According to the BME procurement association, German companies are reacting to the geopolitical tensions with China, but are having problems realigning their supply chains. “The development of new procurement markets outside of China is complex and expensive for purchasing organizations,” said Riccardo Kurto, head of the China office of the Federal Association of Materials Management, Purchasing and Logistics (BME), on Wednesday. “Companies weigh up carefully whether it’s worth it.” Countries from Southeast Asia such as Vietnam, but also India and states in Eastern Europe are in demand as alternatives to China. However, not all of these countries offer political stability.
Kurto advocated more realism in dealing with China. Some companies generate 30 to 40 percent of their operating profit there. Procurements from the People’s Republic could only be replaced from other regions in the medium to long term. “If you move back to Europe, you can expect significant price increases,” said the association, which represents around 9,750 companies.
In view of the geopolitical tensions, there is a debate about the close trade relations between German companies and China. Economics Minister Robert Habeck (Greens) and Chancellor Olaf Scholz (SPD) have pleaded for reducing one-sided dependencies as a lesson from the Russian war against Ukraine. Instead, German companies should position themselves more broadly in Asia.
Companies are working on strategies to reduce dependency on China – but a complete reversal is an option for very few, according to the BME. According to a survey of 46 member companies of the BME Expert Group China, 14 percent replace procurement from the country with supplies from other regions, 37 percent do so partially, and 26 percent do not do so at all. Three quarters of the companies see China as a reliable supply partner, also because supply chain problems have eased with the end of the zero-Covid policy. (dpa)