Angela Merkel says German companies should diversify to Asian markets beyond China

Stuart Lau of South China Morning Post, and Reuters

Posted at Oct 20 2020 12:43 PM | Updated as of Oct 20 2020 12:47 PM

Germany has begun a campaign calling for diversification from China, with Chancellor Angela Merkel and her economics minister suggesting that businesses expand their Asian market.

This comes days after Merkel cancelled a meeting with 26 other European Union leaders to discuss future China policies, citing the coronavirus pandemic and the more pressing priority of Brexit.

Germany, the biggest economy in the EU, recently launched its Indo-Pacific policy, which officials said was aimed at encouraging businesses to explore destinations in the region other than China.

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Beijing has been eager to keep the EU on its side as its economic and geopolitical contest with the US intensifies. But it remains unclear whether it will agree to further market access demanded by the EU amid talks for an investment treaty, scheduled to be completed this year.

Other European leaders, including French President Emmanuel Macron, have also called for less reliance on China, but usually in the context of the medical supply chain, rather than an all-out diversification, as Merkel suggested.

Speaking in an event organised by the Asia-Pacific Conference of German Business on Monday, Merkel urged German companies to diversify and win new markets throughout the Asia-Pacific region. The government will continue its efforts to improve the framework conditions, she said.

Currently, about three-quarters of Germany's Asia exports go to east Asia, and half of them to China alone, Merkel said.

Economics Minister Peter Altmaier, at the same conference on Monday, said that German companies should diversify to Asian markets beyond China to be less dependent on single supply chains, which the pandemic has shown are vulnerable to interruption.

He alluded to bottlenecks in the supply of medical equipment for the German market in the spring. "We naturally want to diversify our supply chains," the minister said.

Singapore and South Korea could offer promising opportunities as they had handled the coronavirus crisis well and regained their economic strength early on, he said.

A German official recently told the Post: "Germany does not aim to decouple with China. Rather, we would like to get a bigger pie in Asia, since we are currently very dependent on China when it comes to the Asian market."

While China's economic recovery accelerated in the third quarter to 4.9 per cent, headline growth was weaker than expected, suggesting persistent risks. Still, the International Monetary Fund expects the country to be the only major economy to report economic growth this year.

Germany's economy is expected to shrink by around 5.4 per cent this year.

Additional reporting by Reuters

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