Just a small (metro) train ride away from Hong Kong, straight at the border with China lies Shenzen. A city that has not only grown into China’s Silicon Valley and a mighty Tech Centre for the Empire of the Middle in just 40 years but for us clean tech and new mobility nerds, it has grown its name on being a center where electrification happens… Home of the rising star: BYD, the city with Shell’s largest EV station offering 258 public fast charging points. Indeed, it’s a place where you can Build Your Dreams…
Whereas our partner Woon Hui had the pleasure to visit Shenzen before lockdown, I had to endure a pandemic to finally see Shenzen for myself this October in 2023 to satisfy my curiosity and finally meet our network connections in China.
With the exception of going through a rather manual and painful experience VISA wise, Shenzhen did not disappoint. Our key contacts Angel and Chris Ha had setup a tight agenda for us to meet plenty of interesting people. From the Battery Scale Up OLiPower, Yinke Lawfirm and the local Startup accelerator E-Nova we even managed to squeeze in a superb Chinese lunch. Now, more than a week and quite some jet lag later it’s time to reflect…
Christopher Gruen and Woon Hui Oh introduced to Shenzen’s Startup and Electrification scene by Angel Ha (middle)
Listening to our contacts in China carefully, for Chinese doing business with the West has become much more difficult than before the pandemic. The geopolitical divide between East and West is no secret. Over the years, China has progressively distanced itself from the West and vice versa. The US has been assertive in its approach to reducing dependencies on China, and Europe has followed suit to some extent.
During our interactions with our partners in Shenzhen, we recognized this to be a crucial concern. The growing divide threatens the progress toward everyone’s net-zero and decarbonization targets. It’s a reality we have to confront.
Can we afford to isolate China? Given the urgency of the climate crisis and China’s expertise in electrification, the answer is a resounding ‘no’. The country has a wealth of knowledge and capital that could greatly contribute to the global fight against climate change and significantly accelerate achieving net zero goals.
Contrary to some old fashioned belief in the West, China has made remarkable strides in electrification over several decades. The sight of electric vehicles dominating the roads in Shenzhen was a stark testament to this fact. China’s leadership in intellectual property (IP) around electrification further amplifies this point if you talk to the subject matter experts – in particular around electric vehicles and batteries.
And guess what? Slowly public opinion in Western market seems to wake up to this fact. Just count how many Chinese EV brands are entering the European market and are starting to gain market share? Growth rates have been on a steady increase based on a great value for money ratio, often undercutting local automotive OEMS price wise – accommodating those market segments being hungry for affordable EVs. This is also seen as a concern within the EU that without protective tariffs we could see history repeating itself by Chinese producers flooding the European market with cheap EVs and batteries choking local OEMs similar to what was seen around local solar panel production. A difficult environment to maneuver in.
As we navigate the complexities of the globalized world, there is a noticeable paradigm shift in the realm of international trade. The narrative of free trade and open markets is increasingly shadowed by an era of trade protectionism, particularly in the United States and the European Union. The focus of this intensifying trade war is the electric vehicle and advanced chip technology market, dominated by Chinese state-subsidized behemoths like CATL, BYD, and SAIC [1][2][3].
The US and EU are increasingly watchful of the Chinese players who benefit from state subsidies. These subsidies have catapulted Chinese electric vehicle manufacturers into direct competition with Western brands, resulting in a significant market share grab [2]. The European Commission has taken the route of investigation, exploring the imposition of punitive tariffs on Chinese EV imports to protect EU producers [1].
Contrastingly, the US has adopted a more aggressive stance. Apart from levying high tariffs on Chinese imports, the US has successfully blocked China’s access to advanced semiconductor technology, crucial for the technology of the future [3]. The aim is to contain competition, driven by the perception of China’s assertive trade policy and the imbalance of trade relations [3].
However, it is essential to remember that most US and EU companies are beneficiaries of state-backed schemes themselves, such as the Individual Retirement Account (IRA). This raises questions about the fairness of these protectionist policies. Are we heading towards a world where the lines between free trade and protectionism blur, leading to a contested global economic order?
The global EV market is a battleground where these economic philosophies and trade strategies clash. How this plays out will define not just the future of the EV market, but also the contours of global trade and geopolitics [2][3]
So what are the sustainable opportunities we can see? In short “exporting IP” from China to the West and attracting much needed capital into the growing clean tech sector. Europe’s commitment to green energy and sustainability presents a wealth of opportunities for investment in renewable energy projects and companies driving this change.
The key lies in finding the right form of collaboration that also finds local support. Strategic Win Win partnerships with European companies could pave the way for better political navigation, local presence, and local market insights without local European companies loosing “control”.
Despite the apprehensions about Chinese investments, particularly in the US, it’s worth remembering that not all Chinese capital is tied to the Chinese government. There’s plentiful capital from Chinese private equity holders and investors outside China that could be productively channeled.
A shift in investment strategies – creating (joint) local production capacities can be an answer. While Western investors have traditionally sought entry into the Chinese market, Chinese companies are now eyeing the West to introduce their electrification IP by setting up distribution first and considering setting up production capacities locally where it makes economic sense – looking at Joint Venture setups to accelerate local market entries.
Ironically, this is similar to how China has allowed outside countries to operate within its borders for decades. Capital and IP have flowed into China in this manner, so indeed – why not facilitate a reverse flow?
Christopher Gruen and Woon Hui Oh meeting up with Angel and Chris Ha and OLiPower at the Beijing Yingke Law Firm at Shenzen.
In conclusion, China’s size and global influence make it impossible to ignore. As someone raised within both Western and Chinese cultures, I hope the political situation doesn’t escalate further, as this would have catastrophic effects on the global economy and and the climate change agenda. In the meantime, we should be open to explore those win-win collaborations that aren’t seen as conflicts but as steps forward in the fight against climate change. After all, climate change is the bigger problem we collectively face.
What do you think? If you are or want to get involved in collaborations within a Chinese / European context then please contact us at NovAzure under info@novazure.com.
