2024-04-12 15:00:03
Survey: German companies have achieved remarkable results in “de-risking” China
12.04.2024
According to a new research report released by the German ifo Economic Research Institute, in the fields of furniture and automobile manufacturing, German companies’ efforts to reduce their dependence on China have achieved remarkable results. In contrast, the chemical industry has not only failed to “de-risk”, but has become more dependent on raw materials and intermediate products imported from China.
(Deutsche Welle Chinese website)“De-risking”It is the most frequently mentioned keyword in discussions about Germany-China economic relations in recent years. Russia’s aggressive war in Ukraine has also put Germany’s economic dependence on China under scrutiny. According to a latest survey by the German ifo Economic Research Institute, “risk removal” has achieved remarkable results in some industrial sectors.
A representative questionnaire survey of companies conducted by the institute in February this year showed that the proportion of German companies still relying on Chinese raw materials and goods in the industrial and trade fields has dropped to less than 40% respectively. That’s down significantly from the last time the survey was conducted, shortly before the war in Ukraine broke out.
Among them, the most significant results of “risk removal” were found in furniture manufacturing and automobile manufacturing. The proportion of companies in these two industries that relied on important raw materials or intermediate products from China decreased by 29 and 17 percentage points respectively.
Background reading: Exclusive interview: “Removing risks” is to prepare for “black swans”
In contrast, the German chemical industry has not only failed to “de-risk”, but has become more dependent on China – 46% of the companies surveyed in this field said they relied on Chinese supplies, an increase of 5 percentage points from the 2022 survey. . A report released a few days ago by another well-known German economic research institution, the Cologne-based IW Economic Research Institute, also pointed out that in the fields of chemical and electronic products, German companies have failed to reduce their dependence on China.
Supply chain diversity and political risk
It is also worth mentioning that many German companies have their own production bases in China and obtain important intermediate products from these production bases. The proportion of these companies has hardly changed compared with 2022.
In addition, compared with the results of a questionnaire survey conducted by the ifo Institute on the eve of the Russian-Ukrainian war, the proportion of companies that hope to continue to reduce imports from China in the future has also declined. In the field of industry and trade, less than 40% of companies currently have this idea.
The report pointed out that under this background, supply areas outside Europe that can replace China are receiving more and more attention, while alternative options in Germany or within Europe are less considered.
In addition to the general trend of diversifying supply channels, increasing political uncertainty has also become one of the main reasons why companies plan to reduce imports from China. In 2022, 41% of the companies surveyed listed political factors as one of the main reasons for reducing imports from China, and by 2024 this proportion has risen to 65%.
The report by the ifo Institute concluded that for many German companies, the diversification of the supply chain is still an important strategic goal; but at the same time, it must also be noted that the direct investment of German industrial companies in China is This is an important factor that prompts Germany to import products from China, and it has a certain degree of stability. If the German government wants to promote the process of trade diversification, it must pay attention to foreign direct investment.
(ifo Institute of Economic Research)
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Who invented “de-risking”?
Von der Leyen think tank speech
On March 30, 2023, European Commission President von der Leyen delivered a speech in English at an event hosted by two European think tanks in Brussels. She pointed out that the economic relationship between China and Europe is becoming increasingly unbalanced, and that China’s “clear integration of the military and commercial sectors” brings risks to European security, so it needs to be de-risked and better Make full use of existing tools to safeguard European economic interests. “Our relationship is not black and white, and our answers cannot be. So we must focus on de-risking, not decoupling.”
Who invented “de-risking”?
New keywords for relations with China
Von der Leyen’s speech received huge attention. The term “risk de-risking” immediately began to be cited by media and politicians in Germany and the United States. The New York Times believes that this statement is a new summary of the EU’s relations with China. German and French diplomats have since promoted the concept of “de-risking” in international organizations and made it reflected in the statement of the G7 Summit in Hiroshima in May of that year. in content. Germany’s “Der Spiegel” pointed out that von der Leyen hopes to retain space in the wording, which is different from the “decoupling” used by the United States for some time.
Who invented “de-risking”?
Is dependency a “good choice”?
During his visit to China in mid-April, German Foreign Minister Berbock also stated that Germany does not want to “decouple” from China, but to “reduce risks”, which means that Europe should reduce its “unhealthy” dependence on China. Chinese Foreign Minister Qin Gang, who also attended the press conference, responded that “China and Germany are partners, not rivals” and that mutual dependence on the supply chain “is the best choice under market rules”; as long as both countries remain open, “there is no need Worry about so-called dependence.”
Who invented “de-risking”?
Was Scholz the instigator?
Some German media noticed that the first person to publicly use the term “de-risking” was not von der Leyen, but German Chancellor Scholz. In November 2022, the German “Stern” magazine quoted Scholz in a report before his visit to China as saying when he talked about dependence on China’s industrial chain: “De-risking and diversification are top priorities.” But. At that time, this statement did not attract special public attention.
Who invented “de-risking”?
financial terms
The term “De-Risking” is not a recent invention, but a term in the financial industry that refers to banks or investors shrinking or terminating trading relationships to reduce the risk of payment defaults. In January 2023, President of the European Commission Von der Leyen also stated at the World Economic Forum that although the EU needs to “cooperate and trade with China,” it must still revise the direction of commercial transactions with China and seek cooperation with the world. The second-largest economy “reduces risks, not decouples”.
Who invented “de-risking”?
Sullivan: Freedom from Coercion
Officials in Washington have also begun using the language of “de-risking.” At the end of April this year, U.S. National Security Advisor Jake Sullivan said in a speech at the Brookings Institution in Washington, “De-risking means having a resilient and effective supply chain and ensuring that we are not subject to coercion by any country.” “We just want to ensure that the technology of the United States and its allies will not be used against ourselves,” rather than cutting off trade, he stressed, “as Chairman von der Leyen said not long ago.”
Who invented “de-risking”?
transatlantic consensus
German Handelsblatt pointed out that on this issue, von der Leyen, German Chancellor Scholz and US National Security Advisor Sullivan have apparently reached a consensus. “Different from ‘decoupling’, the purpose of ‘de-risking’ is not to isolate China economically, but to enhance Europe’s own economic resilience.”
Who invented “de-risking”?
Aftermath of the G7 Summit
After the G7 summit in Hiroshima in May, British Prime Minister Sunak (second from left) told the media that the UK and other G7 countries are working together to find ways to reduce the challenges posed by China. “This is all about de-risking, not decoupling.” He added: “We (G7) are taking steps to prevent China from using economic coercion to interfere in the sovereign affairs of other countries.”
Who invented “de-risking”?
Beijing: Don’t “imitate parrots”
Beijing, which was already dissatisfied with the G7 meeting communiqué, reacted fiercely. The spokesperson of the Chinese Embassy in the UK accused Prime Minister Sunak of “parroting” his remarks. The Chinese Ministry of Foreign Affairs (pictured) previously stated in the G7 communiqué: “Regarding the so-called ‘economic coercion’, the United States is the real ‘coercer’ that politicizes and weaponizes economic and trade relations by engaging in unilateral sanctions and ‘decoupling and breaking links’. We advise the G7 not to be accomplices and accomplices in economic coercion.”
Who invented “de-risking”?
Li Qiang denounces “false proposition”
Chinese Prime Minister Li Qiang delivered a speech at the opening ceremony of the World Economic Forum (WEF) “Summer Davos Forum” held in Tianjin on June 27: “Now in the West, some people are hyping the so-called ‘reducing dependence and removing risks'” , I think to a certain extent, these two sentences are a false proposition.” He believes that risk management and control should be made by “enterprises to make corresponding judgments and choices”, and the government and relevant organizations “should not overstep their authority, let alone do it for them.” Expand, politicize, and ideologically de-risk.”
Who invented “de-risking”?
Entering into the EU’s China Strategy
The common China policy is also an important topic at the EU summit that ended on June 30. The joint statement of the summit stated that it will support the continued maintenance of economic and trade relations with China while reducing Europe’s economic dependence on China. “De-risking” officially debuted in this statement and became a concept. In the future, the EU will use it as a guideline to launch its China strategy. However, some critics point out that the EU’s current “de-risking” statement still lacks specific plans and responsibility regulations.
Who invented “de-risking”?
Germany’s first China strategy
On July 13, 2023, the German federal cabinet adopted the first relations strategy with China, with “no decoupling and risk reduction” as one of the important contents. The document states that Germany will continue exchanges and cooperation with China and at the same time “reduce dependence in key areas.” The German government will increase society’s sensitivity to China-related risks, strengthen communication with companies, and remind companies to do a good job in risk management and control. The document also emphasizes that unilateral changes to the status quo in the Taiwan Strait are unacceptable, and the escalation of military conflicts in the Taiwan Strait will affect the interests of Germany and the EU.
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