German economy, automobile sector face risks from China exposure, says fund manager

FRANKFURT, Nov 15 (Reuters) – Germany’s heavy economic exposure to China poses significant risks to Europe’s top economy, the country’s second-largest fund manager said, citing the market for electric vehicles as a specific example. .

Union Investment, which has 432 billion euros ($462 billion) in assets under management and looked at nearly 2,000 listed companies worldwide, concluded that German companies were particularly vulnerable in a study seen by Reuters.

„No other country, even China’s direct neighbors such as Japan and South Korea, has as many large companies with greater exposure to China,” the study said, which applied to nearly a quarter of all German companies in the focus group.

China has been Germany’s largest trading partner since 2016, with nearly 300 billion euros in bilateral trade, more than the United States. This poses an embarrassment for the German government, which is actively trying to lure companies out of China, the world’s second-largest economy.

German companies are also increasingly moving research and development activities to China, the fund manager said, while others did the opposite for security reasons.

„This strategy is dangerous on several levels: Germany suffers as a business location as areas with significant value creation are moved abroad while the supplier industry loses orders.”

Union Investment owns stakes in almost all German blue-chip companies, including German carmakers Volkswagen ( VOWG_p.DE ), BMW ( BMWG.DE ) and Mercedes-Benz ( MBGn.DE ) and BASF ( BASFn.DE ). It has significant ties and exposure to the Chinese economy.

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The fund manager said the disclosure means German carmakers face risks of being squeezed out of the Chinese market and seeing increased Asian competition in Europe.

German carmakers could face retaliation in China if Berlin defends itself from Asian rivals, Union Investment said, adding that technology supplied by German carmakers can now be replaced unlike 10 years ago.

„It makes China less likely to retaliate — a critical decision-making criterion for Beijing, as we all know.”

($1 = 0.9361 euros)

Report by Christoph Steitz; Editing by Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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