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The European Commission (EC) recently gave the go-ahead to the formation of a joint venture between Baoshan Iron & Steel (Baosteel), Baowu Aluminium and Kobe Steel (Kobelco), in accordance with the EU Merger Regulation.
However, although the approval does not raise immediate competition concerns in the European Economic Area, the initiative does raise questions about China’s growing ambitions in the global automotive sector, especially considering the expansion strategies Beijing is implementing to consolidate its industrial leadership.
The European Commission’s Review: A Too Superficial Approach?
In particular, the Commission stated that the creation of this joint venture does not pose significant risks to competition in the European Union due to its limited impact on the European market.
However, the decision to examine the transaction through the simplified procedure, which is reserved for mergers with minimal competitive risks, could be seen as too shallow, considering that the project is mainly focused on the Chinese market, and thus could escape European supervisory jurisdiction.
China is already known for its aggressive industrial policy, with an economy heavily stimulated by the state and its ability to support key sectors such as automotive. With this move, it further strengthens its presence in the market for advanced materials such as aluminium, a sector that has not only economic but also geopolitical implications.
China As Manufacturing Giant: Joint Venture with Kobe Steel
According to the 8 August announcement on Kobe Steel’s website, the new joint venture, provisionally called Kobelco Baosteel Automotive Aluminum Rolled Products, will be equally divided: Kobelco will hold 50 per cent, while Baosteel and Baowu Aluminium will share the remaining 50 per cent.
This apparent balance of power should not mask the fact that the new company will be entirely focused on the Chinese market, with production plants in Tianjin and Henan, and headquarters in Shanghai.
A structure clearly aimed at strengthening Chinese self-sufficiency in the production of strategic materials, bypassing potential trade barriers with the West.
Even the initial capital of the joint venture – amounting to RMB 900 million (around EUR 123 million) – testifies to the importance China attaches to this collaboration, considering the intention to serve mainly its automotive market.
And although Kobelco is formally a partner, one has to wonder how fair this partnership really is, given the prominence of China as a manufacturing location and outlet market.
The Chinese Automotive: Between Expansion and Protectionism
The Chinese automotive market is the largest in the world and, in many sectors, protected by barriers that limit access for international manufacturers. Despite rhetoric of openness to trade, China has systematically created favourable conditions for its domestic manufacturers, often through aggressive industrial policies.
The joint venture between Baosteel and Kobe Steel, therefore, could be seen as an attempt to further consolidate this protection, making China increasingly self-sufficient in the automotive sector and less dependent on foreign suppliers, also thanks to the technology provided by Japanese partners.
Aluminium for Automotive: A Double-edged Weapon?
Aluminium has become a central material for the future of the automotive industry, particularly with a view to reducing the weight and emissions of vehicles, especially electric vehicles. However, in this context, China’s rise in the automotive aluminium sector cannot only be seen as a victory for efficiency or environmental sustainability.
In fact, China’s increasing control over strategic sectors could pose a threat to the global market balance.
Although the global automotive industry is turning to aluminium to reduce the weight of vehicles and improve performance, the concentration of production in the hands of Chinese industrial giants cannot but cause concern.
Access to resources, the ability to control prices and possible market manipulation by a single country are factors that risk penalising not only Western competitors but also global consumers.
Moreover, Chinese dominance over aluminium production could make the global automotive industry increasingly dependent on Chinese suppliers, generating imbalances and potential trade tensions, especially in the event of political or economic disputes.
Beijing’s Strategy and Global Ambitions
This joint venture fits perfectly into China’s strategy of strengthening its dominance in technologically advanced sectors, using collaboration with foreign partners to obtain crucial know-how and technologies.
The apparently inoffensive European approval could therefore conceal a larger and more dangerous game, where the West risks finding itself once again dependent on supplies and expertise developed elsewhere, in an increasingly complex geopolitical context.
While Chinese companies, supported by the state, continue to grow, investing massively in cutting-edge technologies, Western countries, unfortunately, seem disarmed in the face of this advance.
Working with companies such as Kobe Steel, one of the oldest and most respected steel and metal producers in the world, suggests that China’s real goal is to consolidate its position as a global leader in the automotive and advanced materials sectors, and not just serve its domestic market.
Conclusions
While the joint venture between Baosteel, Baowu Aluminium and Kobe Steel appears to be a technical operation aimed at meeting the growing needs of the Chinese automotive industry, a far more complex reality emerges.
China is exploiting every opportunity to strengthen its self-sufficiency, increase its production capacity and consolidate its control over strategic resources, all under the apparently complacent gaze of the West.
The question that remains is: to what extent will European and global economies be willing to cede ground to China before fighting back?