German firms diversify in Asia to reduce China risk: survey
NEARLY half of the German companies operating in China are taking measures to reduce the risk of doing business there, largely due to growing geopolitical tensions, according to a new survey by the German Chamber of Commerce in China.
Firms are building supply chains that are independent of China, shifting some operations away from the country and growing markets elsewhere in Asia, according to the survey of 566 companies conducted between Sep 5 and Oct 6.
Some 83 per cent of companies cited geopolitical tensions as the main reason for their steps to mitigate risks related to China business; 45 per cent chalked it up to the country’s economic slowdown, and 24 per cent put it down to its greater focus on self-reliance.
Other countries are benefiting from this risk mitigation strategy, according to the survey, with 57.5 per cent of companies surveyed saying they would be investing more in India, followed by 37.9 per cent for Vietnam, 30.1 per cent for Thailand, 23.3 per cent for Malaysia and 20.1 per cent for Singapore.
The survey comes five months after the German government unveiled a strategy toward de-risking its economic relationship with China, its biggest trade partner. It also confirms anecdotal evidence reported by Reuters of German firms reducing their dependence on China.
Other countries in the West are also promoting greater risk mitigation, amid growing concerns about China’s increasingly assertive attitude toward Taiwan and in the South China Sea, as well as its tightening grip over its domestic economy.
This in turn is beginning to have an impact on the world’s second-largest economy, with China recording its first-ever quarterly deficit in foreign direct investment in the July-to-September quarter.
Still, of the German companies surveyed, some 54 per cent said they wanted to invest further in China – up from 51 per cent last year – to localise production, in effect also potentially shielding it from the repercussions of geopolitical spats, said economists.
That was more than the 44 per cent that said they were pursuing risk mitigation strategies.
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