Analysis: German business confident as China shifts gears

Wed Sep 11, 2013 2:12am EDT
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By Michelle Martin and Alan Wheatley

BERLIN/LONDON (Reuters) - Confident or complacent, German business executives are bullish about their chances of profiting from China's transition to an economy fired by consumption rather than investment.

As China deliberately dampens its long boom in capital spending, Germany will no longer be able to count on windfall gains from exports of the high-quality machinery for which it is renowned.

What's more, Chinese manufacturers are likely to pose a growing competitive threat to Germany in some sectors as they abandon low-value-added production and march up market.

Yet German entrepreneurs express confidence that their time-honored recipe of constant innovation will continue to pay off.

After all, Germany has managed to increase its share of global manufacturing exports to OECD countries since 1995 even as China's ascent has eroded the shares of France and Italy.

"There's a lot of competition from China, but thank God the Chinese are not as innovative as we are - they are known for copying things rather than bringing new developments onto the market, so they tend to be a step behind us," said Sabine Herold, co-managing director at DELO Industrial Adhesives, based near Munich.

Europe is not as directly exposed as commodity producers to the changes unfolding in China, which aims to wean itself off resource-intensive heavy industry and low-skilled assembly of imported components and raw materials.

But the potential repercussions are considerable. China is Germany's fifth biggest market, taking 6 percent of its exports. By comparison, France ships 3.4 percent of its exports to China, Britain 3.3 percent and Italy 2.3 percent.   Continued...