Dr Eric Schmidt’s Post

🌏  Germany’s Economic Pivot to Southeast Asia: Do All Roads Lead to China after All? 🇩🇪 🇨🇳 German chancellor Olaf Scholz’s recent visit to China underscores Germany’s challenge of reducing economic reliance on China while maintaining crucial trade ties. According to CHOICE authors Tim Hildebrandt and Julian Klose: ➡  Events like the COVID-19 pandemic and Russian aggressive war in Ukraine have prompted reassessment of risks, leading to a 30% decline in German investment in China in 2023. ➡  Yet despite “de-risking” strategies, German corporations like BASF continue with significant investments in China. ➡  Countries like Malaysia, Thailand, and Vietnam offer lower labor costs and less competition, attracting German businesses such as Porsche and Mercedes-Benz. ➡  However, despite Southeast Asia’s appeal, China’s manufacturing capabilities and logistical complexities make complete relocation to Southeast Asia challenging.Germany’s approach reflects the growing need to balance its economic interests with geopolitical realities. Southeast Asia offers opportunities for German businesses. However, the process of learning for the German companies that not all roads lead to China may be longer and more painful than anticipated. #Germany #China #SoutheastAsia #Trade #Geopolitics #Investment #SupplyChain

‘In China for China’: German firms buck the trend, bring best tech and products to compete, the South China Morning Post SCMP reports: ➡️ The country’s huge market size, coupled with a raft of charm offensives, have persuaded them to stay and increase their investment, but they are increasingly adopting an “in China for China” strategy to cope with fiercer competition from local companies and in the face of rising global supply-chain risks, according to executives of some of those firms. ➡️ Last year, German businesses’ direct investment in China increased by 4.3 per cent to a record-high 11.9 billion euros (US$13 billion) despite their government’s calls to reduce exposure in the country, Reuters reported in February, quoting a study by the German Economic Institute (IW) based on official Bundesbank data. ➡️ The total #investment in #China by German firms in the last three years was equivalent to that they had made in the previous six years, the private economic research institute was quoted as saying. ➡️ This is against the backdrop of waning enthusiasm among European companies in recent years amid the region’s struggle to strike a balance between de-risking from China and cooperating with it. #EU investments as a proportion of China’s overall foreign direct investment (FDI) fell from 7.5 per cent in 2018 to 5.3 per cent in 2022, according to an annual #FDI statistical bulletin released by the Ministry of Commerce. ➡️ In contrast with the position of optimistic German manufacturers, there was a sharp overall rise in European firms experiencing a “decoupling” between their headquarters and China operations over the past two years, triggering “a slowdown in existing operations and a reduced ability to capitalise on new projects or investment plans” in China, according to a report released by the EU Chamber of Commerce in China in May. And behind the decoupling trend, it said, was a declining number of Europeans employed by their China operations. And this factor is said to have contributed to a loss of mutual understanding and trust. #geoeconomics #geopolitics #Germany https://lnkd.in/eK7PdNwp

German firms keen to invest more in China German companies are determined to ramp up investment in China, motivated by the country's heightened focus on expanding market openness and fast-growing industries. German direct investment in China reached 7.3 billion euros ($8.04 billion) in the first half of the year, compared with 6.5 billion euros for the whole of 2023, according to data from the Bundesbank, Germany's central bank, shared with the Financial Times newspaper early this week. In the context of a rapidly changing global economy, China's ongoing opening-up measures, flourishing high-end manufacturing and green industries are set to accelerate the emergence of new economic growth drivers and foster innovation. These advancements will present decent opportunities for German businesses. https://lnkd.in/gjMBm6cn

German investment is here to stay in China (14.8.24) Amid a de-risk call across the EU businesses and pullout of outward investment trend from China, German direct investment into China rose sharply. The flows rose from €2.48bn in Q1 to €4.8bn in Q2 (€7.3bn in H1 compared to €6.5bn in 2023). Most of them came from big German automakers. Much of profit made in China were reinvested there under "In China, for China strategy". This causes a growing fear in Europe. Germany businesses have not learnt from over-reliant issue on Russia gas since the Russia-Ukrain war sparked. In case geopolitical tensions in the Taiwan Strait escalate, it could harm those German companies with deepening reliance on China such as critical inputs, raw materials, and rare earth metals for production, as well as export market. The Olaf Scholz's goverment called on German companies "not to put all their eggs in one basket” by diversifying their supply chains and export markets away from China. It could help reduce vulnerability to external shocks. Cr FT "German investment in China soars despite Berlin's diversification drive"

🏭 Industry Under Pressure: The Story of German Companies Finding Solace in China 🌏 Navigating New Horizons: The Strategic Pivot of German Industry to China In a gripping tale of corporate survival and strategic foresight, German industries are navigating through their most precarious phase yet. Traditionally strongholds in the European market, these companies are now facing stark realities. With the U.S. offering both opportunities and significant challenges, German Chancellor Schulz's recent engagements in China highlight a crucial strategic pivot, seeking a safer and more promising growth environment for German enterprises. 🤝 From Challenges to Opportunities: German Industries Embrace China As Schultz directs his gaze towards the East, it's evident that the allure of China isn't just about survival—it's about thriving. The data speaks volumes: a record-breaking 12 billion euros of direct investments in 2023, with titans like BASF and Wacker Chemical experiencing exponential growth. This shift isn't just a business move; it's a calculated leap towards sustainable success, ensuring German industries can leverage Chinese growth potentials to rebound on the global stage. ⚖️ Weighing the Scales: The U.S. Versus China in German Industrial Strategy The contrast couldn't be starker. While over sixty prominent German companies like Lufthansa and Siemens have ventured into the U.S. since 2023, the anticipated American dream contrasts sharply with reality. Challenges from delayed compensations to complex legal battles over land and labor issues highlight the rocky journey in the U.S. Conversely, China presents an area of stability and potential—qualities that Schulz is keenly capitalizing on to safeguard the future of German industry. Schulz's strategic maneuvers are about setting a course for global impact, innovation, and ideation. As industries worldwide watch and learn, the German approach underscores a profound narrative of resilience and strategic recalibration. #China #Germany #BusinessStrategy #EconomicGrowth #InternationalRelations #Trade #Investment #Technology #Leadership #Manufacturing #innovation #ideation #GlobalImpact

CHINA-GERMAN BUSINESS ALLIANCE: GERMANY’S “TRAFFIC LIGHT” GOVERNMENT HAVE SOME DECISIONS TO MAKE This research note from The Rhodium Group is an excellent overview of the China-German business/trade evolution and alludes to what can be anticipated in the future. US MNC’s and the National Chamber of Commerce “lobbied hard” to stop Trump’s long overdue challenging of China’s mercantilist practices, but Xi fought harder in demonstrating EXACTLY what the CCP’s ambition and global plans are; i.e. supplant the post WWII Democratic global order. Nicholas Burns, US Ambassador to China, made this unequivocally clear to the nation in his 60 Minute interview on Sunday night! And while FDI into China declined by ~85% last year, Germany’s big chemical/auto, have failed to recognize the futility of their continued investments in China, long-term, despite the official Made-in-China 2025 blueprint that has been steadily executed by the CCP since premiering in 2015. Germany’s “Traffic Light” governing coalition better come to terms with their auto giants and their blind adherence to the, Chinese dominated, “green” monopoly, quickly, are there will be a lot more on the streets other than farmers. As the implications of the “Green Putsch” that the current US Administration has been attempting to forcefully finance and orchestrate becomes more apparent, American consumers are flatly rejecting, in mass, and China is viewed as an enemy, not just a strategic competitor. The German public is likely not far behind. Whether it is Xi’s and Putin’s “No Limits” partnership, pledged days before Vlad’s invasion of Ukraine two years ago this month, or Imperial Japan’s and Nazi Germany’s Tripartite Pact/Berlin Pact pledged in September 1940, Germany needs to realize that we are truly living in every sense, “Interesting Times!” https://lnkd.in/gW-VTgdZ #china #germany #us #mercantilism #trade #foreigndirectinvestment #manufacturing #supplychains #reshoring #decoupling #foreignaffairs #madeinchina2025 #diplomacy #investing #rhodiumgroup

Germany, long renowned for its economic resilience and industrial prowess, is facing one of its most profound crises in decades. Key sectors such as automotive, chemicals, and engineering—the bedrock of the German economy—are under simultaneous strain. This situation holds significant implications not just for the country, but for the entire European Union (EU), given Germany’s outsized economic role within the bloc.

🇩🇪 German Investment in China Defies Government Warnings 📊 German direct investment in China has surged to €7.3bn in the first half of 2024, surpassing the entire amount invested in 2023. Despite government calls to diversify, German companies, particularly in the automotive sector, continue to deepen their ties with China, driven by reinvested profits and a strategy of localizing production. 🌍 The increase in investment reflects a "In China, for China" strategy aimed at reducing supply chain risks by localizing production. However, experts warn this approach could harm the German economy by reducing exports to China and increasing reliance on Chinese workers. ⚠️ Germany’s government has urged companies to "de-risk" from China, yet the momentum of investment remains strong, with major announcements like Volkswagen and BMW's multi-billion euro expansions. Critics worry this deepening involvement may backfire, especially amid rising geopolitical tensions. #Germany #China #Investment #Economy #AutomotiveIndustry #SupplyChain #Geopolitics #BusinessStrategy

Siemens has previously defended its business in China and announced its intention to expand its market share there, while German Chancellor Olaf Scholz arrived in China on Sunday with a high-profile business delegation. Among them are the CEO of Siemens and the incoming boss of BASF. "It would be a serious misunderstanding to think that this is the intention of this administration (to reduce trade with China). We want to further expand trade with China, taking into account the need to de-risk and diversify," a a German government official said. #china #germany #europe #chinaeurope #euchina #economy

Japanese businesses are trapped between America and China https://lnkd.in/gR6gRf3N from The Economist Excerpt, Economist //To navigate the minefield of great-power rivalry, many Japanese firms are war-gaming how politics could disrupt their #businesses. “Economic security” is the latest buzzword. A survey of large Japanese companies by the Institute of #Geoeconomics, a think-tank in Tokyo, found that 38% had established economic security departments. The divisions often report directly to a board member and monitor political risks to the company’s operations and supply chains. Many large companies, particularly exposed to #geopolitical winds, receive money from Japan’s government to support such efforts. Knowing where they stand can be a source of solace for Japanese firms. Another is improving relations across East Asia’s wealthy #democracies. Governments and businesses in South Korea and Taiwan face similar challenges in maintaining crucial economic relationships with America and China. In an interview with Nikkei, a Japanese newspaper, on May 23rd, Chey Tae-won, chairman of sk Group, a South Korean conglomerate with a leading memory-chip business, said his company would expand tie-ups with Japanese #semiconductor firms. TSMC, a Taiwanese giant that is the world’s leading manufacturer of advanced microprocessors, opened its first factory in Japan in February and has announced plans to build a second. An increasingly unpredictable outside world is also leading some Japanese companies to retreat to the comfort of home. It helps that while #manufacturing wages have surged in China, Japan’s sluggish growth has made repatriating production relatively less expensive than it once was. The government has also granted modest #subsidies to hundreds of companies in sensitive industries, including aircraft parts, medical devices and #rareearth #minerals (used in electronics). Last year, Panasonic announced it would shift some air conditioner production from China to Japan. Such moves may calm Japan Inc’s nerves. But if this foreshadows a less globalised future, they may also stall its comeback.// Corporations should proactively explore opportunities to diversify their market presence away from the PRC to mitigate the growing uncertainty of geopolitics and future economic growth. It will also lessen their dependence on nationalised supply chains. H/T to Benjamin Qiu #geopolitics #greatpowercompetition #friendshoring #supplychain #trade