China import is still worth it now

China’s economy through the ages
But in recent years, softer tones have been coming from China. The radical views of Mao Zedong have long been a thing of the past and attempts are being made to walk the tightrope between loyal communism and economic interests. To do this, however, China also had to open up to the western world. That succeeded with the death of Mao in 1976. Deng Xiaoping, previously ousted and placed under house arrest, began initial reforms as China’s new prime minister in the country. But unlike in the former Soviet Union, Deng Xiaoping didn’t want everything at once, which was a good decision. Because even before the dissolution, the planned economy of the former Soviet Union was at an end. He gradually paved the way for an economically successful country.

China’s new Prime Minister Li Keqiang – the man of the people
More than 35 years later, Li Keqiang is now at the head of China’s government. A farm boy who worked his way up from the bottom to the top of the party, but is not one of these revolutionaries, but has in-depth specialist knowledge with a degree in economics and law. He likes to be presented on Chinese television as a man of the people. But he also has big plans for himself. Reducing the gap between rich and poor and improving the living conditions of the population are ambitious goals. However, China’s prime minister must also not ignore the economy, which has only stabilized in recent years and still needs support wheels to keep it running smoothly. To this end, a lot has been invested in the infrastructure in recent years. New road networks, railway lines, improved water and electricity supply should boost the domestic economy. Between 2001 and 2005 alone, around 24,000 kilometers of motorway were built.

Attractive conditions attract foreign companies to China

At the same time, China is opening its doors to foreign investors. More and more foreign companies are taking advantage of this and settling in China. Not only are the workers there cheaper than in Europe, for example, the tax system is also more flexible. Because the profit of foreign companies in the People’s Republic is subject to the “Foreign Enterprise Income Tax” (FEIT). This FEIT tax rate is 30 percent and another local rate of 3 percent. But the state tax rate can also be lowered to as low as 10 percent and the local rate waived entirely. This means additional relief for foreign investors.
But many now also rely on Chinese products. The image of cheap products from China has long been forgotten. In the People’s Republic, quality is important and that makes importing interesting for foreign companies. Germany in particular maintains an intensive trading relationship with China and so the relationship is constantly growing Chinese imports .

Germany stands behind China – despite the threat of penalties in Europe
That’s why Li Keqiang traveled – quite officially – to Germany to intensify trade relations. The new Prime Minister sees the new dream couple in Germany and China, who complement each other perfectly. According to Keqiang, both countries are particularly strong in the manufacturing industry and together they could also open up markets in other countries. Great words, which were received with a certain benevolence by Chancellor Angela Merkel. After all, China has been an important trading partner for Germany in the past. The first contact between the two countries came in 1972. Although in the common history of Germany and the People’s Republic there were first trade relations as early as the 16th century, which actually never really broke off completely over the course of the centuries. However, a modern trading relationship developed with the “new” China and the relatively young Federal Republic. Today, China is Germany’s second largest supplier (next to the Netherlands). Germany mainly imports electronics, clothing and machines from China. But the People’s Republic also uses the trade relations with Germany. As a trading partner for China, Germany ranks sixth worldwide and number one in Europe. There were already intensive talks and agreements with the previous Prime Minister Wen Jiabao to expand trade relations between the two countries.

Germany and China sign trade deals worth billions
With Li Keqiang, an even closer relationship with the Federal Republic is now to be sought. Germany is not averse and contracts worth billions were signed during Keqiang’s official state visit. Specifically, it is about mutual investments in the fields of electromobility, construction and life sciences. The European aircraft manufacturer Airbus also receives an order worth billions from China and the People’s Republic is to become an official partner of the Hanover Fair. In total, contracts worth around 15 billion US dollars (equivalent to 10.6 billion euros) were concluded. However, China does not only want to maintain a closer relationship with Germany; the People’s Republic would also like to further open up its market for foreign investments. Keqiang guarantees that companies can expect fair competition and the state would also ensure the protection of intellectual property. This was also the subject of the meeting with Philipp Rösler, who called for increased efforts to protect intellectual property and at the same time urged Chinese investors to get more involved in Germany.
But the meeting of the trading partners is overshadowed by the dispute over punitive tariffs for Chinese solar panels in Europe. Perhaps this is also the reason why the Chinese prime minister visited Germany exclusively as the only EU member state.

Threatening trade conflict between Europe and China
According to media reports, European Commissioner Karel de Gucht has launched the largest trade investigation that Europe has ever seen against China. It’s about the dumping prices of Chinese solar panels. De Gucht accuses the Chinese of selling their products below the market price in Europe. That’s why De Gucht is now demanding punitive tariffs of 47 percent on Chinese solar panels. However, that is not really what most of the 27 EU Member States want. As the “Spiegel” now reports, the majority of the EU pending countries are against the proposal of the EU Commissioner. Eastern Europe, Scandinavia and Germany in particular are against the planned punitive tariffs.

Germany is on China’s side – China imports should not weaken
Germany in particular has officially rejected De Gucht’s plan and is calling for an amicable solution. Although it is not just about the dispute over Chinese solar modules. Even when the EU Commission wanted to impose punitive tariffs on the China-based telecommunications manufacturer Huawei, the German government vehemently opposed the project. Because if Huawei were to face additional costs, the prices for modems would skyrocket, which would ultimately mean that Telekom in Germany would no longer be able to push ahead with the planned and also legally required expansion of the Internet supply. In any case, the Federal Government and the EU have achieved little agreement in recent months. The EU Commission had to accept harsh criticism from Wolfgang Schäuble when it came to the EU rescue policy. Even before Li Keqiang’s visit, Philipp Rösler spoke out against the EU Commissioner’s efforts and believes that something like this could have serious consequences. Rösler could not be entirely wrong. In the meantime, China has already reacted to the European proposal, if only verbally. Liang Tian from the Chinese solar manufacturer Yingli speaks of “unlawful interference” in international competition. According to Tian, everything has been tried to negotiate with the EU, but so far without any significant results.

Punitive tariffs against China divide Europe
In Europe, on the other hand, opinion on the planned punitive tariffs is divided into two camps. Many fear that the prices for solar systems in Europe could shoot up as a result, as was suspected with Huawei. Last but not least, many are against the project because they fear the consequences of China. But it was the Bonn-based solar company Solar World that gave the project the decisive push. In a telephone interview with “Deutschlandfunk”, the spokesman for Solarworld, Milan Nitzschke, commented in detail on the subject. He is convinced that negotiations, in the framework in which the federal government wants to conduct them, are not having an effective impact. As an example, he cited the punitive tariffs introduced in the USA. There were negotiations there for more than 15 months, to which, according to Nitzschke, China did not show up. And the EU has also been investigating dumping from China for about seven months. According to Nitzschke, however, the People’s Republic was not willing to talk. Therefore demand the enforcement of the applicable trade law and only then can you negotiate with China. Furthermore, Nitzschke believes that stable competition in Europe could only be restored by introducing punitive tariffs. Nevertheless, Nitzschke welcomed the fact that the federal government is looking for an amicable solution. But Nitzschke continued to stick to his point of view. The fact is that the punitive tariffs against China will come into force on June 6th. Because in the first six months, De Gucht can override the heads of the member states and introduce the regulation without consent. The agreement of the EU member states is only required when the regulation is finally decided. The extent to which the opinion of the individual states that are currently against punitive tariffs will change may also depend on the development of competition.

Import from China to Switzerland – New trade relations between China and Switzerland
The negotiations between China and Switzerland, on the other hand, were far more harmonious. Before visiting Germany, Chinese Premier Li Keqiang arrived in Switzerland to strengthen trade ties with Switzerland. The relationship between the countries has been very close for over 60 years. Switzerland was one of the first Western countries to recognize the new People’s Republic of China as a state. In the meantime, the mutual respect has developed into an intensive trading relationship. As early as 2002, China was one of Switzerland’s most important trading partners and its third largest supplier. In 2010 alone, China’s exports to Switzerland amounted to 3.03 billion US dollars and China’s imports from Switzerland 17.04 billion euros. With the recent visit of Chinese Prime Minister Li Keqiang, the importance of trade was emphasized once again. A new free trade agreement between Switzerland and China brings decisive advantages to both countries. Around 99.7 percent of exports to Switzerland will be duty-free once the agreement comes into force. This applies above all to textiles, shoes, metal products and car parts. Around 84 percent of Swiss exports are also exempt from customs duties.

Gradual waiver of customs duties for Switzerland
But for around 7 percent, the exemption is gradual at first. Imports for Swiss watches will also be gradually reduced. The free trade agreement stipulates that customs duties will fall by 60 percent over the next ten years. The new regulation will come into force as early as July 2013 and in the first year China will already be reducing customs duties by 18 percent. The decision to gradually downgrade is not without reason. Chinese negotiator Yu Jianhua explained the details of the phased reduction at a press conference. For the time being, China wants to protect some domestic branches of industry from strong Swiss competition in order to be able to stabilize them first so that they can become competitive again. This also includes the watch sector. The negotiations for Chinese agricultural products were just as successful. In the future, around 76 percent of agricultural products will be duty-free and many more will receive reduced customs duties as a result of the free trade agreement. Even with very different views, Switzerland and China were able to find a solution. This applies above all to working conditions, intellectual property and government tenders. The Chinese media likes to report on a win-win situation, which the media is not entirely wrong about. Because just like Germany, Switzerland also benefits from a country that has established itself from an agricultural state to a global economic power in a very short time.