German industry calls for more support to diversify beyond China

More support for industry to diversify trade beyond China is what the Association of German Chambers of Industry and Commerce (DIHK), one of Germany’s main industry lobby groups, called for on Monday, as the government works out new policies designed to reduce the economy's dependence on Beijing.

Businesses faced an administrative burden from planned measures such as stress tests and greater scrutiny on investments in China, outlined in a draft document seen by Reuters, the DIHK said.

“Everything we have heard so far about the German government's China strategy is extremely defensive,” said Volker Treier, head of foreign trade at DIHK. “There is a lack of an encouragement strategy for building out sustainable economic relations, particularly in the wider Asia-Pacific realm, to avoid one-sided dependencies.”

The Chinese foreign ministry in Beijing referred to the draft document telling Reuters its hopes that Germany would develop its relations in an “objective and rational manner”, adopting a policy benefiting the people of both nations.

Germany decided to revisit its close ties with Beijing, especially in the field of manufacturing, after Russia initiated its invasion of Ukraine, which in turn put Germany’s economy in the spotlight as being too dependent on Russian energy.

Carmakers Mercedes-Benz, BMW and Volkswagen and the chemicals giant BASF, all being German, accounted for a third of all European investment in China in 2018-2021, according to a study by research company Rhodium Group.

The foreign ministry document, which still has to be agreed upon by other ministries, said key industries including cars and chemicals must steer clear of the risk to companies and the country of investing too heavily in China.

Although a spokesperson for Mercedes-Benz refused to comment on the specific policies presented in the document, he did, however, say the company sought it as its “task to work on greater diversification of our supply chains”.

“We need an active and resilient industrial policy and strategy in Europe with regards to raw materials, batteries or semiconductors,” he said.

Much in the same vein, a BMW spokesperson declined to comment on the document's details, albeit admitted the group was as heavily invested in Europe and the Americas as in China, and carry on with continuing “to pursue the goal of opening up new sales markets in the future”.

No comment came from Volkswagen and BASF.

Diversified group Merck KGaA, whose investments in the region include a production site for lab equipment in Wuxi near the commercial hub of Shanghai, said facilities in China would mainly serve customers in the country.

“We need constructive dialogue with the goal to enhance multi-nationalism in the face of international bloc building,” it said, when asked to comment on Germany's plans.