Don't Hate. Imitate. What Can Germany Learn From China?

Mr. Zeller, you hold a degree in business and mechanical engineering, have studied Asia for a long time, and have also worked there professionally. What fascinates you about this economic region?

My thesis at RWTH Aachen already focused on Japan and the Toyota Production System. That's when my interest in — and love for — Asia was sparked. From the very start, I was also fascinated by these thousands-of-years-old cultures and societies that were already highly developed back then. Asia has mastered complexity. Just organizing the daily lives of 120 million Japanese people across four islands speaks to an extraordinary level of discipline. And when it comes to strategic thinking, the two rival states of Japan and China have perfected it over millennia. You can still see that in today's economic world.

…which many economists say China thinks about far more long-term strategically — and has much greater staying power.

That's true. China organizes and structures its economic policy — and with it its economy — on a very long-term basis. Here in Germany, a new federal government can theoretically be elected every four years and change direction entirely. In China, it's a completely different game. You can view that positively or negatively, but China sets strong conditions for strategic, sustained action. That allows it to define gigantic undertakings and pursue them with real staying power — the Belt and Road Initiative, for example.

You mean the New Silk Road.

Exactly. The initiative to connect China with Europe applies not just to land routes but to sea routes too — and with it, port expansion and the acquisition of stakes in ports in various countries, including Pakistan. The initiative is shaped by strategic action that is no longer driven primarily by business, but above all by politics.

China was long considered a developing country and, in some areas — climate protection, for example — still likes to position itself that way. Is China still a developing country in your view?

Yes and no. There are areas where China, from today's perspective, is certainly no longer a developing country. When it comes to innovation, China has clearly taken the lead in various fields. Take battery production for electric vehicles: of the world's ten largest lithium battery manufacturers for EVs, CATL and BYD alone put two Chinese manufacturers in the top three. But in semiconductors or highly complex machinery, China isn't quite there yet. And if you look at the country as a whole, especially rural regions, you'll find that a great many people are still employed as migrant workers, laborers or farmers. On human rights and environmental protection, those topics are also still very much in a developmental stage. So you have to look at China in a very differentiated way.

At the same time, China has carried out very significant knowledge and technology transfers — through investments, joint ventures and company acquisitions, among other things. Today, China's battery, EV and solar businesses are booming. The partner has become a systemic rival. What have we overlooked?

A few things. First: the sheer brainpower China has built up through its population and population structure. China has also started to age, but if you look back 20 years, a huge number of very well-trained graduates in IT, advanced technology fields and biotechnology entered the Chinese labor market. They are largely responsible for the innovation and current dynamism in China. Second, we underestimated just how long-term and strategic China's political thinking is — and how that, in turn, steers its economy.

That shows especially in electromobility. China has already installed more than four million charging points. But part of why that works so well is that the state mandates and subsidizes the progress — in some cases even taking over project management and coordinating supply chains, from battery manufacturers to control systems. Here in Germany, the charging-point register most recently recorded around 115,000 charging points, including fast chargers.

That's a good example. It's clear that, with our political system, we in Germany neither can nor want to intervene and steer things in that way. That's just something you have to accept. But it also makes it harder to coordinate the promotion of initiatives and drive the rapid spread of innovations and new technologies.

So what can we learn from it? What would be a good solution for a democracy?

What we can definitely learn from is China's openness to technology, its momentum, its consistency, its long-term approach to execution. And there's actually an intermediate model — or rather a counterexample — from within a democracy. Look at Tesla: the fact that the company grew so quickly, initially in the US, was partly because it built a complete concept from the outset, including the Supercharger network. Unlike the Chinese approach, that was not regulated at all. Tesla's rapid rise ultimately came down to the economic strength and drive that Elon Musk and his team brought to the table. That gave Tesla, at various points, enormous advantages over competitors — alongside technology factors like hardware and software architecture.

So strong revenue growth doesn't actually require regulatory power?

I don't think so. What it needs are overarching, centrally coordinated initiatives that combine infrastructure with funding and incentive policy — the EV purchase bonus, for example — and then actually implement them over the long term. And that's exactly where we're somewhat trapped by our political system. We currently have a government that's been in office since 2021. After a year and a half of finding its footing, attention already shifts to the next federal election. Are truly long-term, sustainable initiatives and funding programs even possible under those conditions? I see a huge disadvantage there.

We've talked about what Germany has overlooked or underestimated. Have we also overestimated something about China?

Yes — we believed it was about genuine partnerships. But of course, China is pursuing its own national interests. Regarding the joint ventures we mentioned — Chinese companies taking stakes in German companies operating in China — China has always aimed to retain control, in order to secure the transfer of know-how and technology.

China has carried out a great deal of knowledge and technology transfer. There are also numerous cases of industrial theft. To put it in Confucius' words, is China taking the easy path? He said imitation, after all, is the easiest way to act wisely.

In certain product categories — construction machinery and commercial vehicles, for example — China has imitated heavily. It has copied, replicated and adopted. But a great deal has also been created through genuine innovation. Take battery production: both the product and the production technology have been developed with real innovation. That said, it should also be noted that this was made possible, to a significant extent, by European manufacturers of production equipment.

You've visited several automotive supplier plants in China. What details reminded you of their German counterparts?

I remember visiting a first-tier supplier in Taicang particularly well. A former Bosch manager was responsible for the plant. The entire production setup was state-of-the-art — from the rigorous application of lean management principles to cutting-edge production equipment. Material flow principles, process visualization and much more were all at the leading edge. What also impressed me — and what's completely different in China — is the flexibility and commitment of the workforce. In Germany, you sometimes get the impression that parts of society have become more complacent. The younger generations in particular have a very different attitude toward work, which is, of course, widely discussed.

Beyond a flexible, committed workforce, what else could Germany learn?

There are a few examples. One that illustrates the technological dimension very well is the Transrapid maglev test track in the Emsland region: the technology was developed in Germany, but it was never actually deployed for public use. China, on the other hand, adopted the Transrapid early on — and simply did it. Since December 2002, the line between Shanghai Airport and the city center has been in operation. To this day, it remains the only Transrapid line ever opened anywhere in the world. I've used it myself.

What does that example stand for?

On one hand, for the willingness to take a chance — even if partly for the sake of prestige.

And on the other?

For an openness to technology and new technological applications.

Do you see Germany as closed off in that respect?

Yes. Here, too, there are several examples that show just how much German society often struggles with new technologies. There are frequently narrow, sectional interests at play. Numerous lawsuits have been filed against wind farm expansion, for instance. Or take public space surveillance: privacy protection and data protection concerns are also debated extremely controversially there. I don't want to argue against data protection, but overall, we're holding back new technologies, technological applications and products. That's disastrous. Western Europe, and Germany in particular, have significantly lost ground when it comes to this openness to technology and the momentum that comes with it. There are often excellent ideas that then get realized somewhere else.

Where does Germany go wrong?

In my view, as a high-cost location, Germany can only position itself long-term through dynamic innovation strength. That gets too little space, both in the economic policy debate and in the creation of suitable conditions. Here, we often only develop the base technologies behind products. Germany also needs to take the next step: developing marketable products, commercializing them, generating real competitive advantages, and keeping other market players at a distance.

What does that take?

Genuine entrepreneurship and openness to technology — in substance, not just as a political phrase. We need far more dynamism back in our economic life. In some areas, that means significantly less regulation. We need to rediscover a genuine spirit of innovation. That also means focusing on building up our science base — and concentrating it here. I observe scientists moving abroad, to places with better research conditions, greater freedom, very good job prospects and, not least, more attractive salaries.

Think of the Intel chip plant in Magdeburg, the planned Northvolt battery plant near Heide, and other initiatives — Germany's economic policy already seems fully committed.

Yes, that's true. There are concrete efforts to attract investment. But it isn't always a level playing field. The task of economic policy shouldn't just be handing companies funding: it also needs to generate long-term benefit for the relevant industry segment and for Germany as a location. Think of Tesla in Grünheide — just two years after the plant opened, there's already discussion of cutting hundreds of jobs. What we actually need in Germany are durable, long-term jobs in fields with a future.

Germany's strongest industries remain automotive, mechanical engineering, chemicals and electronics. In our preliminary conversation, you said semiconductors are the need of the hour. What scenarios are conceivable for Germany in this field?

That's a really important point. We have successful companies in the semiconductor field in Germany. In automotive semiconductors, Infineon is very well positioned. And of course Bosch has both the capability and the know-how to keep developing this business area further. Semiconductors are extremely resource- and capital-intensive, which means they require long planning horizons. In my view, we need an economic and location policy here too that specifically supports this field — pushed from research all the way through to industry. That's the job of economic and science policy: to set the right conditions. What happened to us with photovoltaics must not happen to us a second time.

You also advise companies in the transport and logistics sector. In that context, what's your view of the Chinese drop-shipping providers Temu and SHEIN? Here in Germany, there's talk of 400,000 packages delivered daily — and reportedly Temu is even planning its own airline between Zhengzhou and Frankfurt. Do you find these developments dangerous?

From a consumer's perspective, this development initially seems attractive. A huge number of products — and product imitations — are offered at very low prices. Logistics companies benefit too: they sell large transport capacities and keep their delivery capacity utilized. Courier, express and parcel services are bursting at the seams. That's one side of the coin.

And the other?

These developments come heavily at the expense of providers who can't offer their products at such low prices — partly because they operate under a different business ethic, and partly because they hold their products to different standards. As long as these developments affect the consumer goods sector, that's one thing. It becomes dangerous — and here I'm not talking about Temu or SHEIN — in the industrial sector. One example is the debate around expanding mobile networks using Huawei components. Another concerns equipping ports with crane systems from Chinese manufacturers. That shows where things could be heading. After all, infrastructural and digital security could ultimately be at stake.

And even though there's an undercurrent of concern, even though there's a China strategy and the Chancellor is pushing for a level playing field: imports from China were still twice as high as German exports to China in 2023. What do you think will happen if the Taiwan-China conflict escalates?

Two points need to be distinguished here. What are the most important volumes coming from Taiwan? Certainly semiconductors and advanced electronics and electronic components. An attack by China on Taiwan would cause massive disruptions here. That's one dimension. The second concerns how Western powers — particularly the US and its NATO allies — would respond: what sanctions would follow? That's the key question.

Severe sanctions against China would also cause major parts of global supply chains to collapse.

And that's exactly why the global sourcing approaches of the last 30 years are currently being fundamentally rethought. Among other things, resourcing and relocating from Asia toward Eastern European countries or the NAFTA region are being discussed — and already being implemented.

What concerns do mid-market companies share with you?

When it comes to supply chain fragility, many companies are now carefully weighing whether to have goods delivered by truck from Romania within two days, rather than waiting four to six weeks for shipments from China. And that's without even factoring in the extra two weeks at sea, or the additional cost of sea transport around the Cape of Good Hope. Taken as a whole, depending on the product, that can be the smarter approach. I also see mid-market companies — just like large corporations — thinking very carefully about their own production networks and locations, as well as the localization of their key suppliers.

So, from “Don't hate. Imitate” to “Rethink and Relocate”?

Yes, a great deal now needs to be rethought and re-energized. The conditions have changed. Decisions that were made at one point — decisions that made sense and worked well for many years — no longer hold up. Production costs in Asia, for instance, have also risen significantly. Certain structures need to be rethought for that reason too. But it would be wrong to apply blanket “relocation” — that is, bringing everything back. Doing so would also cost the big global players their market access. Germany's economy can't afford that either.

Thank you for your insights, Mr. Zeller.