CHINA VS. GERMAN AUTOMAKERS: PARTNER TO COMPETITOR

Now we return to the relationship between Germany’s car industry and China. we talked about how the relations continued to grow at times and places where human rights violations are rampant. We also addressed how the car industry’s dependence on China might have distorted the picture and exaggerated Germany's dependence on China. In part three of this special report, we'll look at exactly what Germany has gotten out of it's ties to China. And China's aim to shift its role from a target market to a competitor. In April 2012, German Chancellor Angela Merkel and then-Chinese premier Wen Jiabao visited a Volkswagen factory in Germany. There, they witnessed a ceremony announcing a 25-year extension of the partnership between the German car maker and its Chinese joint venture partner FAW. Three months later, Volkswagen found out that their Chinese partner had been “systematically and repeatedly” stealing automobile designs and technology from them. That’s according to a report by German business newspaper Handelsblatt, citing multiple unnamed executives from Volkswagen. One called the copying of designs “simply a disaster.” In one example, Volkswagen executives told the paper that FAW stole the design for a transmission. The Chinese carmaker then used the design in their own car model, which then exported to Russia and became Volkswagen's competition. The paper reported that by 2012, at least four Volkwagen patents valid in China have been infringed. In another case, FAW used the design for a Volkswagen four cylinder engine for its own domestic brands. The only difference between the original engine and the copy was the company logo, as the Chinese carmaker replaced the VW brand with their own. But Volkswagen isn't the only example. Much of the forced technology transfer and intellectual property theft experienced by western firms in China happens via joint venture. Unlike investment in other countries, in China, foreign manufacturers are forced to establish a partnership with a local manufacturer. That's in order to enter the 1.4 billion population market. And until recently, China didn’t allow foreign companies to hold more than 50-percent ownership of the joint venture. As for the theft, it's costly for carmakers to openly challenge it. In 2018, out of the ten million cars sold by Volkswagan worldwide, four million were sold in China. Most were produced by local joint ventures. Now, Beijing aims to shift from a partner to western car makers, to a competitor. According to a 2019 report by the Chinese Ministry of Commerce, Beijing aims to promote export of Chinese cars produced by joint ventures with European and American markets. The report states that now the joint ventures have possessed the ability to fulfill the Chinese market *and* export to developed countries like Europe and the U.S. It also adds that foreign companies should "accelerate the transfer of modern technologies and localization even more" to establish China as "the global base for automotive development, purchases, production and exports."