Businesses are facing two risks: the risk of losing money and the risk of missing opportunities. Every company must find its own balance here. They carry out their own risk management, which includes hedging against supply chain risks, market risks and geopolitical risks.<\/p>\n
China is not easy and foreign companies face many obstacles, such as lack of IPR enforcement<\/strong>, data security laws<\/strong>, increasing political influence<\/strong> and control<\/strong>, rising HR costs<\/strong> – the list of burdens for German companies is long, but they do not necessarily outweigh the advantages of doing business in and with China. Most companies will probably not abandon the Chinese market and will not decouple from China, but their focus will shift to de-risking rather than decoupling<\/strong>.<\/p>\nCompanies are aware that they are well-advised to be more cautious and not to put all their eggs in one basket.
\nGerman companies today should know that China aims to become less dependent on foreign companies and have a more autarkic economy. At the same time, there is an explicit political and strategic desire to make foreign companies and international supply chains dependent on China in order to gain influence and leverage.<\/p>\n<\/div><\/div><\/div>
In China for China and Diversification<\/h4><\/div>In order to avoid becoming dependent on individual countries and suppliers, Germany and German companies are thinking about diversifying their sales markets<\/strong>, production sites<\/strong>, supply chains and sources of raw materials<\/strong>. Diversification makes German companies less vulnerable and the German economy more secure. However, diversification and setting up a new supply chain infrastructure is a difficult task that involves high costs and takes a lot of time. It is not a matter of two or three years but may take ten years or more.<\/p>\nOne way to deal with these challenges is to implement a \u201cChina plus one<\/strong>\u201d strategy. Companies are thinking about or have already started to localize or silo their China operations by creating two separate systems – one for China and one for the rest of the world. This means that supply chains, data, human resources, research and development are organized separately for China. Products and components manufactured in China are only used and sold in China. This way, businesses reduce their dependency on Chinese factories for goods sold abroad and minimize the risk that potential problems in China would endanger the whole corporate existence.<\/p>\n<\/div><\/div><\/div>
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