Dr Volker Treier, German Chamber of Industry and Commerce’s (DIHK) head of the foreign trade department and member of the management board, on the German export diversity and the views on China.

Dr Treier, is the German export model obsolete, as has been stated in many commentaries in recent months?

Absolutely not. It is an unacceptable caricature that we lived off cheap gas from Russia and that only China bought our exports. Even when we obtained 50 per cent of our energy from Russia, energy supply and gas prices were demonstrably significantly more expensive than in the USA. The second caricature is China: we import more from China than we export to it. China has lost momentum as a sales market after Covid and is now only our third or fourth most important market, incidentally only just ahead of the next markets. None of Germany’s export markets accounts for more than ten percent. We were and are diversified – if you compare that with the dependencies of the USA’s neighbours.And if we are honest about the Chinese export surplus, we also have to remember our ambitious timetable for climate neutrality and for the energy transition. This also means that we will have to continue to import battery technology, solar modules and wind energy from China for some time to come.

None of the German export markets accounts for more than ten per cent. We were and are diversified.

What has become of the de-risking that is being discussed so much?

China is a large and complex market that has developed enormously over the last 25 years. The country has developed from being an extended workbench to a competitor and rival. I deliberately do not talk about system rivalry – I leave that to others. Of course, it is good that we diversify the purchase of strategically relevant raw materials and their products in further processing as much as possible. But it is also the state’s responsibility to take collective precautions. Geopolitical events can affect the health sector, energy supply and even the digital world. It is not right to place the burden on companies alone and to build a regulatory machine. Having to take this into account along the entire supply chain makes it difficult for companies to offer competitive end product prices. Furthermore, there are often only a very few suppliers today, and they don’t come from China.In view of the size of the market, it would also have been necessary to negotiate investment conditions with China. The conditions we have offered here to everyone, including the Chinese, could have been improved by an agreement in China: joint ventures in certain sectors, such as finance. But despite the economic necessities, they entered into the discussion about decoupling. In the end, we are now glad that in the public sphere only the term de-risking has remained.Incidentally, we have been promoting new free trade agreements for a very long time. If there is no political support for this, it is hardly possible to diversify across the board. The conclusion of the Mercosur agreement marks an important step, even though the negotiations have taken more than 25 years. An agreement like TTIP would have offered a great opportunity under the Obama presidency to strengthen transatlantic trade relations – a potential that is often regretted today. At the same time, other important trade agreements, such as those with Australia, Indonesia or India, have not yet been finalised. In this context, companies are faced with the challenge of critically reflecting on their dependencies on international markets, particularly China, and reducing them in the long term.

In business terms, de-risking can also mean adding more value in China.

Companies simply argue that the volume of the Chinese market is still growing faster in absolute terms than the gross domestic product of entire economies in the region.

That is exactly how you put it. The total trade volume with India, which now has a larger population than China, is one-tenth of the trade with China. In the automotive industry, it is even less. And India also protects its markets. China will remain an important market for decades to come. So instead of constantly presenting the country in a negative light and commenting on its problems, we have our own weaknesses that we should be discussing in Germany. To put it diplomatically, we are far too concerned with ideological brushstrokes. The whole canon of reporting requirements in Europe with the sustainability certificate goes far beyond the German Due Diligence for Supply Chains Act – right down to imported screws for 150 euros or more, for which you need a certificate.

What is the companies’ view of China?

At our AHK World Conference 2022, former BASF CEO Martin Brudermüller once calculated that the company generates roughly 40 percent of its value added in Europe, but that this represents less than 20 percent of the total global chemical market. In China, however, it is exactly the other way around. From the business point of view of such a company, de-risking then means having more value added in China! There are companies that can finance the development of other business areas through their successful business in China and the higher profit margins achieved there. Companies also consider whether their existence would be threatened if their business in China were to cease. This discussion is now becoming a little more realistic in Germany. We have the worst growth performance of all 38 OECD members – with the same companies that were leading the pack five or six years ago. Instead of the discussion being about China, it is now often about the survival of industrial companies. In a survey, 30 percent of them said that they want to leave the country at least partially for reasons of energy supply and prices and set up production elsewhere.

Doesn’t that mean that internationalization remains a necessary strategy even in difficult times?

Yes, the internationalisation of industry has made Germany resilient. The fact that almost every industrial company – the large companies in any case – has tapped into markets, set up local production and invested there has given our value chain a certain robustness. We have more resilient and more variable supply chains. By investing abroad, historically also in neighbouring European countries, medium-sized companies have also been able to build more robust value chains and grow for many years despite all the crises. This is something other than a ‘failed’ export model.

The interview took place in mid-December 2024. The interview is oart of a series of talks with German and Chinese companies and organizations, printed in the Annual Report 24/25 of CIIPA.