As China's investments in Germany grow, so do the ethical pitfalls
| Duisburg, Germany
On paper, the German city of Duisburg, population 500,000, seems like a perfect stop on the roadmap of China鈥檚 global ambitions.
Situated at the confluence of the Rhine and Ruhr rivers, Duisburg had become the poster child for industrial decline, a heady fall for a city long counted among the wealthiest in Germany. Duisburg fortunes were made via tobacco and textiles in the 19th century and coal, chemicals, and steel during the 20th. As a major industrial center, it was often targeted by Allied bombers during World War II. Though, as industry dwindled over the last few decades, high unemployment and low levels of education settled into the area鈥檚 DNA.
鈥淒uisburg is a rather poor city,鈥� says Susanne L枚hr, managing director of the city鈥檚 Confucius Institute, a Chinese state educational organization tasked with overseeing cultural and educational exchanges. 鈥淏ut the city鈥檚 geography is very favorable as a logistical hub for Western Europe. That's a lucky coincidence.鈥�
Why We Wrote This
It is not just American businesses that are figuring out how to balance the ethical demands of their domestic public with those coming out of an increasingly influential China.
Indeed, as industry melted away, Duisburg鈥檚 key assets remained: the largest inland port in the world, with waterways, highways, and railways that connected to the rest of Europe.
So 鈥渇avorable鈥� is that geography that Chinese President Xi Jinping himself came to this gritty city for a look-see in 2014. Flanked by local leaders as a loaded freight train rolled in from Chongqing, Mr. Xi ceremoniously called for Germany and China to strengthen their economic ties. Duisburg is now an important terminus on China鈥檚 sprawling 鈥淏elt and Road鈥� development program, and welcomes 35-40 trains from China each week. The city鈥檚 mayor has courted Chinese investors, and at least 60 Chinese companies have opened shop there.
Yet this raises questions whether Duisburg 鈥� dubbed by local media as 鈥淕ermany鈥檚 Chinese city鈥� 鈥� is opening itself up to ethical compromises or reputational risk by so openly welcoming Chinese investment. The pressure Beijing exerts on foreign entities is increasing, at a time surveys show the German public is increasingly negative on Chinese investment. What price is paid to engage with China?
鈥淭here is a red line鈥�
That reputational risk is one the NBA knows all too well. This fall, the manager of the Houston Rockets tweeted support of the Hong Kong pro-democracy protests, which led to a massive public backlash by consumers in China.
A handful of German companies have faced similar situations. Two years ago, Audi used maps of China at a press conference that left off Taiwan and Tibet. Last year, Daimler was compelled to apologize to China after subsidiary Mercedes-Benz posted a Dalai Lama quotation on Instagram. Just this April, camera maker Leica distanced itself from the world-famous image of the Tiananmen 鈥渢ank man,鈥� after an affiliate used it in a tribute to photographers.
City governments aren鈥檛 immune to the wrath of Beijing or the Chinese public. Prague recently drew Beijing鈥檚 ire when its mayor moved to excise mention of Beijing鈥檚 鈥淥ne China鈥� principle from the two cities鈥� sister-city agreement. Beijing abruptly canceled that agreement, then retaliated further by canceling the Prague Philharmonic Orchestra鈥檚 long-planned 14-city tour of China.
Governments and businesses must walk a tightrope, for they face not only Chinese public backlash for the original offense, but also Western criticism should they apologize for that offense. Both can cost customers and reputation. Daimler鈥檚 apology to the Chinese public 鈥渁ngered Western media, and as a result further fanned the crisis,鈥� according to the report 鈥�.鈥�
鈥淭here is a red line and you have to be aware of it,鈥� says Kerstin Lohse-Friedrich, an analyst at the Mercator Institute for China Studies. 鈥淚t鈥檚 not only about Taiwan, Tibet, or the Dalai Lama anymore, but about the geostrategic goals set out by the Chinese government. All parties must follow it or risk falling from grace.鈥�
For that reason, Ms. Lohse-Friedrich says, if you're invested in China, or dependent on Chinese customers, it will 鈥渁lways come with a price [in Western circles]. You鈥檒l always be asked, 鈥楢re you paid by the Chinese to say what you say?鈥欌��
海角大神 Rusche of the German Economic Institute says that German companies operating in Xinjiang 鈥� China鈥檚 northwestern region, where an estimated million ethnic Uyghurs and Kazakhs have been placed in camps 鈥� 鈥渉ave not shared or expressed their political opinion for fear of repercussions. If you鈥檙e against the Chinese Communist Party, then you automatically have the party against you.鈥�
The benefits for Germans
Another issue is whether Chinese investment engenders the kind of prosperity that benefits the locals. In other words, does the economic promise President Xi represents, when he stands at the Duisburg port, ever materialize for his German partners?
Not always. German analysts who track foreign investment point to the Chinese appliance maker Midea鈥檚 purchase of German robotics maker Kuka. It was a hostile takeover and the German CEO soon announced his departure. References to failed Chinese investments in Frankfurt-Hahn Airport followed closely behind.
There鈥檚 also Parchim International Airport in the northern region of Mecklenburg. A Chinese company purchased that airport more than a decade ago, with locals expecting 1,000 new jobs, import-export activity from Belt and Road, and Chinese tourists with bulging wallets. Yet today the airport enjoys only traffic from training flights, very few tourists, and a handful of missed construction deadlines. 鈥淣o takeoffs, no landings,鈥� barked a recent news media report.
In Germany鈥檚 southwest, the town of Lahr saw Chinese investment become an issue in the last mayoral campaign. Lahr has built up school exchanges with three Chinese cities, and Chinese economic interests followed, especially as Lahr鈥檚 airport is fortuitously situated at the triangular border of Germany, France, and Switzerland.
Yet, a Chinese bid to manage the airport was portrayed negatively in the press, and the community became hesitant to invite Chinese investment. 鈥淎ll the mayoral candidates were critical,鈥� says Wolfgang M眉ller, Lahr鈥檚 outgoing mayor. 鈥淚t was a matter of principle. We don鈥檛 need the money.鈥�
Ultimately, Mr. M眉ller says, Germany and China 鈥渘eed each other. We can鈥檛 be na茂ve. We can鈥檛 just fold our arms and say 鈥榥o.鈥欌��
Back in Duisburg, Andree Haack, the city鈥檚 deputy minister for economic affairs, says development decisions will be made appropriate to the behavior of its partners. Ultimately, Haack says, when something happens that is 鈥渘ot compatible with our values 鈥� the international collective normally finds an answer.鈥�
Burkhard Landers, head of the region鈥檚 chamber of commerce, offers more specific thoughts. 鈥淪ure, the public image of Chinese money isn鈥檛 always positive and we are, of course, reluctant to sell out on Germany,鈥� Mr. Landers says. 鈥淏ut Duisburg isn鈥檛 for sale, and if a business from China is looking for a strategic partnership, the economy should be open to it.鈥�
