Germany opts against energy subsidies to industry

Decision may exacerbate the steady stream of German companies looking to relocate industry offshore

The Scholz government in Germany has rejected a plan from the Greens party to subsidise power prices for energy-intensive industries. The plan would have spent between €25 to €30 billion (US$27 to US$32 billion) to keep power prices below €0.06 per kWh for large industrial companies until 2030. The current spot market price is €0.089 per kWh. While the government said that it will instead invest in renewable energy and transmission capacity to drive down prices, it did not announce any additional spending in the area. Germany is aiming to have 80 percent of its energy mix comprised of renewable sources by 2030. Germany’s energy prices are currently roughly 40 percent higher than before the Ukraine War.

The lack of government assistance may accelerate Germany’s deindustrialisation. According to BDI, a leading German business body, 16 percent of medium-sized industrial companies in Germany are currently shifting operations overseas, while 30 percent are considering moving. Whether enough renewable projects can be built in time to prevent mass industry relocation is unclear. Berlin is facing a particularly complicated balancing act of simultaneously seeking to accelerate its energy transition and wean itself off Russian gas whilst maintaining the integrity of its industrial base.

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Chongqing announces hard-hitting anti-spying laws

Western companies may have a complicated array of counter-espionage laws at the provincial government level

Local governments in China are beginning to implement their own versions of national anti-espionage legislation. In April, China released laws which broadened the definition of information related to spying to include “documents, data, materials, and items related to national security and the national interest” and banned the export of these materials. Chongqing’s laws appear to go a step further. Some of the municipality’s 29 new articles include a requirement for almost any overseas travel exchanges in civil service, schools and firms to acquire express clearance for mandatory anti-spy training.

The danger is that provincial and local governments will compete to adopt a hardline on national security. In other words, Chongqing’s laws may be the first of many similar but distinct versions of anti-espionage policy across China’s provinces. The volume of varying laws could give rise to greater regulatory variance and complexity. How local governments will balance national security imperatives with a desire to revivify flagging investment remains unclear.

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The West and India strengthen global infrastructure spending to counter China

Initiatives include expanding the reach of multilateral development banks in low and middle income regions

The US, EU and India are intensifying efforts to compete with China’s Belt and Road Initiative (BRI). The BRI’s massive lending allocations of over US$1 trillion in global infrastructure projects has added to concerns among China’s geopolitical rivals of its growing influence. One of the main avenues countries are pursuing to counter the BRI is an enlargement of the balance sheets of Western-led multilateral development banks. The Biden administration is calling for a US$25 billion increase in the World Bank’s lending volume for low and middle income countries, with an option to increase that amount to over US$100 billion if other countries commit additional capital. The IMF’s managing director, Kristalina Georgieva, has separately urged to increase the organisation’s available lending funds by the end of the year.

Ambitious development projects are beginning to emerge as a result of these efforts. During this month’s G20 Summit in New Delhi, the US, EU and India furthered plans to establish an economic corridor through the Middle East and India. The project will create an interlinking rail network through Israel, Jordan, Saudi Arabia and the UAE, connecting ports in the west of Israel to those in the east of the UAE. It also includes upgrades to energy transmission infrastructure and maritime infrastructure between the UAE and India in the Arabian Sea. The parties agreed to develop an ‘action plan’ over the next 60 days. The West’s schemes that more directly compete with the BRI such as the G7’s US$600 billion Partnership for Global Infrastructure and Investment and the EU’s €300 billion (US$322 billion) Global Gateway Initiative complement these efforts.