Germany: Trade and government in different ways against China

The government of German Chancellor Olaf Scholz is trying to reduce Germany’s dependence on China, but the heads of the country’s biggest companies are fighting back.

The top executives of BASF, Mercedes-Benz, Siemens and VW are trying to hide their business interests amid political concerns sparked by the war in Ukraine, which has highlighted Germany’s dangerous dependence on Russian energy. The relationship with China could be deeper.

The Asian superpower is Germany’s biggest trading partner, with total trade reaching 300 billion euros last year, or 8% of the GDP of Europe’s largest economy. In addition to large investments in domestic manufacturing industries, China is also a major supplier of spare parts and raw materials as well as a major buyer of products from German companies.

Germany has the largest deficit with China

Business and its main partners in 2022

Source: German Federal Statistical Office

BASF is investing about $10 billion in a chemical plant in Zhanjiang on China’s southern coast. Volkswagen has confirmed its commitment to a car manufacturing plant in Xinjiang, despite ongoing concerns about the treatment of Uyghur Muslims and other ethnic minorities in the northwestern region.

“We will not leave China,” Arno Antlitz, VW’s chief financial officer, said after BYD overtook the German automaker as China’s top automaker in the first quarter.

Comments from senior business leaders contradict Scholz’s calls for a disengagement from China. His government has insisted on “de-risking” instead of earlier US calls for “disengagement” – a tacit admission that Germany cannot afford to suddenly cut ties with the world’s second-largest economy.

Trade relations should change so that “the risks of dependence on one or a few countries are not so great,” Scholz said last week at the G7 summit in Hiroshima, Japan.

However, there is little evidence that companies share these risks. Leaving China is “unthinkable” for the German industry, Mercedes CEO Ola Källenius said in an interview with Bild in April. “The main players in the world economy – Europe, the United States and China – are so closely related that withdrawing from China makes no sense.”

The Chinese market accounts for about 40% of Mercedes’ sales, with the automaker selling more than twice as many cars there as in the United States.

Siemens CEO Roland Busch has vowed to “defend” and “expand” his carmaker’s market in China, telling the Financial Times in an interview that Chinese customers are driving the German engineering giant to innovate.

“The world doesn’t become less dangerous when you take it apart, on the contrary,” Stefan Hartung, head of German auto parts giant Robert Bosch, said at the company’s annual press conference earlier this month.

Similarly, BASF CEO Martin Brudermüller has warned that it is more dangerous not to expand in the Asian economy than to pull out because of geographic concerns. and information from Bloomberg

Read also:

G7: A New Approach to Transforming Supply Chains

Plötner, Councilor Soltz: Europe must be stronger and stand on its own

Volkswagen: Targets China’s electric car market with 1 billion euro investment

Follow Money Check on Google News