"The best protection is to be competitive," says Ole Källenius with real conviction on the Tagesschau on April 16, 2024. He advocates fair and free world trade in the spirit of the WTO. The confidence to be competitive is not the same everywhere. The conditions for this must also be viewed critically.
It seems that China is now only a partner and competitor on the Chancellor's trip. You don't hear anything about the systemic rival anymore.
"I am the head of government of one of the most successful export countries in the world," said Scholz in Shanghai. "The basis of our economy is that we are globally competitive."
As early as July 2023, the Chancellor delegated the handling of the risk to the companies. "My impression is that many companies will continue to invest heavily in China, export to China and also purchase goods and services from China, but at the same time, in the spirit of what we call de-risking, they will also use the opportunities elsewhere to make direct investments."
However, genuine de-risking cannot be replaced by simple diversification.
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Why did we talk about de-risking in 2023? Let's remember!
In response to China’s efforts at systemic change of the international system with itself at the center, Europe would need to strengthen the international system itself, von der Leyen said. … According to von der Leyen, decoupling from China is neither viable for nor in the interest of Europe. Instead, she laid out a course of diplomatic and economic de-risking.
De-risking is intended to protect the (German, European, Western) economy when China tries to take the world order into its own hands. China does this by sometimes not adhering to international rules (even if China had previously committed to doing so), dismissing allegations of unfair state subsidies as "baseless" or "misinformation", by ignoring an alliance like the EU as much as possible and instead trying to play individual states off against each other. All of this is as true today as it was 1 year ago. The approach of the Chinese government has not changed.
But the two German premium car manufacturers can easily say that they are diversified and at home in all world markets. They will be able to cope with the 80,000 Chinese EVs that China is pushing into the European market. The German solar industry was unable to do this. German suppliers for Chinese core industries such as robotics are already complaining that they are increasingly being replaced by Chinese competitors.
De-risking for the German economy as a whole is disappearing from the agenda.
Every company should look after itself, is the implicit message of the Chancellor's state visit.
What is left for companies to do? Corporate risk management is the only conclusive answer.
Well, they already do that anyway, it's part of the mandatory program in the annual financial statements! - No, not really!
Risk management in China looks different than risk management anywhere else in the world.
The special conditions of the Chinese government, which interferes more in operational decisions than a German works council, the coordinated activities in a company's environment and other aspects characterize a controlled economic environment, which makes it necessary to take additional dimensions into account in risk management. In addition, there are aspects neglected by economic policy, such as ongoing deflation, (youth) unemployment, low propensity to consume due to limited individual provision options. Furthermore, it is important to keep an eye on the future-oriented key sectors defined by China as strategically important (information technology, robotics, artificial intelligence, aerospace, energy sectors and pharmaceutical technologies).
These are, among other things, the questions that are addressed in these articles on Risk Management for Business with China.
Using individual core terms and central topics, the linked articles give the reader the opportunity to find helpful information about their specific company situation without numerous redundancies.
The articles will soon be continually detailed and supplemented, further links will follow, and statements will be adapted to new information and findings. That's why it's currently it is not possible to make the text available other than on the web; a PDF would only be possible statically.
Jürgen E.L. Meyer, YanJie-Horizon, Shanghai April 17, 2024
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Sitemap Risk Management in China:
0. Risk Management for Business with China - Introduction
1. Discontinuous Imbalances
2. Risk Management
3. Risks in China
4. Distinguishing Businesses with China
5. Five Scenarios
6. Risks for Sales in China
7. Risks for China as a Production Location
8. Risks for China in the Supply Chain
9. Conclusions
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