BASF has withdrawn from the Chinese Uighur province of Xinjiang, VW is thinking about it. The background to this are reports about possible forced labor in joint venture companies. How serious is the withdrawal?
The Xinjiang plants are relatively modest investments for both companies. You can definitely sacrifice that for the bigger picture. However, it does not mean a withdrawal from the centrally important overall Chinese market, on the contrary. BASF is currently investing 10 billion euros in a Verbund site in Guangdong in southern Cantonese China.
What do the withdrawal considerations say about the economy in China?
Ten years ago, German companies would not have dared to offend China. But the wind has changed. China is in a weaker economic position than it was back then and is very dependent on investments like those from BASF. A large number of Volkswagen's plants are located in structurally weak regions, which are needed for economic development and social peace.
So far, Beijing has not taken kindly to foreign companies opposing the doctrine. Is it different now?
I do not expect major retaliation from Chinese leaders or boycotts by Chinese consumers as we have seen in the past. In the current situation, China would be cutting itself in the flesh.
To what extent does it matter that VW is in joint ventures with Chinese state-owned companies?
It should not be forgotten that Volkswagen is half a domestic company in China. More than 90 percent of the cars the group sells there are also manufactured there, and half of sales and profits benefit the Chinese joint venture partners. This is also why it is very unlikely that Volkswagen will come under pressure following a possible withdrawal from Xinjiang.
What importance does VW have for China?
VW is very relevant to the Chinese economy and to the Chinese public as a significant investor. German companies are also needed as bridgeheads in the EU, Volkswagen for example, when it comes to possible negotiations on protective tariffs for electric vehicles. Nobody has any interest in completely destroying the relationship.
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