State guarantees revised: Habeck decreed Germany new China course

State guarantees revised
Habeck decreed Germany new China course

Economics Minister Habeck is drawing lessons from the energy debacle with Russia. His new China course is intended to encourage German companies to invest in other Asian countries. For this, the Green politician cuts state investment guarantees.

Federal Economics Minister Robert Habeck wants to take a new China course, also taking a lesson from the Russian attack on Ukraine. Business associations also made it clear that former dependencies, for example with important raw materials, must be avoided, supply routes expanded and new markets opened up. The federal government wants to use the instrument of investment guarantees to increasingly direct German foreign investments worth billions to markets outside of China. Shortly before an Asia-Pacific conference of German business in Singapore with Habeck and Chancellor Olaf Scholz, the federal government agreed on Habeck’s proposal for a fundamental decision to revise investment guarantees. That was reported by the Ministry of Economy.

Shortly before departure, Habeck himself spoke out in favor of a broader positioning of the German economy. The investment guarantees should create an incentive for companies to diversify and “not only” go to China, but also to other countries, for example in Asia. With federal guarantees, German companies can protect investments in emerging and developing countries against political risks, such as expropriation or capital and transfer restrictions.

Incentives to invest outside of China

When revising the investment guarantees, the aim of the federal government is to provide companies with more help in implementing projects in countries that have not previously been the focus of the economy – but which offer great potential. More favorable conditions are planned in order to offer incentives for investments in these countries. At the same time, so-called cover conditions are to be tightened in those countries in which there has been an “excessive concentration” of covered projects, it said with a view to China.

Last year, the Federal Republic of Germany issued investment guarantees totaling 2.6 billion euros, roughly three times the previous year’s volume. Once again, China took first place. Overall, the German economy has currently secured investments of around 29 billion euros from the state. It had previously become known that Habeck wanted to make it more difficult for Chinese investors to take over German companies in key technologies. The federal government is currently developing a new China strategy.

Dependence on fossil fuels from Russia has triggered a debate about how to reduce dependency on China for raw materials, for example. China has also been criticized for human rights violations, saber-rattling against Taiwan and a more aggressive foreign policy approach. The economic conference on Sunday and Monday in Singapore is therefore about increased trade relations with other countries in the Asia-Pacific region, as business associations made clear. The federal government and the EU should work towards the speedy conclusion of trade agreements with countries such as Indonesia, India and Thailand. The President of the Foreign Trade Association BGA, Dirk Jandura, said: “Asia is more than just China.”

Siemens: Avoid one-sided risks

Siemens CEO Roland Busch, chairman of the Asia-Pacific Committee of German Business, said that diversification would be a key issue – with the aim of reducing dependencies and avoiding one-sided risks. Asia-Pacific is the most important non-European region for German trade and investment. Industry President Siegfried Russwurm said: “The lesson learned from Russia’s war of aggression against Ukraine is to avoid one-sided dependencies.” A diversified economy reduces risk, especially in crisis situations. However, China is likely to continue to play an important role.

In a guest article by several CEOs such as Busch, Martin Brudermüller (BASF) and Klaus Rosenfeld (Schaeffler) for the “Frankfurter Allgemeine Zeitung”, it says: “Despite all the challenges facing China and with China, we are convinced that its basic growth momentum will continue. A Withdrawing from China would cut us off from those opportunities.” The presence in China secure jobs in Germany.

However, with a view to Taiwan and the human rights situation in Xinjiang Province, among other things, the managers spoke out in favor of readjusting relations. As the DIHK reported with reference to a survey, companies see numerous advantages at their locations in Asia. The supplier network stands out in the region. This is especially true in China. Companies there also appreciate the lower energy costs compared to Europe.

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