked about the the O word over capacity, very sensitive,
very volatile subject. Recently, I want to read from your
(04:10):
piece itself to get us going. It says here China's
overcapacity problem is nearing its breaking point, and it does
not appear Beijing has the ability to address it. So
let's begin with the first part of that. What is
the overcapacity problem in China?
Speaker 4 (04:27):
Well, it's systemic. It's not a book. We had this before.
I launched a report in twenty and sixteen as Chairman
of the European Chamber and that was very well received,
and then China grew out of it. They still had
the capacity of having strong rows, which helped. Of course.
Sixteen keep in mind was the global financial crisis the
aftermath of that. No, Actually, the first one I did
(04:51):
in two thousand and nine two thousand nine, yes crisis,
and the one in twenty sixteen was basically a warning shot,
and it was a little bit based on my political
and economic coach, a former minister of the junej Cabinet
who unfortunately passed away in twenty twenty. That's why I
can talk about it. Chairman le Room Rong, who was
heading SASSAK, advised me that the over capacity issue is
(05:16):
not just difficult for trade relations, it actually is corrosa
for the Chinese economy, and was guiding my thoughts about
this and so two thousand and nine, twenty sixteen, two reports.
I did a report in twenty seventeen called Made in
China twenty twenty five where I warned that everything that
China's planning ends up in over capacity and China last year,
(05:39):
and I also had the honor of briefing Secretary Yellen
and Guangzhou in April, the response of the Chinese government
was basically, there is no over capacity. So I left
everybody in a delusional state. But I was very encouraged
this week when for the first time they actually acknowledged yes,
there's over capacity.
Speaker 3 (05:57):
In your article. In fact, there's a call out here
vote from the Vice Minister one Lean June saying some
countries have repeatedly hyped up the overcapacity issue, which is
actually meant to suppress and contain China's development. This is
fundamentally a form of protectionism, severely under my global industrial
(06:18):
cooperation and so on. So as you say, China is
in denial mode saying no, no overcapacity. If you had
an opportunity to speak with if mister Wang was on
our podcast today, what would you ask you.
Speaker 4 (06:33):
Gret So The political constraints of what you can say,
of course, everything, there is no overcapacity. But under four eyes,
of course, p you acknowledge that overcapacity means under utilization
of assets, meaning you have one hundred and forty car brands.
You have four hundred and forty eight car factories in China,
and only twenty of them have a capacity load of
(06:53):
sixty percent and above, meaning they make some sort of money.
Bid certainly, I think as one hundred percent capacity load
they make lots of money. But everyone else, everyone else
means one hundred companies at least lose money. And this
stay in the game. There has to be a market correction,
unlike in open societies open economies, where basically companies go
(07:15):
belly up once they don't make money. Here, of course,
in China you have a support system meet evergraining of loans.
I remember very well when mister Lee, Chairman Lee said
to me, York, do you understand that actually there are
no over capacities in pants and in socks? Why? And
I said, yes, chairman ly because they're private companies. Once
they make no money bank they go out. But China
(07:37):
has one hundred and fifty thousand sooe small ones, one
hundred big ones. And of course this day in the game.
It's all about market shares and hope that they can
exit the last So in a way, it's corrosa for
the Chinese economy.
Speaker 3 (07:48):
Tell us at let's go a little bit deeper on
the mechanics of how overcapacity works in China. You were
there for many, many years. For people who have not
spent time in China, it's hard to get their head.
How does this happen, especially in the state enterprise environment.
Speaker 4 (08:03):
Well, China has a plan. China's a planning economy, and
whenever they have a plan, basically everybody in the industry
knows that there's going to be money, second, there's going
to be demand, and then third the foreigners will be
kept out of the game until the others are big
enough in order to compete. So basically a system where
(08:24):
everybody can anticipate a market development and then it replicates
across all these thirty provinces and regions, and everybody wants
to have a piece of the cake. And that's why
always any plan leads to over capacity. You can be
assured of that. And again, as chairmanly said, there is
no exit mechanism, there's no exit valve in the fact
(08:47):
that companies go bankrupt. There are bankruptcies. But again, if
you look into the car industry, for example, it is Southwest,
it's high Fie, it's the private companies, it's the Koreans
partly leaving Ford closing down. It's all those that have
to react on market forces. Everybody who has a little helper,
mother's little helper government. Then they hang in there too
(09:08):
long and hence you have an incredible price erosion that
is harming China. And it shows also an export data.
You know, in twenty twenty two Europe, China had an
export deficit four hundred billion US dollars, so four hundred
billion dollars more sold into Europe than Europe was selling
(09:29):
into China. And you look into the container movement, I
think it was three point four containers going to Europe
and one comes back. Twenty twenty three looked like a
decent year two hundred and ninety billion trade deficit only,
so something positive happened. Either China was exporting less, so
Europe was importing into China more. Turns out to be
(09:49):
three point seven containers went to Europe and one came back,
meaning ten percent more containers in twenty twenty three. So
How does that fit that you have less of for
nextport in US dollars, but you have more containers. It
is simply over capacity. The prices of solar panels went
down by sixty percent, you had electronics going down by
(10:10):
forty fifty percent, So more volume across the border and
less dollar clicked the signpost, and of course the export
has made less money.
Speaker 3 (10:20):
This sounds like a problem for China and maybe even
a bigger problem for the rest of the world. I mean,
isn't a Chijiping who went out there and said, we
want China to be less dependent on the rest of
the world and the rest of the world more dependent
on China. How do we work out of the situation, which,
as you describe, is actually systemic, It's part and parcel
(10:41):
of China's plan. How do we get out of it?
Speaker 4 (10:44):
Well, you have a situation where if there's overcapacity and
it happens to a head for your ports, you can
close it. You can have terrorists, you can protect yourself.
The Chinese domestic economy cannot protect yourself, meaning most if
effect is within China, and it shows in the decline
of industrial profits, and the decline in industrial profits translates
(11:07):
into less research. Everybody is sort of doing a development,
of course, but basic research is gone unless you are
bid or companies like that. And you have a situation
where companies are starting to cut corners, you know, doing
a water treatment plant twenty four to seven or maybe
shut it down during the night time and stuff like this.
(11:27):
So in a way, companies are very stressed out and
it shows in the equity markets. How you get out
of this is basically by market consolidation. It has to happen,
as it happens in other economies. Does baiting have the
political will in order to actually facilitate that process, safeguard
the rights of those that have to exit the companies
they're getting unemployed, and helping the other companies in order
(11:50):
to do the consolidation. My hunch is this is the
year of consolidation.
Speaker 3 (11:55):
I think twenty five I will.
Speaker 4 (11:57):
See consolidation massive style because the pain too deep and
the local governments are running out of cash. To keep
this game going, it has to happen, and companies have
to earn a living in order to do all of
the above, meeting following the laws and make a profit.
Speaker 3 (12:11):
This is why you use the word the term breaking
point twenty twenty five is the year, yes see a change.
And you mentioned the folks in Beijing. So again for
people outside of China, you and I understand Chinese have
this expression. It's called shang yo juansa shahyo twitsa. That is,
people in Beijing have a vision about how things ought
to be and there should be more competition and less overcapacity. Maybe,
(12:34):
but the people the local levels at every province, as
you said, want to duplicate. Oh, this is where the direction,
that's where the money is. We want in too, And
how come Guangdong can get in and Way can get
in and we can't. We all want in. Yeah, So
this is the kind of mess we find ourselves in.
And you're saying that we're at a point where the
(12:55):
local governments are going close to bankrupt and Beijing may
not be there to be the last resort of lending
or where would it break.
Speaker 4 (13:05):
Well, in the end of twenty twenty three, China put
I guess twelve provinces on a life support system similar
to the IMF. Well, these twelve provinces were told game over.
You know, we stabilize you, you will not go down.
Tanging is one of these areas, but you have to
stop building roads that nobody uses, opera houses where nobody
(13:26):
is singing, and you have to basically as in companies
that are losing money. So that was actually a very
sensible step by the central government. And again I think
in these provinces you have to in particular those twelve,
you have to help in the transition. It has to
be funded well, they have to be supported. They can't
just let the go. Primarily I think about the northwest
(13:48):
of course Hailu, Jiang, Jilin and Leoning, and of course
the southwest with Guangxi and Yunan. So there has to
be a stabilization momentum from Beijing and maybe stimulants on
new economy and less of an emphasis of state on enterprises.
Private enterprise again enter the market and exit once they
don't make money. The others can go, can go on
(14:11):
as long as they or the party wants them to function.
And that's the problem that actually, you know, the whole
Polberal believes more in state on enterprises. So for them,
it's a hard ideological break in order to see that
these companies that go bankrupt, But it has to happen,
and I guess that Channa's well advised to have more
(14:33):
of these private entrepreneurs succeeding that have been so incredibly
innovative over the last years. The mechanism is politically hard anywhere,
but over capacity is something that is corrosive in for
the equity markets and for the local governments and regions.
But you know, it's always spawned spawning beating, like aren't
(14:55):
you happy that we are giving you solar pens virtually
free of charge? You know, I you're happy about our
very inexpensive EVS cars. Of course we are. And there
are countries in this world that cannot get enough of that.
Australia doesn't have a supply chain on cars, of course
they like the cars. But if you look into Turkey, Brazil, Thailand, Europe,
of course those countries have come up with protective mechanisms
(15:20):
to safeguard their supply chain and make that transition amenable
for their people. And the US has come down hard
and you know, high fences, very high fences, you know,
make sure that there are no cars and other stuff
from China coming in. So China has to accommodate to
the fact that the world cannot be its over capacity
safety development.
Speaker 3 (15:39):
Yes, the numbers were just alarming, sensational that then the
last year I think China had a one trillion dollar
trade surplus and they're not making any apologies about it. Oh,
the world loves our products, yeah yeah, and yet eventually
if this plays out, it means we lose our own
industries in the West. Do you feel as though the
West had the will and the backbone to hold the
(16:03):
line with regards to this, because you do have people
out there advocating on the consumers deserve to have the
best product at the lowest price and they don't see
the trade offs that costs associated with it. Will Europe
and other places be able to hold the line your view?
Speaker 4 (16:19):
I think Europe again twenty seven member states. You have Cyprus, Malta,
they don't have any of these cars, solar panels, turbine producers.
They don't care the cheaper the bank you have of course,
the Danes with vestas, you have the Germans for the
cars and the solar panels used to be at least
some solar panels. Of course, they want to maintain a
stability in the supply chain and want to keep this going.
(16:43):
And again, I mean, you know, you made a very
very substantial investigation last year and they found that some
companies got subsidies and they went through the whole supply chain.
It's not that BYD got a subsidy, it was the mind.
It was the transportation was electricity subsupplied a Limum steel
and it ended up in a car called BYD. And
(17:04):
they got seventeen percent of terrorists, which is nothing for BYD.
Saiic got thirty percent, the Germans ironically more than twenty percent.
So in a way, this study has clearly indicated whether
the subsidies are they're outsized and they are basically hampering
a fair competition. It's like nineteen eighty eight where you
(17:24):
have Carl Lewis running against Ben Jonson. It's the same
distance of one hundred meters, but one of the guys
has red eyes.
Speaker 3 (17:33):
And I've never heard that one before. I love that
one of the guys is used.
Speaker 4 (17:40):
Yes, exactly, that's the English word. So in a way
it has to be changed. And also for the benefit
of China. Why shouldn't Chinese companies earn a profit, Why
shouldn't they have a decent abbit, you know, so spend
the money on research and they can pay their people better.
If you look into wind turbin manufacturers, I think nobody
(18:00):
made money. They have incredible installation of wind turbines in
China and they're starting to export this and these products
are fantastic. Mean Young is one of them, and sid
of file. I think it's called and so in a way.
But you know, part of being business is it has
to be sustainable. You look into scaling up, you know,
(18:21):
you see, you see already the end game. You know.
I think BYD has a capacity of three point five
three point eight million cars production every year and they
plan under twenty twenty six to expand to six point
five five. You know, hey, the whole domestic market of
China twenty three million cars. You can see the blood
bess already four Chinese companies in China China want I
(18:45):
definitely should not. They should have a market which is
fair and square, and they have to stop with these steroids.
They have to, all right.
Speaker 3 (18:53):
I love where you're going with this. I want to
ask a tough question because veterans who like us, who've
lived in China long time, there's two incentives, two motivations
happening at the same time. One the companies themselves want
to be profitable, They want to grow, they want to
make money. At the same time, the nation China wants
to be Fujiang, wealthy and powerful state center stage, and
(19:18):
up until now, it seems like China is willing to
sacrifice the profits made at the companies in order to
win out on a more national power level. Do you
so twenty twenty five year projection? First of all, do
you agree that there's that tension in play? In two?
Is there a reason to believe that Beijing would give
(19:39):
more love to private companies than they have in the
last five to ten years.
Speaker 4 (19:43):
It would not be in the mindset of the Party soldiers.
Certainly there will be on the edges in some areas,
some accommodation, but always in the framework of you know,
guys with the Party and even deep seeks sitting in
the first role listening to that. So, yes, there is
a new dimension of understanding in the Party that they
need these fantastic private entrepreneurs. But to a certain point
(20:07):
only you know, and it is always the kind of
fear that is I think built up during the trauma
traumatic Soviet Union and as well as the starting of Russia,
meaning you know, a system collapses and then oligards are
slicing it up and become more powerful than the politicians.
I think Ttping has this trauma and he will definitely
(20:28):
make sure it's not going to get repeated in the republic.
So I guess that what's going to happen there has
to depend on how they see the problem. They see
the problem, unfortunately as a cyclical challenge, a cyclical challenge
that China can get out of that. I think China
is going through a structural problem situation, and they have
(20:51):
to have to reform, you know, and Rea dash form
in the sense of they have to reform the economy
in order to face the next challenges they have. They
plucked the low hanging fruits, so they have to now
face the fact that the working population has been sinking
since twenty eighteen. The population as such is dropping since
twenty twenty two, and so they have to actually really
(21:14):
make that shift. And they are going in the right
direction with a digital with robotics and supports and supports,
but it is not necessarily helping those folks in the countryside.
There's a million of them.
Speaker 3 (21:29):
I read with great interest a quote from you recently
where you said you know someone asked, what's the difference
between Chinese people that you knew in the eighties when
you first went there and today, and basically more or
less you said they were humble and very curious, hungry
to learn, and now not so humble and not that curious.
(21:51):
What does that mean for Western companies? Is there still
an opportunity or role to play in China for Western
companies where we sort of, ok, we learned everything we
needed to learn from you guys, next move out of
our way.
Speaker 4 (22:04):
Yeah, it has shifted. China used to be an export market,
then it became an investment area, and now that's declining.
For example, European Union twenty seven companies in November sold
more into the Swiss economy than into the Chinese economy,
and the strength line will carry on. Last year, Germany
exported more to Poland than China. So putting is this
(22:27):
way we are more export wise dependent on the Polish economy.
Speaker 3 (22:33):
Oh my goodness.
Speaker 4 (22:34):
So in a way it has completely shifted. But what
should not be disregarded is the fact that I call
China fitness center. China has an incredibly deep bench in engineering,
has incredible innovation skills, has a digital landscape, which is unique.
And so in a way, if you want to be
in future technologies, you have to be in China. And
that's why I completely support the German car companies are
(22:58):
putting more money in my exployer Beyers f stays in
the game in the fitness center, and they all in
particular car industry. Of course, they have to unlearn how
to build cars, and they have to learn how to
build mobile phones on wheels. And the only place where
you can make that transition fast is in China, where
you have the clusters, you have the engineers, you have
the demand story, the digital demand story. So whoever is
(23:22):
exiting the Chinese market does it as her own peril
because they might lose out on this learning process. So
in a way, yes, China's disappointment when it comes to
exporting to China, it becomes tougher to invest to make money.
At the same time, you still can gain and learn
from the Chinese a great deal.
Speaker 3 (23:39):
So might we might begin to think of it as
investment in R and D. We have a China R
and D budget to go learn what they're doing and
doing right.
Speaker 4 (23:49):
Not only that, it's also engineering. You know, fifty of
the top one hundred Global engineering universities are in China
forty seven out of one hundred top universities and chemical
engineer and RN China. And again China is not super
championing everything. I think they just have two out of
one hundred. In medical science, the US is forty five,
Europe forty, so it is it is not balanced. But China,
(24:13):
in the area at least where I work chemistry and engineering,
there is a world champion, really top class. So you
might want to have an engine top and engineering center
in China that serves you globally in drawing the plans
for your facilities. Be it in Texas, b's in Germany,
be it elsewhere. So that's very important, not just R.
It's very little R. China does extremely little. Are China
(24:36):
is world champion in D in development people together. They
are certainly championed some very specific areas. Huawei stands for
it in CTL, but then the other is designed. The
Chinese customer is really brand iloial. You know, if it's
not cool, if it's not funky, I don't buy it.
If my father drove e Benz I drive events, my
(24:57):
son has gonna drive him a cespence And in China
all such a thing not called not bought, and so
in a way you have to really you're forced to
be very fast in lap to market coming out in
the marketplace. China is again a fitness center and that respect,
and then on top of it, in design, it has
to be top end and it has to be always
(25:17):
different from your competitor. That's why China's design heaven in
this respect. And it's very notable that the BMW seven,
which is built in Munich designed in Shanghai and it
looks it looks for duristic. You know, BMW was leap
flocking by handing the design work to the Chinese engineers
in Shanghai. Also for the reason is the majority of
(25:41):
seven series is bought in China, so you better look Chinese.
Speaker 3 (25:44):
What is the outlook for those premium brands in the eighties, nineties,
two thousands, twenty tens, like the Chinese called abb Audi, BMW, Benz,
they were like gods to Chinese consumers and you couldn't
imagine a day that they wouldn't remain They're like forever god.
And yet in the last couple of years we've seen
(26:04):
them waiver a bit. In fact, portions sales last year
were down an astounding thirty three percent. Yes, if you
are an investor in those German premium brands and Chinese
your main market, what's the outlook, Well.
Speaker 4 (26:18):
The outlook is more competition and you had you have
to get out of your comfort zone, less complacency and
certainly no extrapolation allowed anymore. It has to be, it
has to be according to the Chinese taste buds, you know,
they are the twenty three million car market and the
upper class definitely thirty forty percent is in China. So
(26:39):
you Petta designed these cars as BMW does according to
Chinese taste. But that might be very hard to sell
back home because people in Germany, at least my own country,
they're less tech saving than the Chinese.
Speaker 3 (26:51):
You know, right, that's right, are in.
Speaker 4 (26:53):
Say, you know, what the hell is this? You know
as a computer, So in a way that it has
to be balanced. But I think that individualization is very important.
The branding. I think that's where still the German car companies,
or the Italians or some of the French have an edge.
Branding is always a promise, a promise of something, and
(27:14):
they have to find features where the Chinese are not
as good in this respect, but again they have to learn.
I mean, it's a different customer base. I learned from
one of these companies that the average Chinese scrolling spree
point one kilometers on the Huawei or the mobile phone,
you know, and an average Chinese is apparently sitting one
(27:34):
point six hours every day in a not moving car,
And that should give us some idea of why they
do this. Because it's cool to sit with friends in
a car which has this super sound system, has all
kinds of gimmicks. It's just fun. You know. In Germany,
you don't drive a car because it's fun. You drive
because you want to get from a to B, you know.
So it has to be it has to be internationally
(27:57):
minded a car at the same time based on Chinese
in gods. So in a way, if you cut yourself
off from China there you definitely face more challenges. So
in a way, I think the US car industry is
going to face a major challenge by being cut off
from this fitness center.
Speaker 3 (28:14):
As you said, well, Jeep's already out, yeah, significantly smaller.
GM took a five billion dollar charge last year. Its
market is fallen by two thirds. Yes, be a poster child, right,
GM Shahi GM. Wow. That's that's the target. That's the
benchmark for how you want to do a joint venture
in China. Today's shambles. So that's very unsettling for Western
(28:37):
automakers and companies in general. Is there a market upside
anymore in China? Or is that ship sailed? What I'm
hearing from you is that ship is probably mostly sailed,
except for premium segments like the Germans, and that the
real purpose of being in China is for that fitness center.
I think you called it China Fitness Club. Is that right?
Speaker 4 (28:57):
Yeah? Right?
Speaker 3 (28:58):
Have you trademarked that name or no?
Speaker 4 (29:01):
I did not, and Tom Friedman used it recently, So
I'm very five start.
Speaker 3 (29:06):
Okay, big picture, York, it's you were there all together.
I think eighty eight was your first year, is that correct?
Speaker 4 (29:14):
I was the first time studying in Shanghai and eighty two.
Speaker 3 (29:19):
At school there Shanghai, which.
Speaker 4 (29:21):
Was based on a picle that was built on a
buick from the thirties, and of course they had to
Shigovich and the Moscovich and all these cars, and now
they have the most futuristic cars in the world. So
I went I went from walking by foot bicycle to
having show me a portionl like car. I mean, it's
just I was so privileged to cover that period of time.
(29:42):
I worked in China since eighty eight on and off
eighty eight nineteen, then ninety three onwards, all the way
until I retired last year, and I was privileged to
see this, this incredible growth story. But at the same
time I was sad at the end to see how
China's closing up, how China is paying lip service to Oh,
how China is promising opening up and are still As
(30:03):
president of the Upean Chamber, had to launch a position
paper every year that had nine hundred and sixty points
of reference in Vaunta thirty pages. So last time I
met the Chinese government and they said, oh, what can
we do for European business? And I said, please stop
asking me, and I shuffled with paper, start reading and
(30:23):
maybe my successor yanes escland has only five hundred points
to present it and I made two hundred pages. Then
I can see you actually read it and implement it.
Don't come with this Boau and China Development Forum, my
Sunday speeches, you know, and this poor fellow yes, my
success a great guy. Actually, in the end of last
year he had to sell a position paper with one
(30:45):
thousand and fifty four points and exactly for the thirty pages.
So it actually didn't get better. And that tells you
something about the discrepancy of words and actions. And that's
the problem in China. They think that words will make
us come. No, the size of the mchamp white book,
the size of the European Chamber position paper will be
(31:06):
decisive investment. Last year, European companies invested ten billion dollars
into the Chinese economy. If you look at the investment
of European companies into the United States last year was
nine one hundred ninety six, you know, so we invest
more in Texas than in China. And if you look
into the investment stock over the last twenty years of
(31:26):
European companies European twenty seven companies in China, it stands
at one hundred and eighty five billion US dollars. You
will be very surprised to see that the Chinese stock
of investment in the European Union stands at one hundred
and eighty four more or less the same, you know,
And the investment stock of German or European business in
the United States of America is a call two thy
(31:48):
four hundred billion US dollars meaning two point four trillion.
Now you see two point four trillion and you can
see one hundred and eighty five billion, you know. And
the difference is not on the market size opening it
is m and as you know, that's why the Chinese
number in Europe is so big. You can buy some
gentle for thirty five billion, You can buy p ready
for a couple. We can't do the same. The big
(32:12):
exception was in the kindest re billions twenty five percent
handed over to to BMW. What happened to Delantez in Guangdong.
They were supposed to buy a new GAC, didn't work out,
they left, You know, way, we are totally totally underrepresented
and underinvested in the People's Republic, and we face serious
criticism by everybody that we're over dependent on China.
Speaker 3 (32:34):
That's such a crucial point you're making here. The response
you get from the leadership in China when you put
forth these papers so question and we're sensitive. Is it
that they think we're naive or they're not interested? Why
wouldn't they take that at face value and go, this
(32:55):
is serious. We want to make changes.
Speaker 4 (32:57):
Because they don't have an individual like Prime Mister jero
g at the forefront, a guy who was stepping on toes,
a gentleman who actually, against all the odds, managed despite
the bombing of the transendaals in Belgrade in ninety nine,
he managed to get China into W two in two
thousand and one. What a political achievement, you know what
(33:18):
happened to him. He's the only prime minister in the
history of China that only got one term because he
was uncomfortable, you know. So in a way you have
a situation where they are not decisive enough in order
to tackle structural problems. Again, the viewpoint on the economy
today is cyclical, but it's structural. So in a way
(33:38):
there has to be some political guts in order to
do difficult decisions. And now's the time, and I hope
twenty twenty five will be wake up call.
Speaker 3 (33:46):
Okay, very convincing. Let's pivot here for a moment to Europe,
because Europe's in play, so to speak. Right now. You've
got the United States sending a bombshell message to Europe
you're Russia on the doorstep as friendly. Not not sure.
Where do you see the relationship between China and Europe
(34:06):
going specifically, it.
Speaker 4 (34:07):
Will remain tense. Again. China has lost a lot of
goodwill in many countries due to the fence sitting during
the Ukraine War, I mean active fen sitting in the
sense of it. A lot of their material ended up
on the battlefields on the Russian side, you know, and
they were not precisely, precisely very helpful in prisoner exchange
and getting these thirty sounds of kids back and stuff
(34:28):
like that, everything that the Europeans asked the Chinese to help.
So but at the same time, it's an important trading partner,
and I think I always plead that we should keep
European or bought us open for Chinese products. Our consumers
like it. You know, I would definitely vote for tariffs
because that's a value added tax for your own consumers.
(34:49):
What Donald Trump right now is doing is taxting. Is
all people selling it as the Chinese are going to
pay for it. A's good months and so of course,
so in a way keep it open and try to
invest as much is possible Chinese investment into your We
need their supply chains. We need the same effect that
Tesla did to the supply chain in China by putting
up Shanghai and getting everyone else and everybody benefits from
(35:12):
the supply chain. That has to be replicated. You'll, we
want to be in the future business of electric vehicles,
and there we need the Chinese companies, you know. But
fair and square, there has to be bureaucratic oversight, investment
screening to make sure that they are not just putting
up shows but actually real factories and employ Europeans in
this respect. So I think that might be happening. I
(35:34):
think the business people in China realized it's important to
be global. Besides, they don't make money at home, so
they rather would like to put up shops outside China.
But politically is still going to be tough, you know.
But I tell you one thing, I thought about two
months ago that the White House will under Trump will
give Europe very little wiggle room, that Europe will basically
(35:55):
follow the guidance of let's be tough on China, you know,
after Van's speech in Munich, and after the fact that
how Ukraine got treated particular as we record this today,
and certainty just fled the Oval Office after he was
round basically be rated there. Even our newly elected incoming
Chancellor mass who is the ultimate friend of the United States,
(36:16):
says we have to turn out back on it. So
in a way, the Trumpet insinuation two months has current
alien on old allies in a way that I did
not anticipate it. And of course what's going to happen.
I think now we can give a damn about what
the White House is thinking about China. We do our
own stuff, our own policy, as our leaders feel it's
(36:38):
relevant for our continent. You know, there will be far
less alignment on China between Europe and the United States,
and that is a great, great pity. I was hoping
that democratically elected democracies in countries administrations will work together,
but this administration shows that it's not willing to cooperate.
(36:59):
It was to dominate, and that of course will find
respective answers in our economies and our political landscape. But
will the Chinese be beneficiaries. I don't think so, because
are two different so it's not one or the other.
And besides, you know, if you look into the economic
dependencies and leverage, we have roads apart.
Speaker 3 (37:20):
In US and China, terrrists are controversial. No one likes
teriffs because they add costs to the consumer. As you say,
at the same time, it's a language that the Chinese
themselves probably understand because if you look at tariffs and
how they've used teriffs for their own car market over time,
China never allowed imports to it to be more than
(37:41):
six percent of total sales in their market, and without
the tariffs against Chinese imports in Europe, I'm pretty sure
that Chinese would happily just ship boat loads as they
are doing now by these guys' own boats to Europe
with hundreds of thousands of cars and overwhelmed the industry.
So tariffs alone, but terriffs alone, nobody has an appetite
for them. But I can see their role in inducing
(38:04):
investment in it to make sure that the industry stays
in Europe not become.
Speaker 4 (38:10):
Our politicians have to safeguard our economic fiber. Of course,
it's a toss up between consumer and producers. Our constumers
love Chinese products, and again the solar panels, there's no
choice but actually say okay, let it rip baby, you know,
let's get more Chinese solar panels because they're so inexpensive
(38:30):
and it doesn't make sense to add capacity to over
capacity loaded industries. But in the kind industry and supply
chains are too long, the importance is too big, and
we just have to play the game of having still
production back home, inviting the Chinese to join that game,
at the same time being in channel to learn how
to how that game is being changed. So in a
way it has to be more sophisticated, just putting up
(38:53):
terraces for the fact of you know, protecting the domestic
industry normally leads to complacency. And again, you know, service
is nothing more than value edit text for your own population.
Speaker 3 (39:03):
You have phenomenal experience, great achievements at BASF. In terms
of negotiating huge deals, you understand the mindset of the Chinese.
If you are going to give one piece of advice
to a Western business person engaging with the Chinese companies,
whether it's in China or overseas, what's the first rule
(39:26):
to know when engaging in a business deal with the Chinese.
Speaker 4 (39:31):
Follow your physical autonomy two years, one month, speak less,
listen better, and in your silence. The Chinese are champions
in silence you know. So when the Chinese stops talking,
a Westerner normally has the urge of responding right away
saying something. Just just go through this painful five seconds
(39:51):
of silence and see maybe they add something, you know.
Speaker 3 (39:55):
Let it hang out there. Yes, definitely, I did see that.
I was part of negotiation once between Japanese companies and
Chinese company and the Japanese are the only ones I've
found who are even better than the Chinese at that.
And it drives the Chinese crazy because the Japanese in
this instance, the Japanese executive let silence hang for two
(40:17):
or three minutes. It was excruciating, yes, long it was,
and yet it's so effective. Okay, So number one, listen
more talk less. Second, once you get a deal signed,
what you need to know about getting along with the
Chinese in a way that's productive for both sides, not
for one or the other.
Speaker 4 (40:38):
Go for a drink, go for a hike, get to
know the counterpart as a person, as an individual, try
to understand built a bond of trust because the implementation
of projects, the running of the business is going to
be very tense. Everybody has different interest groups, different cultures,
and you need a bond of trust between individuals in
(40:59):
order to actually bridge these find solutions. You know, if
you get confrontational, if you get indegal speak sort of,
you know, go off the paragraphs and support you will
get over. You always lose in China, you know, so
be smart, communicate well, have a firm grip on your headquarter,
(41:20):
make them absolutely understand there cannot be any split between
headquarter and the channel operation. And again, build trust with
the Chinese. They have a hard time defending things within
their own system. You have to realize that they are
not world champions and negotiations, they're just better camouflaging in.
Speaker 3 (41:38):
The rifts headquarters. I can't tell you the number of
executive in China would tell me at the end of
the night, they're at the bar. They're saying China is hard,
but communicating with headquarters is even harder. Is that accurate
in your experience?
Speaker 4 (41:51):
Absolutely? And that's why I think you have to watch
out how the composition is of your top management in China.
You know, there is a tendency of putting Chinese nationals.
There is obvious. You know, you want to have those
people that understand the language, the culture and everything. My
company BSF always thought it has to be a very
good mix, you know, of taking top Chinese and top foreigners.
(42:12):
For two reasons. One is the foreigners just tend to
have a better and deeper grip on what the headquarter
is thinking. Hence they can explain it better to the headquarter.
The second is, again the fitness center of China. You
want young managers to be exposed to the kind of
hyper competitive Chinese environment. If silo Chine operations, you just
make it Chinese only, you have no learning whatsoever. No,
(42:36):
you want your guys to be there for three or
four years and then they will go to Brazil, America
and Australia, Germany in order to instill this Chinese spirit
of competitiveness into your organization. And again you have to
have a very good mix. That's the answer, and not
to silo just Chinese nationals.
Speaker 3 (42:54):
All right, we are almost out of time. But to
your last point about Chinese competitiveness, sort of zealousness that
we know is in the Chinese business person. What is
that magic superpower that they have? Is it just work
ethic or what can we learn from that or how
do we get some of that?
Speaker 4 (43:12):
You know, I think a generation that comes out of
the dark woods is very different. It's differently wired, you know.
I know it from my parents after the Second World War.
They left an abject poverty in the fifties and Germany
had economic wonderland fifties and sixties. I think when you
come out of very dark days, you have a different
working ethics. You know. My generation was sort of in
(43:33):
between and like in sense that younger generations might find
it not so pleasant to have a longer working hours
or even to have children. To get to this point,
you know. And China is displaying this laying flat having
a replication rate of zerup on six in Shanghai one
point one in China, it has to be two point one.
It's just indicative that something is wrong in the social
(43:55):
fiber of China, as it is in other societies. So
China is not usual in this respect, but for me
it's it's also really I'm a deep admirer of the
generation that was running the countries in the eighties, nineties
and early two thousands. You know, they were partly badly educated,
They were tough cookies. They were self made women and men,
(44:16):
and I must say that I will never forget the
kind of learning again. People like former chairmans from Sassak
lew Rung are star stars for me, and the best
of Prime Minister Junji Bless his.
Speaker 3 (44:29):
Heart, he was tremendous, tremendous. You're tremendous, York. Thank you
so much for your time today. I wish we had
time for more. Maybe we'll do a sequel soon. I
understand there's a book coming out soon, can you tell us?
Speaker 4 (44:42):
Yeah, I write my autobiography right now, and my wife
is sitting with the gun behind my head. She says,
I have to do it. The Tiklar father, who was
a deputy Foremanist of Sol Union fourteen years Russian ambassador
translator Khrushov Mao in the year I was born nineteen
fifty eight, he refused to dis altobiographies. So she's very,
very determined that at least a husband does it. So
(45:04):
I'm in pain, but I to do it.
Speaker 3 (45:07):
The women are always wiser to take away. Yes, thank
you again. We'll see you soon.
Speaker 4 (45:12):
Yeah, bye bye bye.
Speaker 3 (45:13):
Take care. It's pretty clear that your Guka is the
kind of guy you really want to listen closely to.
(45:36):
Lots of wisdom to be drawn from his twenty seven
years on the front lines inside China. Yep, he's pretty
much seen it all for me. Here are three pearls
that I'll take away from today's conversation. One, For years,
China was a great market to export too, No longer.
For years, China was a great place to invest in
(46:00):
slim pickings. Today, hard to make a buck there. Foreign
companies going forward should therefore think of China as a
fitness gym. A fitness gym, Yeah, that's a place where
you learn how to stay competitive when it comes to speed, costs,
and innovations. That's number one, Number two, easy one or
(46:21):
is it hard? Listen more, say less? Mister Wuka recommends
when you're in China. This is hard to do, especially
when you're flying into China to get a deal done.
But fight that impulse to fill the void. Ask more questions,
reveal less and three China's secret superpower. It's engineering, very
(46:46):
deep bench What about R and D that used to
stand for receive and duplicate Nowadays Woodca makes clear China
is still quite light on our research, but very strong
when it comes to the D development. Hey listen up.
If you liked this episode, please share it with friends,
(47:07):
write a review, shout its praises to the heavens above.
Thank you for listening. I am Michael Dunn and this
is the Driving with Done podcast.
Speaker 2 (47:19):
Where you meet the experts creating the technologies that will
power tomorrow's cars electric autonomous software. To find this is
a Driving with Done podcast. Thank you for joining this
episode of the Driving with Done podcast. To connect with
Michael Dunn, visit doneinsights dot com or find Michael on
(47:39):
x or LinkedIn. This is the Driving with Done podcast.
As a longtime foreign correspondent, I've worked in lots of places,
but nowhere as important to the world as China. I'm
Jane Perlez, former Beijing bureau chief for The New York Times.
On Face Off, the US versus China will explore what's
critical to this important global relationship, Trump and Sijianping, Ai, TikTok,
(00:23):
and even Hollywood. New episodes of Face Off are available
now wherever you get your podcasts.
Speaker 2 (00:35):
Where top executives and crazy entrepreneurs gathered to talk about
the future of electric vehicles. This is the Driving with
Done podcast.
Speaker 3 (00:46):
Hello and welcome to the Driving with Done podcast. I'm
your host, Michael Dunn. Now go to any China related gathering,
whether it's in Asia, United States, or Europe. I just
got back from Spain mention the word over kapacity, and
there's bound to be controversy. Chinese leaders, on the one hand,
believe overcapacity across industries, including the automotive industry, is just
(01:09):
a cyclical problem that can be solved with fresh growth.
Foreign investors, on the other hand, with experience in the
People's Republic, see things differently. To them. Overcapacity is the
direct result of China's planned economy. And not only does
massive overcapacity spark price wars at home, they say it
(01:31):
also threatens to spurren avalanche of exports into markets worldwide.
What does that do? It undermines industries and kills jobs.
No wonder it's so controversial this topic. Well today joining
us is Yorg Wudca. He knows China and he has
a view on over capacity. He led the China operations
(01:54):
of Basf, the German chemical giant, for twenty seven years.
In the summer of twenty twenty four, he left Basf
to become a partner at the Albright Stonebridge Group based
in Washington, d C. Mister Wuka is considered one of
the world's leading experts on China trade and investments. Today
(02:16):
we talk about what mister Wuka calls China's breaking point
when it comes to the big old word over capacity.
You're going to love this episode because mister Wuka takes
us deeper into understanding exactly how overcapacity comes about in
China and why it's so intractable. More importantly, he paints
(02:37):
a picture of what happens in twenty twenty five when
we reach that breaking point. What does it mean for China.
What does it mean for markets worldwide? Here we go
with Jorg Wutka partner albright Stonebridge Group on the Driving
with Done podcast. Your Goodka, thank you so much for
(03:11):
joining me today on the Driving with Done podcast.
Speaker 4 (03:13):
It's welcome and greetings from DC.
Speaker 3 (03:17):
Now you're, as I understand you originally from Germany, lived
many years in China, now in d C. How do
you get around DC? Just curious?
Speaker 4 (03:25):
Well, it was a tough start, you know, after thirty
five years in Beijing and working for two multinationals, the
US was a new country for me. Not that I've
visited before, but I've never lived here before, and consulting
is very different from working in huge multinationals. But I
must say I have I had a very steep learning curve,
(03:45):
and I have great colleagues.
Speaker 3 (03:46):
I'm finding my feet right, finding it very fantastic. Speaking
of finding your feet, you found feed for all of
us this week in a very powerful and compelling opinion
piece that was published in the Wired China where you
talked about the the O word over capacity, very sensitive,
very volatile subject. Recently, I want to read from your
(04:10):
piece itself to get us going. It says here China's
overcapacity problem is nearing its breaking point, and it does
not appear Beijing has the ability to address it. So
let's begin with the first part of that. What is
the overcapacity problem in China?
Speaker 4 (04:27):
Well, it's systemic. It's not a book. We had this before.
I launched a report in twenty and sixteen as Chairman
of the European Chamber and that was very well received,
and then China grew out of it. They still had
the capacity of having strong rows, which helped. Of course.
Sixteen keep in mind was the global financial crisis the
aftermath of that. No, Actually, the first one I did
(04:51):
in two thousand and nine two thousand nine, yes crisis,
and the one in twenty sixteen was basically a warning shot,
and it was a little bit based on my political
and economic coach, a former minister of the junej Cabinet
who unfortunately passed away in twenty twenty. That's why I
can talk about it. Chairman le Room Rong, who was
heading SASSAK, advised me that the over capacity issue is
(05:16):
not just difficult for trade relations, it actually is corrosa
for the Chinese economy, and was guiding my thoughts about
this and so two thousand and nine, twenty sixteen, two reports.
I did a report in twenty seventeen called Made in
China twenty twenty five where I warned that everything that
China's planning ends up in over capacity and China last year,
(05:39):
and I also had the honor of briefing Secretary Yellen
and Guangzhou in April, the response of the Chinese government
was basically, there is no over capacity. So I left
everybody in a delusional state. But I was very encouraged
this week when for the first time they actually acknowledged yes,
there's over capacity.
Speaker 3 (05:57):
In your article. In fact, there's a call out here
vote from the Vice Minister one Lean June saying some
countries have repeatedly hyped up the overcapacity issue, which is
actually meant to suppress and contain China's development. This is
fundamentally a form of protectionism, severely under my global industrial
(06:18):
cooperation and so on. So as you say, China is
in denial mode saying no, no overcapacity. If you had
an opportunity to speak with if mister Wang was on
our podcast today, what would you ask you.
Speaker 4 (06:33):
Gret So The political constraints of what you can say,
of course, everything, there is no overcapacity. But under four eyes,
of course, p you acknowledge that overcapacity means under utilization
of assets, meaning you have one hundred and forty car brands.
You have four hundred and forty eight car factories in China,
and only twenty of them have a capacity load of
(06:53):
sixty percent and above, meaning they make some sort of money.
Bid certainly, I think as one hundred percent capacity load
they make lots of money. But everyone else, everyone else
means one hundred companies at least lose money. And this
stay in the game. There has to be a market correction,
unlike in open societies open economies, where basically companies go
(07:15):
belly up once they don't make money. Here, of course,
in China you have a support system meet evergraining of loans.
I remember very well when mister Lee, Chairman Lee said
to me, York, do you understand that actually there are
no over capacities in pants and in socks? Why? And
I said, yes, chairman ly because they're private companies. Once
they make no money bank they go out. But China
(07:37):
has one hundred and fifty thousand sooe small ones, one
hundred big ones. And of course this day in the game.
It's all about market shares and hope that they can
exit the last So in a way, it's corrosa for
the Chinese economy.
Speaker 3 (07:48):
Tell us at let's go a little bit deeper on
the mechanics of how overcapacity works in China. You were
there for many, many years. For people who have not
spent time in China, it's hard to get their head.
How does this happen, especially in the state enterprise environment.
Speaker 4 (08:03):
Well, China has a plan. China's a planning economy, and
whenever they have a plan, basically everybody in the industry
knows that there's going to be money, second, there's going
to be demand, and then third the foreigners will be
kept out of the game until the others are big
enough in order to compete. So basically a system where
(08:24):
everybody can anticipate a market development and then it replicates
across all these thirty provinces and regions, and everybody wants
to have a piece of the cake. And that's why
always any plan leads to over capacity. You can be
assured of that. And again, as chairmanly said, there is
no exit mechanism, there's no exit valve in the fact
(08:47):
that companies go bankrupt. There are bankruptcies. But again, if
you look into the car industry, for example, it is Southwest,
it's high Fie, it's the private companies, it's the Koreans
partly leaving Ford closing down. It's all those that have
to react on market forces. Everybody who has a little helper,
mother's little helper government. Then they hang in there too
(09:08):
long and hence you have an incredible price erosion that
is harming China. And it shows also an export data.
You know, in twenty twenty two Europe, China had an
export deficit four hundred billion US dollars, so four hundred
billion dollars more sold into Europe than Europe was selling
(09:29):
into China. And you look into the container movement, I
think it was three point four containers going to Europe
and one comes back. Twenty twenty three looked like a
decent year two hundred and ninety billion trade deficit only,
so something positive happened. Either China was exporting less, so
Europe was importing into China more. Turns out to be
(09:49):
three point seven containers went to Europe and one came back,
meaning ten percent more containers in twenty twenty three. So
How does that fit that you have less of for
nextport in US dollars, but you have more containers. It
is simply over capacity. The prices of solar panels went
down by sixty percent, you had electronics going down by
(10:10):
forty fifty percent, So more volume across the border and
less dollar clicked the signpost, and of course the export
has made less money.
Speaker 3 (10:20):
This sounds like a problem for China and maybe even
a bigger problem for the rest of the world. I mean,
isn't a Chijiping who went out there and said, we
want China to be less dependent on the rest of
the world and the rest of the world more dependent
on China. How do we work out of the situation, which,
as you describe, is actually systemic, It's part and parcel
(10:41):
of China's plan. How do we get out of it?
Speaker 4 (10:44):
Well, you have a situation where if there's overcapacity and
it happens to a head for your ports, you can
close it. You can have terrorists, you can protect yourself.
The Chinese domestic economy cannot protect yourself, meaning most if
effect is within China, and it shows in the decline
of industrial profits, and the decline in industrial profits translates
(11:07):
into less research. Everybody is sort of doing a development,
of course, but basic research is gone unless you are
bid or companies like that. And you have a situation
where companies are starting to cut corners, you know, doing
a water treatment plant twenty four to seven or maybe
shut it down during the night time and stuff like this.
(11:27):
So in a way, companies are very stressed out and
it shows in the equity markets. How you get out
of this is basically by market consolidation. It has to happen,
as it happens in other economies. Does baiting have the
political will in order to actually facilitate that process, safeguard
the rights of those that have to exit the companies
they're getting unemployed, and helping the other companies in order
(11:50):
to do the consolidation. My hunch is this is the
year of consolidation.
Speaker 3 (11:55):
I think twenty five I will.
Speaker 4 (11:57):
See consolidation massive style because the pain too deep and
the local governments are running out of cash. To keep
this game going, it has to happen, and companies have
to earn a living in order to do all of
the above, meeting following the laws and make a profit.
Speaker 3 (12:11):
This is why you use the word the term breaking
point twenty twenty five is the year, yes see a change.
And you mentioned the folks in Beijing. So again for
people outside of China, you and I understand Chinese have
this expression. It's called shang yo juansa shahyo twitsa. That is,
people in Beijing have a vision about how things ought
to be and there should be more competition and less overcapacity. Maybe,
(12:34):
but the people the local levels at every province, as
you said, want to duplicate. Oh, this is where the direction,
that's where the money is. We want in too, And
how come Guangdong can get in and Way can get
in and we can't. We all want in. Yeah, So
this is the kind of mess we find ourselves in.
And you're saying that we're at a point where the
(12:55):
local governments are going close to bankrupt and Beijing may
not be there to be the last resort of lending
or where would it break.
Speaker 4 (13:05):
Well, in the end of twenty twenty three, China put
I guess twelve provinces on a life support system similar
to the IMF. Well, these twelve provinces were told game over.
You know, we stabilize you, you will not go down.
Tanging is one of these areas, but you have to
stop building roads that nobody uses, opera houses where nobody
(13:26):
is singing, and you have to basically as in companies
that are losing money. So that was actually a very
sensible step by the central government. And again I think
in these provinces you have to in particular those twelve,
you have to help in the transition. It has to
be funded well, they have to be supported. They can't
just let the go. Primarily I think about the northwest
(13:48):
of course Hailu, Jiang, Jilin and Leoning, and of course
the southwest with Guangxi and Yunan. So there has to
be a stabilization momentum from Beijing and maybe stimulants on
new economy and less of an emphasis of state on enterprises.
Private enterprise again enter the market and exit once they
don't make money. The others can go, can go on
(14:11):
as long as they or the party wants them to function.
And that's the problem that actually, you know, the whole
Polberal believes more in state on enterprises. So for them,
it's a hard ideological break in order to see that
these companies that go bankrupt, But it has to happen,
and I guess that Channa's well advised to have more
(14:33):
of these private entrepreneurs succeeding that have been so incredibly
innovative over the last years. The mechanism is politically hard anywhere,
but over capacity is something that is corrosive in for
the equity markets and for the local governments and regions.
But you know, it's always spawned spawning beating, like aren't
(14:55):
you happy that we are giving you solar pens virtually
free of charge? You know, I you're happy about our
very inexpensive EVS cars. Of course we are. And there
are countries in this world that cannot get enough of that.
Australia doesn't have a supply chain on cars, of course
they like the cars. But if you look into Turkey, Brazil, Thailand, Europe,
of course those countries have come up with protective mechanisms
(15:20):
to safeguard their supply chain and make that transition amenable
for their people. And the US has come down hard
and you know, high fences, very high fences, you know,
make sure that there are no cars and other stuff
from China coming in. So China has to accommodate to
the fact that the world cannot be its over capacity
safety development.
Speaker 3 (15:39):
Yes, the numbers were just alarming, sensational that then the
last year I think China had a one trillion dollar
trade surplus and they're not making any apologies about it. Oh,
the world loves our products, yeah yeah, and yet eventually
if this plays out, it means we lose our own
industries in the West. Do you feel as though the
West had the will and the backbone to hold the
(16:03):
line with regards to this, because you do have people
out there advocating on the consumers deserve to have the
best product at the lowest price and they don't see
the trade offs that costs associated with it. Will Europe
and other places be able to hold the line your view?
Speaker 4 (16:19):
I think Europe again twenty seven member states. You have Cyprus, Malta,
they don't have any of these cars, solar panels, turbine producers.
They don't care the cheaper the bank you have of course,
the Danes with vestas, you have the Germans for the
cars and the solar panels used to be at least
some solar panels. Of course, they want to maintain a
stability in the supply chain and want to keep this going.
(16:43):
And again, I mean, you know, you made a very
very substantial investigation last year and they found that some
companies got subsidies and they went through the whole supply chain.
It's not that BYD got a subsidy, it was the mind.
It was the transportation was electricity subsupplied a Limum steel
and it ended up in a car called BYD. And
(17:04):
they got seventeen percent of terrorists, which is nothing for BYD.
Saiic got thirty percent, the Germans ironically more than twenty percent.
So in a way, this study has clearly indicated whether
the subsidies are they're outsized and they are basically hampering
a fair competition. It's like nineteen eighty eight where you
(17:24):
have Carl Lewis running against Ben Jonson. It's the same
distance of one hundred meters, but one of the guys
has red eyes.
Speaker 3 (17:33):
And I've never heard that one before. I love that
one of the guys is used.
Speaker 4 (17:40):
Yes, exactly, that's the English word. So in a way
it has to be changed. And also for the benefit
of China. Why shouldn't Chinese companies earn a profit, Why
shouldn't they have a decent abbit, you know, so spend
the money on research and they can pay their people better.
If you look into wind turbin manufacturers, I think nobody
(18:00):
made money. They have incredible installation of wind turbines in
China and they're starting to export this and these products
are fantastic. Mean Young is one of them, and sid
of file. I think it's called and so in a way.
But you know, part of being business is it has
to be sustainable. You look into scaling up, you know,
(18:21):
you see, you see already the end game. You know.
I think BYD has a capacity of three point five
three point eight million cars production every year and they
plan under twenty twenty six to expand to six point
five five. You know, hey, the whole domestic market of
China twenty three million cars. You can see the blood
bess already four Chinese companies in China China want I
(18:45):
definitely should not. They should have a market which is
fair and square, and they have to stop with these steroids.
They have to, all right.
Speaker 3 (18:53):
I love where you're going with this. I want to
ask a tough question because veterans who like us, who've
lived in China long time, there's two incentives, two motivations
happening at the same time. One the companies themselves want
to be profitable, They want to grow, they want to
make money. At the same time, the nation China wants
to be Fujiang, wealthy and powerful state center stage, and
(19:18):
up until now, it seems like China is willing to
sacrifice the profits made at the companies in order to
win out on a more national power level. Do you
so twenty twenty five year projection? First of all, do
you agree that there's that tension in play? In two?
Is there a reason to believe that Beijing would give
(19:39):
more love to private companies than they have in the
last five to ten years.
Speaker 4 (19:43):
It would not be in the mindset of the Party soldiers.
Certainly there will be on the edges in some areas,
some accommodation, but always in the framework of you know,
guys with the Party and even deep seeks sitting in
the first role listening to that. So, yes, there is
a new dimension of understanding in the Party that they
need these fantastic private entrepreneurs. But to a certain point
(20:07):
only you know, and it is always the kind of
fear that is I think built up during the trauma
traumatic Soviet Union and as well as the starting of Russia,
meaning you know, a system collapses and then oligards are
slicing it up and become more powerful than the politicians.
I think Ttping has this trauma and he will definitely
(20:28):
make sure it's not going to get repeated in the republic.
So I guess that what's going to happen there has
to depend on how they see the problem. They see
the problem, unfortunately as a cyclical challenge, a cyclical challenge
that China can get out of that. I think China
is going through a structural problem situation, and they have
(20:51):
to have to reform, you know, and Rea dash form
in the sense of they have to reform the economy
in order to face the next challenges they have. They
plucked the low hanging fruits, so they have to now
face the fact that the working population has been sinking
since twenty eighteen. The population as such is dropping since
twenty twenty two, and so they have to actually really
(21:14):
make that shift. And they are going in the right
direction with a digital with robotics and supports and supports,
but it is not necessarily helping those folks in the countryside.
There's a million of them.
Speaker 3 (21:29):
I read with great interest a quote from you recently
where you said you know someone asked, what's the difference
between Chinese people that you knew in the eighties when
you first went there and today, and basically more or
less you said they were humble and very curious, hungry
to learn, and now not so humble and not that curious.
(21:51):
What does that mean for Western companies? Is there still
an opportunity or role to play in China for Western
companies where we sort of, ok, we learned everything we
needed to learn from you guys, next move out of
our way.
Speaker 4 (22:04):
Yeah, it has shifted. China used to be an export market,
then it became an investment area, and now that's declining.
For example, European Union twenty seven companies in November sold
more into the Swiss economy than into the Chinese economy,
and the strength line will carry on. Last year, Germany
exported more to Poland than China. So putting is this
(22:27):
way we are more export wise dependent on the Polish economy.
Speaker 3 (22:33):
Oh my goodness.
Speaker 4 (22:34):
So in a way it has completely shifted. But what
should not be disregarded is the fact that I call
China fitness center. China has an incredibly deep bench in engineering,
has incredible innovation skills, has a digital landscape, which is unique.
And so in a way, if you want to be
in future technologies, you have to be in China. And
that's why I completely support the German car companies are
(22:58):
putting more money in my exployer Beyers f stays in
the game in the fitness center, and they all in
particular car industry. Of course, they have to unlearn how
to build cars, and they have to learn how to
build mobile phones on wheels. And the only place where
you can make that transition fast is in China, where
you have the clusters, you have the engineers, you have
the demand story, the digital demand story. So whoever is
(23:22):
exiting the Chinese market does it as her own peril
because they might lose out on this learning process. So
in a way, yes, China's disappointment when it comes to
exporting to China, it becomes tougher to invest to make money.
At the same time, you still can gain and learn
from the Chinese a great deal.
Speaker 3 (23:39):
So might we might begin to think of it as
investment in R and D. We have a China R
and D budget to go learn what they're doing and
doing right.
Speaker 4 (23:49):
Not only that, it's also engineering. You know, fifty of
the top one hundred Global engineering universities are in China
forty seven out of one hundred top universities and chemical
engineer and RN China. And again China is not super
championing everything. I think they just have two out of
one hundred. In medical science, the US is forty five,
Europe forty, so it is it is not balanced. But China,
(24:13):
in the area at least where I work chemistry and engineering,
there is a world champion, really top class. So you
might want to have an engine top and engineering center
in China that serves you globally in drawing the plans
for your facilities. Be it in Texas, b's in Germany,
be it elsewhere. So that's very important, not just R.
It's very little R. China does extremely little. Are China
(24:36):
is world champion in D in development people together. They
are certainly championed some very specific areas. Huawei stands for
it in CTL, but then the other is designed. The
Chinese customer is really brand iloial. You know, if it's
not cool, if it's not funky, I don't buy it.
If my father drove e Benz I drive events, my
(24:57):
son has gonna drive him a cespence And in China
all such a thing not called not bought, and so
in a way you have to really you're forced to
be very fast in lap to market coming out in
the marketplace. China is again a fitness center and that respect,
and then on top of it, in design, it has
to be top end and it has to be always
(25:17):
different from your competitor. That's why China's design heaven in
this respect. And it's very notable that the BMW seven,
which is built in Munich designed in Shanghai and it
looks it looks for duristic. You know, BMW was leap
flocking by handing the design work to the Chinese engineers
in Shanghai. Also for the reason is the majority of
(25:41):
seven series is bought in China, so you better look Chinese.
Speaker 3 (25:44):
What is the outlook for those premium brands in the eighties, nineties,
two thousands, twenty tens, like the Chinese called abb Audi, BMW, Benz,
they were like gods to Chinese consumers and you couldn't
imagine a day that they wouldn't remain They're like forever god.
And yet in the last couple of years we've seen
(26:04):
them waiver a bit. In fact, portions sales last year
were down an astounding thirty three percent. Yes, if you
are an investor in those German premium brands and Chinese
your main market, what's the outlook, Well.
Speaker 4 (26:18):
The outlook is more competition and you had you have
to get out of your comfort zone, less complacency and
certainly no extrapolation allowed anymore. It has to be, it
has to be according to the Chinese taste buds, you know,
they are the twenty three million car market and the
upper class definitely thirty forty percent is in China. So
(26:39):
you Petta designed these cars as BMW does according to
Chinese taste. But that might be very hard to sell
back home because people in Germany, at least my own country,
they're less tech saving than the Chinese.
Speaker 3 (26:51):
You know, right, that's right, are in.
Speaker 4 (26:53):
Say, you know, what the hell is this? You know
as a computer, So in a way that it has
to be balanced. But I think that individualization is very important.
The branding. I think that's where still the German car companies,
or the Italians or some of the French have an edge.
Branding is always a promise, a promise of something, and
(27:14):
they have to find features where the Chinese are not
as good in this respect, but again they have to learn.
I mean, it's a different customer base. I learned from
one of these companies that the average Chinese scrolling spree
point one kilometers on the Huawei or the mobile phone,
you know, and an average Chinese is apparently sitting one
(27:34):
point six hours every day in a not moving car,
And that should give us some idea of why they
do this. Because it's cool to sit with friends in
a car which has this super sound system, has all
kinds of gimmicks. It's just fun. You know. In Germany,
you don't drive a car because it's fun. You drive
because you want to get from a to B, you know.
So it has to be it has to be internationally
(27:57):
minded a car at the same time based on Chinese
in gods. So in a way, if you cut yourself
off from China there you definitely face more challenges. So
in a way, I think the US car industry is
going to face a major challenge by being cut off
from this fitness center.
Speaker 3 (28:14):
As you said, well, Jeep's already out, yeah, significantly smaller.
GM took a five billion dollar charge last year. Its
market is fallen by two thirds. Yes, be a poster child, right,
GM Shahi GM. Wow. That's that's the target. That's the
benchmark for how you want to do a joint venture
in China. Today's shambles. So that's very unsettling for Western
(28:37):
automakers and companies in general. Is there a market upside
anymore in China? Or is that ship sailed? What I'm
hearing from you is that ship is probably mostly sailed,
except for premium segments like the Germans, and that the
real purpose of being in China is for that fitness center.
I think you called it China Fitness Club. Is that right?
Speaker 4 (28:57):
Yeah? Right?
Speaker 3 (28:58):
Have you trademarked that name or no?
Speaker 4 (29:01):
I did not, and Tom Friedman used it recently, So
I'm very five start.
Speaker 3 (29:06):
Okay, big picture, York, it's you were there all together.
I think eighty eight was your first year, is that correct?
Speaker 4 (29:14):
I was the first time studying in Shanghai and eighty two.
Speaker 3 (29:19):
At school there Shanghai, which.
Speaker 4 (29:21):
Was based on a picle that was built on a
buick from the thirties, and of course they had to
Shigovich and the Moscovich and all these cars, and now
they have the most futuristic cars in the world. So
I went I went from walking by foot bicycle to
having show me a portionl like car. I mean, it's
just I was so privileged to cover that period of time.
(29:42):
I worked in China since eighty eight on and off
eighty eight nineteen, then ninety three onwards, all the way
until I retired last year, and I was privileged to
see this, this incredible growth story. But at the same
time I was sad at the end to see how
China's closing up, how China is paying lip service to Oh,
how China is promising opening up and are still As
(30:03):
president of the Upean Chamber, had to launch a position
paper every year that had nine hundred and sixty points
of reference in Vaunta thirty pages. So last time I
met the Chinese government and they said, oh, what can
we do for European business? And I said, please stop
asking me, and I shuffled with paper, start reading and
(30:23):
maybe my successor yanes escland has only five hundred points
to present it and I made two hundred pages. Then
I can see you actually read it and implement it.
Don't come with this Boau and China Development Forum, my
Sunday speeches, you know, and this poor fellow yes, my
success a great guy. Actually, in the end of last
year he had to sell a position paper with one
(30:45):
thousand and fifty four points and exactly for the thirty pages.
So it actually didn't get better. And that tells you
something about the discrepancy of words and actions. And that's
the problem in China. They think that words will make
us come. No, the size of the mchamp white book,
the size of the European Chamber position paper will be
(31:06):
decisive investment. Last year, European companies invested ten billion dollars
into the Chinese economy. If you look at the investment
of European companies into the United States last year was
nine one hundred ninety six, you know, so we invest
more in Texas than in China. And if you look
into the investment stock over the last twenty years of
(31:26):
European companies European twenty seven companies in China, it stands
at one hundred and eighty five billion US dollars. You
will be very surprised to see that the Chinese stock
of investment in the European Union stands at one hundred
and eighty four more or less the same, you know,
And the investment stock of German or European business in
the United States of America is a call two thy
(31:48):
four hundred billion US dollars meaning two point four trillion.
Now you see two point four trillion and you can
see one hundred and eighty five billion, you know. And
the difference is not on the market size opening it
is m and as you know, that's why the Chinese
number in Europe is so big. You can buy some
gentle for thirty five billion, You can buy p ready
for a couple. We can't do the same. The big
(32:12):
exception was in the kindest re billions twenty five percent
handed over to to BMW. What happened to Delantez in Guangdong.
They were supposed to buy a new GAC, didn't work out,
they left, You know, way, we are totally totally underrepresented
and underinvested in the People's Republic, and we face serious
criticism by everybody that we're over dependent on China.
Speaker 3 (32:34):
That's such a crucial point you're making here. The response
you get from the leadership in China when you put
forth these papers so question and we're sensitive. Is it
that they think we're naive or they're not interested? Why
wouldn't they take that at face value and go, this
(32:55):
is serious. We want to make changes.
Speaker 4 (32:57):
Because they don't have an individual like Prime Mister jero
g at the forefront, a guy who was stepping on toes,
a gentleman who actually, against all the odds, managed despite
the bombing of the transendaals in Belgrade in ninety nine,
he managed to get China into W two in two
thousand and one. What a political achievement, you know what
(33:18):
happened to him. He's the only prime minister in the
history of China that only got one term because he
was uncomfortable, you know. So in a way you have
a situation where they are not decisive enough in order
to tackle structural problems. Again, the viewpoint on the economy
today is cyclical, but it's structural. So in a way
(33:38):
there has to be some political guts in order to
do difficult decisions. And now's the time, and I hope
twenty twenty five will be wake up call.
Speaker 3 (33:46):
Okay, very convincing. Let's pivot here for a moment to Europe,
because Europe's in play, so to speak. Right now. You've
got the United States sending a bombshell message to Europe
you're Russia on the doorstep as friendly. Not not sure.
Where do you see the relationship between China and Europe
(34:06):
going specifically, it.
Speaker 4 (34:07):
Will remain tense. Again. China has lost a lot of
goodwill in many countries due to the fence sitting during
the Ukraine War, I mean active fen sitting in the
sense of it. A lot of their material ended up
on the battlefields on the Russian side, you know, and
they were not precisely, precisely very helpful in prisoner exchange
and getting these thirty sounds of kids back and stuff
(34:28):
like that, everything that the Europeans asked the Chinese to help.
So but at the same time, it's an important trading partner,
and I think I always plead that we should keep
European or bought us open for Chinese products. Our consumers
like it. You know, I would definitely vote for tariffs
because that's a value added tax for your own consumers.
(34:49):
What Donald Trump right now is doing is taxting. Is
all people selling it as the Chinese are going to
pay for it. A's good months and so of course,
so in a way keep it open and try to
invest as much is possible Chinese investment into your We
need their supply chains. We need the same effect that
Tesla did to the supply chain in China by putting
up Shanghai and getting everyone else and everybody benefits from
(35:12):
the supply chain. That has to be replicated. You'll, we
want to be in the future business of electric vehicles,
and there we need the Chinese companies, you know. But
fair and square, there has to be bureaucratic oversight, investment
screening to make sure that they are not just putting
up shows but actually real factories and employ Europeans in
this respect. So I think that might be happening. I
(35:34):
think the business people in China realized it's important to
be global. Besides, they don't make money at home, so
they rather would like to put up shops outside China.
But politically is still going to be tough, you know.
But I tell you one thing, I thought about two
months ago that the White House will under Trump will
give Europe very little wiggle room, that Europe will basically
(35:55):
follow the guidance of let's be tough on China, you know,
after Van's speech in Munich, and after the fact that
how Ukraine got treated particular as we record this today,
and certainty just fled the Oval Office after he was
round basically be rated there. Even our newly elected incoming
Chancellor mass who is the ultimate friend of the United States,
(36:16):
says we have to turn out back on it. So
in a way, the Trumpet insinuation two months has current
alien on old allies in a way that I did
not anticipate it. And of course what's going to happen.
I think now we can give a damn about what
the White House is thinking about China. We do our
own stuff, our own policy, as our leaders feel it's
(36:38):
relevant for our continent. You know, there will be far
less alignment on China between Europe and the United States,
and that is a great, great pity. I was hoping
that democratically elected democracies in countries administrations will work together,
but this administration shows that it's not willing to cooperate.
(36:59):
It was to dominate, and that of course will find
respective answers in our economies and our political landscape. But
will the Chinese be beneficiaries. I don't think so, because
are two different so it's not one or the other.
And besides, you know, if you look into the economic
dependencies and leverage, we have roads apart.
Speaker 3 (37:20):
In US and China, terrrists are controversial. No one likes
teriffs because they add costs to the consumer. As you say,
at the same time, it's a language that the Chinese
themselves probably understand because if you look at tariffs and
how they've used teriffs for their own car market over time,
China never allowed imports to it to be more than
(37:41):
six percent of total sales in their market, and without
the tariffs against Chinese imports in Europe, I'm pretty sure
that Chinese would happily just ship boat loads as they
are doing now by these guys' own boats to Europe
with hundreds of thousands of cars and overwhelmed the industry.
So tariffs alone, but terriffs alone, nobody has an appetite
for them. But I can see their role in inducing
(38:04):
investment in it to make sure that the industry stays
in Europe not become.
Speaker 4 (38:10):
Our politicians have to safeguard our economic fiber. Of course,
it's a toss up between consumer and producers. Our constumers
love Chinese products, and again the solar panels, there's no
choice but actually say okay, let it rip baby, you know,
let's get more Chinese solar panels because they're so inexpensive
(38:30):
and it doesn't make sense to add capacity to over
capacity loaded industries. But in the kind industry and supply
chains are too long, the importance is too big, and
we just have to play the game of having still
production back home, inviting the Chinese to join that game,
at the same time being in channel to learn how
to how that game is being changed. So in a
way it has to be more sophisticated, just putting up
(38:53):
terraces for the fact of you know, protecting the domestic
industry normally leads to complacency. And again, you know, service
is nothing more than value edit text for your own population.
Speaker 3 (39:03):
You have phenomenal experience, great achievements at BASF. In terms
of negotiating huge deals, you understand the mindset of the Chinese.
If you are going to give one piece of advice
to a Western business person engaging with the Chinese companies,
whether it's in China or overseas, what's the first rule
(39:26):
to know when engaging in a business deal with the Chinese.
Speaker 4 (39:31):
Follow your physical autonomy two years, one month, speak less,
listen better, and in your silence. The Chinese are champions
in silence you know. So when the Chinese stops talking,
a Westerner normally has the urge of responding right away
saying something. Just just go through this painful five seconds
(39:51):
of silence and see maybe they add something, you know.
Speaker 3 (39:55):
Let it hang out there. Yes, definitely, I did see that.
I was part of negotiation once between Japanese companies and
Chinese company and the Japanese are the only ones I've
found who are even better than the Chinese at that.
And it drives the Chinese crazy because the Japanese in
this instance, the Japanese executive let silence hang for two
(40:17):
or three minutes. It was excruciating, yes, long it was,
and yet it's so effective. Okay, So number one, listen
more talk less. Second, once you get a deal signed,
what you need to know about getting along with the
Chinese in a way that's productive for both sides, not
for one or the other.
Speaker 4 (40:38):
Go for a drink, go for a hike, get to
know the counterpart as a person, as an individual, try
to understand built a bond of trust because the implementation
of projects, the running of the business is going to
be very tense. Everybody has different interest groups, different cultures,
and you need a bond of trust between individuals in
(40:59):
order to actually bridge these find solutions. You know, if
you get confrontational, if you get indegal speak sort of,
you know, go off the paragraphs and support you will
get over. You always lose in China, you know, so
be smart, communicate well, have a firm grip on your headquarter,
(41:20):
make them absolutely understand there cannot be any split between
headquarter and the channel operation. And again, build trust with
the Chinese. They have a hard time defending things within
their own system. You have to realize that they are
not world champions and negotiations, they're just better camouflaging in.
Speaker 3 (41:38):
The rifts headquarters. I can't tell you the number of
executive in China would tell me at the end of
the night, they're at the bar. They're saying China is hard,
but communicating with headquarters is even harder. Is that accurate
in your experience?
Speaker 4 (41:51):
Absolutely? And that's why I think you have to watch
out how the composition is of your top management in China.
You know, there is a tendency of putting Chinese nationals.
There is obvious. You know, you want to have those
people that understand the language, the culture and everything. My
company BSF always thought it has to be a very
good mix, you know, of taking top Chinese and top foreigners.
(42:12):
For two reasons. One is the foreigners just tend to
have a better and deeper grip on what the headquarter
is thinking. Hence they can explain it better to the headquarter.
The second is, again the fitness center of China. You
want young managers to be exposed to the kind of
hyper competitive Chinese environment. If silo Chine operations, you just
make it Chinese only, you have no learning whatsoever. No,
(42:36):
you want your guys to be there for three or
four years and then they will go to Brazil, America
and Australia, Germany in order to instill this Chinese spirit
of competitiveness into your organization. And again you have to
have a very good mix. That's the answer, and not
to silo just Chinese nationals.
Speaker 3 (42:54):
All right, we are almost out of time. But to
your last point about Chinese competitiveness, sort of zealousness that
we know is in the Chinese business person. What is
that magic superpower that they have? Is it just work
ethic or what can we learn from that or how
do we get some of that?
Speaker 4 (43:12):
You know, I think a generation that comes out of
the dark woods is very different. It's differently wired, you know.
I know it from my parents after the Second World War.
They left an abject poverty in the fifties and Germany
had economic wonderland fifties and sixties. I think when you
come out of very dark days, you have a different
working ethics. You know. My generation was sort of in
(43:33):
between and like in sense that younger generations might find
it not so pleasant to have a longer working hours
or even to have children. To get to this point,
you know. And China is displaying this laying flat having
a replication rate of zerup on six in Shanghai one
point one in China, it has to be two point one.
It's just indicative that something is wrong in the social
(43:55):
fiber of China, as it is in other societies. So
China is not usual in this respect, but for me
it's it's also really I'm a deep admirer of the
generation that was running the countries in the eighties, nineties
and early two thousands. You know, they were partly badly educated,
They were tough cookies. They were self made women and men,
(44:16):
and I must say that I will never forget the
kind of learning again. People like former chairmans from Sassak
lew Rung are star stars for me, and the best
of Prime Minister Junji Bless his.
Speaker 3 (44:29):
Heart, he was tremendous, tremendous. You're tremendous, York. Thank you
so much for your time today. I wish we had
time for more. Maybe we'll do a sequel soon. I
understand there's a book coming out soon, can you tell us?
Speaker 4 (44:42):
Yeah, I write my autobiography right now, and my wife
is sitting with the gun behind my head. She says,
I have to do it. The Tiklar father, who was
a deputy Foremanist of Sol Union fourteen years Russian ambassador
translator Khrushov Mao in the year I was born nineteen
fifty eight, he refused to dis altobiographies. So she's very,
very determined that at least a husband does it. So
(45:04):
I'm in pain, but I to do it.
Speaker 3 (45:07):
The women are always wiser to take away. Yes, thank
you again. We'll see you soon.
Speaker 4 (45:12):
Yeah, bye bye bye.
Speaker 3 (45:13):
Take care. It's pretty clear that your Guka is the
kind of guy you really want to listen closely to.
(45:36):
Lots of wisdom to be drawn from his twenty seven
years on the front lines inside China. Yep, he's pretty
much seen it all for me. Here are three pearls
that I'll take away from today's conversation. One, For years,
China was a great market to export too, No longer.
For years, China was a great place to invest in
(46:00):
slim pickings. Today, hard to make a buck there. Foreign
companies going forward should therefore think of China as a
fitness gym. A fitness gym, Yeah, that's a place where
you learn how to stay competitive when it comes to speed, costs,
and innovations. That's number one, Number two, easy one or
(46:21):
is it hard? Listen more, say less? Mister Wuka recommends
when you're in China. This is hard to do, especially
when you're flying into China to get a deal done.
But fight that impulse to fill the void. Ask more questions,
reveal less and three China's secret superpower. It's engineering, very
(46:46):
deep bench What about R and D that used to
stand for receive and duplicate Nowadays Woodca makes clear China
is still quite light on our research, but very strong
when it comes to the D development. Hey listen up.
If you liked this episode, please share it with friends,
(47:07):
write a review, shout its praises to the heavens above.
Thank you for listening. I am Michael Dunn and this
is the Driving with Done podcast.
Speaker 2 (47:19):
Where you meet the experts creating the technologies that will
power tomorrow's cars electric autonomous software. To find this is
a Driving with Done podcast. Thank you for joining this
episode of the Driving with Done podcast. To connect with
Michael Dunn, visit doneinsights dot com or find Michael on
(47:39):
x or LinkedIn. This is the Driving with Done podcast.
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