Get out of China: German companies are facing this problem

WAZ Get out of China: German companies are facing this problem Article by Hannes Koch • 13 hours • 4 minutes reading time The German Chamber of Foreign Trade has set up a special service in China. Companies receive support there if they want to move away from China. This does not have to be advice on leaving China completely, but it is about establishing certain business activities in other countries beyond China's borders. This strategy is called "China plus one". In a recent survey by the Chamber of Foreign Trade, almost half of the companies said they wanted to reduce their business risk. One way is to base activities such as management, research or production on several geographical bases. The Chamber's diversification office particularly suggests India, Japan, South Korea, Thailand, Singapore and Vietnam. Also interesting If German companies operating in China want to reduce their concentration on this country, there can be several reasons for this. The conflict over the independent state of Taiwan, which the Chinese government wants to incorporate, plays a prominent role. Company executives are asking themselves what they would do if tensions escalated and the USA and Europe imposed tough sanctions on China. The slow economic development in the giant empire compared to before is also a cause for concern. Federal government calls for "de-risking" of the German economy The federal government has clear words in its China strategy. It warns against a policy by the government in Beijing that seeks to "create economic and technological dependencies". These already exist today in the case of rare metals, lithium batteries, photovoltaics or pharmaceutical active ingredients, for example. In order to regain or maintain the economic sovereignty of the German economy, the government is calling for "de-risking", i.e. better risk diversification. "The aim is to establish and expand balanced partnerships in Asia without closing ourselves off to China." In concrete terms, this means that German and European companies need new partners. For example, Vietnam. A new production facility belonging to the company RRC Batterien has been operating there for a year. The company from Homburg in Saarland produces, among other things, power storage units for robots, drones, medical and defense technology equipment. The new plant serves to "diversify our supplier and production base in China and Taiwan," explains RRC. With the help of Vietnam, "we can better cushion possible disruptions in the supply chain and ensure continuous and reliable deliveries." The German Chamber of Foreign Trade in Vietnam knows numerous other examples. There are 530 investment projects from over 100 German companies. These now offer almost 50,000 jobs. One focus is on consulting companies, but production in sectors such as machinery, textiles, chemicals and electronics is also strong. Vehicle supplier Bosch, industrial gas manufacturer Messer and pharmaceutical producer Stada, among others, work in China's southern neighbor. "The strongest motive for the new production locations is China-plus-one strategies," writes the Chamber of Commerce. Promising business partners in Asia: Vietnam and India Another potential destination is India. With 1.4 billion inhabitants, the country offers a market of similar size to China, although it is still significantly poorer. Federal Minister of Economics Robert Habeck (Greens) is due to chair the Asia-Pacific Conference of German Business there at the end of October. "German companies could benefit from closer cooperation with India; the country is an ideal location for semiconductor and pharmaceutical production, for example," says Volker Treier, head of foreign trade at the German Chamber of Industry and Commerce in Berlin. "There is also potential in research and development for digitalized mobility." Trade between Germany and India has increased moderately and was worth a good 30 billion euros in 2023. Chemicals, medicines, machinery and clothing were imported from there, among other things. Machinery, aircraft parts, chemical products, electrical engineering and vehicle parts played a major role in exports to South Asia. In order to strengthen India as a trading partner, the European Commission is working on a trade agreement, although negotiations will probably take some time. However, realism is required when looking for new partners. China's importance as a trading partner and location for German companies is so great that it is difficult to quickly rebalance it. Last year, the combined trade volume (imports plus exports) was over 250 billion euros. With around eight percent of total German foreign trade, the country was the largest counterpart.