German business associations widely welcome China strategy

BERLIN, July 13 (Reuters) – German business associations on Thursday welcomed the government’s long-awaited China strategy, praising its focus on minimising risk instead of cutting economic ties, and said the next steps would be to focus on domestic production.

The 64-page document outlined possible responses to an “increasingly assertive” China, such as outbound investment controls on cutting-edge technology with military use, but it did not lay out binding or specific targets for companies.

The BDI industry association said more discussion on the concrete design of some measures, such as instruments for controlling German investments abroad, was still needed.

“There is a danger that entrepreneurial dynamism will be restricted too much,” said BDI president Siegfried Russwurm.

There is particular concern in Germany about the impact of this de-risking strategy on an economy already in recession given its strong business ties with China, which became the country’s single biggest trade partner in 2016.

At now nearly 300 billion euros ($325 billion) in imports and exports, it is a core market for top German companies including Volkswagen (VOWG_p.DE) and BASF (BASFn.DE).

Volkswagen’s China chief said the carmaker was not naive about the economic superpower, but that it was important to remember China also depends on Germany and Europe.

“We can both consolidate the strong German economic position in China and reduce dependencies as well as strengthen our position in other regions,” Ralf Brandstaetter said in a LinkedIn post welcoming the strategy’s “political goal”.

Dirk Jandura, president of the BGA wholesale and foreign trade association, warned, however, that if Germany did focus on remaining competitive as a business location, the coming years might see China become more likely to decouple from Europe.

“Only a strong business location carries political weight. We must finally do our homework here and strengthen our domestic industrial base. Otherwise, the world champion in exports will become a world champion in announcements,” said the VCI chemicals lobby’s managing director, Wolfgang Grosse Entrup.

Reporting by Miranda Murray and Rene Wagner, Editing by Friederike Heine and Nick Macfie

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