How German companies are tackling China risk

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Thomas Nuernberger is preparing for tougher times.

For the past seven years, the 55-year-old has run the Chinese unit of fan and motor maker ebm-papst, and business has been good.

German Chancellor Olaf Scholz's coalition unveiled in July a strategy toward de-risking Germany's economic relationship with China, calling Beijing a "partner, competitor and systemic rival". The 61-page document urged German firms to reduce their dependence on China – the country's most important trade partner - but was light on any binding targets and requirements.

Indeed, Ebm-papst still regards China as a key market: it may greenlight another 25-million-euro investment soon to expand its presence there, Nuernberger said. Since taking office in late 2021, however, Social Democrat Scholz has taken a harder line on China, distancing himself from his predecessor Angela Merkel's embrace of Beijing.

Big German corporates like BASF, meanwhile, regularly point out the relevance of the Chinese market, indicating there is no substitute for its massive potential. A BASF spokesperson referred to recent comments by CEO Martin Brudermueller, who said most growth in the chemicals market will come from China - not Europe or the Americas - until 2030.

Only 51.9 million euros in investment guarantees for China were issued by the government in the first eight months of this year, less than a tenth of the 745.9 million euros issued over the whole of 2022. Horn Group, a maker of precision tools that makes around 5% of its sales in China, opened a sales company in Thailand earlier this year that will be gradually scaled up, managing director Markus Horn said.

Vietnam had close ties with Eastern Germany and there are still German speakers there, Roennfeld said, adding there was now a second wave of diversification in other South Asian countries, such as Thailand, Malaysia and Indonesia.

 

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