Top German enterprise leaders and politicians went on a go to to India final week for a significant gathering searching for methods to additional strengthen financial ties between Germany and the Asia-Pacific area.
“The region is becoming increasingly important for Germany and the EU due to geopolitical shifts and increasing desire to diversify,” Friedolin Strack, head of International Markets on the Federation of German Industries (BDI), informed DW.
“The increasing importance is evident in the value of exports from Germany to the Asia-Pacific, which totaled €214.6 billion ($231.9 billion) in 2023,” he mentioned.
The Asia-Pacific Conference of German Business in New Delhi coincided with the intergovernmental consultations between Germany and India, which have been co-chaired by German Chancellor Olaf Scholz and Indian Prime Minister Narendra Modi.
Growing give attention to India
Highlighting India’s rising significance for Germany, Scholz’s authorities adopted a paper earlier this month, referred to as “Focus on India,” aiming to additional bolster the strategic partnership between the 2 sides spanning all areas of ties, together with commerce, migration, local weather and overseas coverage.
Berlin additionally handed a raft of 30 measures designed to foster immigration from India in an effort to draw expert staff to fill gaps in Germany’s labor market.
The biennial gathering got here at a time when the German financial system is in a downswing amid stagnant development, rising structural challenges and worsening enterprise sentiment. Surveys carried out by business our bodies present corporations are rising more and more pessimistic about enterprise local weather at dwelling.
However, German corporations stay optimistic about their prospects within the Asia-Pacific area.
A current examine carried out by the German Chambers of Commerce Abroad (AHK) and the German Chamber of Commerce and Industry (DIHK) confirmed the optimistic temper amongst German corporations working within the area, despite the fact that optimism stays subdued in China.
Dependence and ‘de-risking’ from China
China has lengthy been the important thing focus of German corporations in Asia.
German industrial corporations, particularly within the automotive, equipment and chemical sectors, have relied on orders from the Asian big to maintain factories buzzing and create hundreds of well-paid jobs.
The slowdown in China’s financial system, nonetheless, has hit these companies arduous, forcing them to restructure and lower prices.
Growing geopolitical tensions between Beijing and the West have additionally elevated requires them to scale back publicity to China, so-called de-risking, and diversify away from the Asian behemoth. In response, many German corporations within the Asia-Pacific have begun efforts to faucet into new markets, despite the fact that they are saying that diversification stays a problem.
“Over the last 40 years, the German economy has established itself on the Chinese market and built up a complex, well-functioning network of supply chains, production paths and distribution channels,” Volker Treier, head of overseas commerce at DIHK, informed DW.
“This network cannot be easily transferred to other markets. It is also important that around 90% of German companies in China produce for the Chinese market — so there is a close link with the Chinese domestic market,” he added.
India presents alternatives and challenges
India, nonetheless, is turning into more and more essential for German corporations, because the South Asian nation’s financial system data speedy development and commerce between either side surges, hitting a document excessive of €30.8 billion in 2023.
“German companies are planning to expand their investments in India in the coming years, attracted by the country’s low labor costs, political stability and availability of skilled workers,” in accordance with a examine titled the German-Indian Business Outlook 2024, carried out by consultancy KPMG and AHK.
But additionally they face challenges on the Indian market, the report famous, pointing to bureaucratic hurdles, corruption and a posh tax system, amongst different points.
“Despite these challenges, German companies are confident about their long-term prospects in India. The Indian economy is expected to grow strongly in the coming years, and German companies are well-positioned to capitalize on the growth,” it underlined.
BDI’s Friedolin Strack additionally thinks India is an “enormously important growth market for German industry.” Investment situations there have improved considerably lately, he mentioned, as a result of growth of infrastructure, availability of expert labor and the speedy adoption of digital applied sciences, amongst different developments. “German companies are very interested in deepening their involvement there.”
DIHK’s Treier mentioned India nonetheless doesn’t should change into “the new China” for German enterprise.
“It is never either/or — global trade is not a zero-sum game,” he mentioned, including that his enterprise affiliation is dedicated to selling robust financial ties between Germany, China and India.
He mentioned that surveys amongst German corporations carried out by DIHK present that the corporations are conscious of the dangers and rewards related to their enterprise actions in each China and India.
“But — at least for now — the risks do not appear to outweigh the rewards,” Treier famous.
Other engaging places in Asia-Pacific
Most German corporations that need to diversify away from China are selecting to relocate their actions to different Asia-Pacific nations, in accordance with a Business Confidence Survey by the AHK Greater China.
“India, Japan and South Korea in particular are benefiting from this trend. In Southeast Asia, it is Thailand, Singapore and Vietnam,” mentioned Treier.
“However, a real relocation of production has not yet taken place,” he added, pointing to obstacles for diversification, corresponding to regulatory necessities, excessive prices and difficulties discovering appropriate suppliers and enterprise companions.
Strack mentioned market measurement issues for German corporations once they search for further markets, along with their development potential. “Looking at these factors, Japan, South Korea and the ASEAN countries are especially attractive for German companies.”
Edited by: Uwe Hessler
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