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POLITICS

Scholz walks tightrope on trade and politics in China

German Chancellor Olaf Scholz arrived in China on Sunday, kicking off a trip in which he faces a tough balancing act as he aims to shore up economic ties with Berlin's biggest trading partner.

Scholz walks tightrope on trade and politics in China
German Chancellor Olaf Scholz arrives in China Sunday. Photo: Tobias SCHWARZ/AFP.

Scholz touched down in the southwestern megacity of Chongqing on Sunday morning, Chinese state broadcaster CCTV said, accompanied by a large delegation of ministers and business executives.

As Western allies are cranking up pressure on Beijing, Scholz is expected to underline that Germany remains committed to doing business with the world’s second-largest economy and rejects US-led calls for “decoupling”.

His friendly overtures towards China risk sparking ire among Washington and EU partners, which have been pushing back against Beijing’s heavy subsidies for industries.

“China remains a really important economic partner,” Scholz told journalists on Friday, adding that he would try to level the playing field for German companies in China.

On the geopolitical front, Scholz will also use his visit to persuade Chinese President Xi Jinping to exert his influence to rein in his Russian counterpart Vladimir Putin and help bring an end to the war in Ukraine.

“Given the close relations between China and Russia, Beijing has the possibility to exert its influence on Russia,” said a German government source in Berlin.

The three-day tour through Chongqing, Shanghai and Beijing is Scholz’s second trip to China since he took office.

His first in November 2022 took place under intense scrutiny, as it came swiftly after Xi strengthened his grip on power, and marked the first post-pandemic visit by a G7 leader to China.

Stung then by painful supply chain disruptions during the health crisis as well as by China’s refusal to distance itself from Russia despite Moscow’s invasion of Ukraine, Western allies had been scrambling to reduce their reliance on Beijing.

‘Position of strength’

Scholz’s visit comes as many of Germany’s Western allies confront China on a range of trade issues.

A slew of probes into state aid for Chinese solar panels, electric cars and wind turbines are ongoing in Brussels.

The United States is meanwhile investigating national security risks posed by Chinese technology in cars.

With tensions rumbling over Taiwan, US President Joe Biden this week made defence pledges to Japan and the Philippines, while describing behaviour by Beijing in the South China Sea as “dangerous and aggressive”.

Two days before his visit, Scholz held talks with France’s President Emmanuel Macron, whose office said the leaders “coordinated to defend a rebalancing of European-Chinese trade relations”.

But China is a vital market for Germany, where many jobs depend directly on demand from the Asian giant.

Both economies also badly need a boost.

The German economy shrank by 0.3 percent last year, battered by inflation, high interest rates and cooling exports, and for this year, the economy ministry expects just an anaemic growth of 0.2 percent.

Beijing has set an annual GDP growth target of around five percent for this year, but exports plunged more than expected last month.

German MPs and analysts urged Scholz to take a firm line. The Green party’s Deborah Duering warned Scholz against viewing China just as an economic opportunity.

“Those who ignore long-term risks for short-term profits risk repeating the mistakes of the past, misguided Russia policy,” said Duering, in reference to past dependency on Moscow for cheap energy supplies.

Max Zenglein of the Mercator Institute for China Studies said Germany should not hesitate to be more assertive.

“As countries such as the USA and Japan are positioning themselves much more sharply against China, Germany has an important role to play,” he said, adding that Germany was “in a position of strength”.

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ECONOMY

Why two leading grocery delivery apps are leaving Germany in May

Speedy delivery services boomed during the Covid years, offering customers the chance to have groceries delivered in minutes. But now two of Germany’s bigger players are leaving the country entirely. Could this be the end of the on-demand delivery trend?

Why two leading grocery delivery apps are leaving Germany in May

Speedy delivery start-ups Getir and Gorillas will leave Germany by mid-May.

After the 15th, customers will no longer be able to order groceries via the Getir or Gorillas apps, and delivery couriers in Getir’s branded purple suits, or Gorilla’s black jackets, will no longer be seen making dizzying laps on Germany’s urban streets.

Getir’s remaining warehouses will be closed down over the next couple weeks. According to WirtschaftsWoche, 1,800 Getir employees in Germany have already received termination notices.

The Gorillas app has continued to serve customers but is owned entirely by Getir, meaning that grocery delivery by Gorillas will also cease in Germany this month.

Why are grocery delivery apps failing?

The speedy grocery sector, sometimes called quick commerce (Q-commerce), grew immensely in recent years. But none of the fast grocery delivery start-ups have managed to turn a profit. 

They have instead been fuelled by large sums of investor money, which was easy to grab when customer numbers rose through the Covid pandemic.

Turkey-based Getir was founded in 2015 and began rapidly expanding in Europe six years later. At its peak, it had a valuation of $12 billion (€11.2 billion).

Meanwhile, Berlin-based Gorillas was founded in 2020, and expanded rapidly across the capital city, subsequently rolling out across Germany and the EU and even entering the US.

Shortly after Gorillas came Flink: yet another Berlin-based grocery delivery start-up, but in pink. Both Gorillas and Flink succeeded in achieving unicorn status, meaning that they grew to a $1 billion valuation within their first year of business.

However, Gorillas’ shining success was short-lived. From early on, the start-up faced criticism from workers who complained about physically hazardous working conditions, faulty gear, and stressful performance demands. 

Meanwhile the company was rapidly burning through investment capital in its efforts to expand into new markets and coax in new customers with hefty discounts.

READ ALSO: German discount supermarket Aldi Süd launches delivery service

Getir bought Gorillas at the end of 2022, despite signs that Gorillas was crashing at the time.

One year later, the writing was on the wall for Getir as it began winding down operations in France, Italy, Spain and Portugal. In August of 2023, Getir announced that it was laying off 2,500 workers, equal to about 11 percent of its staff at the time.

According to British broadcaster Sky, shareholders have agreed to give further funding to Getir on the condition that the company withdraw from the UK, Germany and the Netherlands to instead focus on expansion in its home market in Turkey.

With Getir and Gorillas out of the way, Flink has secured its position as Germany’s market leader. According to Flink, its annual turnover is twice as much as Getir’s, at €560 million.

But even as the clear market leader, whether or not Flink can succeed in making rapid delivery profitable remains to be seen.

The company reportedly secured a further €100 million to extend its runway in Germany for the time being.

Betting on speed was a fatal miscalculation

Those who lived in Germany’s bigger cities in 2020 or 2021 may recall a period when delivery apps like Gorillas, Flink and others were dominating advertisement spaces on the streets and in U-bahn stations.

Gorillas infamously promoted deliveries in “ten minutes” on its billboards, and even on the backpacks and jackets that its riders wore.

Gorillas backpack on a rider

“Groceries delivered in 10 minutes” was among Gorillas’ initial marketing campaigns. Photo: picture alliance/dpa | Annette Riedl

Eventually the brand phased out the ten minute suggestion, presumably because most deliveries took longer than that. But it stuck with speed-focused marketing, turning instead to slogans like “faster than you”.

But market analysts have since determined that the focus on speed was a mistake. Logistically, providing super quick deliveries requires too many warehouse locations and too many employees.

With rents and other costs increasing recently, the weaknesses of the speed-based delivery business model were exposed.

Delivery jobs can be hazardous and exploitative

Delivery start-ups also faced protests and bad press as delivery and warehouse workers complained that they suffered immense stress on the job, and bodily injuries. 

Furthermore many delivery companies stood accused of trying to circumvent workers’ protections, traditionally seen as a key pillar of Germany’s social market economy, by hiring most of their workforce as “self-employed” contractors rather than full or part-time employees.

Gorillas, in particular, faced an onslaught of bad press for years as the so-called Gorillas workers’ collective organised countless protests against the company, and dozens of cases of wage-theft were brought in Berlin’s courts.

Even as Gorillas and Getir exit Germany, these issues can be expected to continue.

On Friday, German and Dutch food couriers protested in front of the headquarters of Just Eat Takeaway in Amsterdam. Just Eat Takeaway is the parent company for Lieferando, which has about 7,000 employees in Germany. 

In response to these kinds of labour disputes, the EU Parliament recently adopted a Platform Directive aiming to improve the working conditions and rights of platform workers at food delivery companies, including measures to prevent companies from hiring “self-employed” workers.

The EU directive also hopes to provide protections for consumers. Companies with delivery apps will be obliged to provide more transparency about how their algorithms work.

READ ALSO: REVEALED – Where to buy groceries on a Sunday in Berlin

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