German econ minister tells firms to diversify beyond China in Asia

FILE PHOTO: German Economy Minister Peter Altmaier welcomes European Commissioner for Energy Kadri Simson (not pictured) during a virtual meeting of European energy ministers in Berlin, Germany, October 6, 2020. Michael Sohn/Pool via REUTERS

BERLIN (Reuters) - German companies should diversify to other Asian markets beyond China to be less dependent on single supply chains which the pandemic has shown were vulnerable to interruption, economy minister Peter Altmaier said.

Trade between the two exporting and manufacturing powerhouses has led in recent years to China becoming Germany’s most important non-European supplier and its second most important export market.

But Altmaier told a business conference that the coronavirus outbreak had shown that supply chains were often one-sided and created dependencies.

He alluded to bottlenecks in the supply of medical equipment for the German market in spring when China was at the height of the pandemic. “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 very well and regained their economic strength early on, he said.

Chancellor Angela Merkel also urged German companies to diversify and win new markets throughout the Asia Pacific region to benefit from its increasing global economic role. The government will continue its efforts to improve the framework conditions, she said at the conference.

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

While China’s economic recovery accelerated in the third quarter to 4.9%, 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% this year.

Reporting by Andreas Rinke and Kirsti Knolle; Editing by Raissa Kasolowsky