For Germany's automotive, engineering and chemical industries, Asia is a vital market. Just how important was discussed at the Asia Pacific Conference of German Business.
Despite globalization, German companies still do most of their business with neighboring European countries. Around 70 percent of German imports and exports are to or from Europe. Less than 20 percent goes to or comes from Asia. Despite this, the future, said Friedolin Strack, managing director of the Asia-Pacific Committee of German Business, was in Asia.
"It is such an important region because growth in recent years has been mostly in Asia, with China in the lead," Strack told DW ahead of a three-day Asia Pacific Conference of German Business, which will take place in Gurgaon, India, from November 1. "If you look at the individual branches, sales for German products have dramatically increased there in the past few years. And China has even become the leading sales market for German machinery and plant engineering."
Only one Asian country was on Germany's list of top 10 trading partners last year and that was China. The People's Republic ranked number three in trade with Germany. Japan was the next Asian country on the list, at number 14. South Korea and Indian came in 21 and 24 respectively.
Increasing trade volume
There is a discrepancy between Asia, with its great economic growth, and the trade figures. The whole of the Netherlands, for example, has as many residents as the Chinese city Shanghai. Yet the small European kingdom is still more important for German foreign trade than the whole of China. Fewer people live in Belgium than in the Indian capital of New Delhi, but in the former, German companies do five times as much business than in India. High time something be done about that, according to Strack.
"We still have the potential to do more there. Germany's industry is still very focused on Europe. There are a few companies we view as trendsetters which do 40 to 50 percent of their business in Asia."
Asia's economy is growing much more rapidly than Europe's. Evidence for that can be found in statistics on German exports to Asia: Between 2009 and 2011, volume grew by 50 percent; and in the eurozone it only grew by 20 percent. So it's only a question of time before Germany's list of most important trade partners becomes more Asia.
Defending key markets
That is already the case in the chemical industry. Half of trade there is done with Asia and one fourth with Europe. Soon Asian companies will have completely eliminated the European competition. At least that is what a study conducted by the management consulting firm A.T. Kearney has concluded. According to the study, by the year 2030, two thirds of all chemical business will be done in Asia and half of all large chemical concerns will be Asian.
For German and European chemical companies, that will have consequences, according to Otto Schulz, a partner in A.T. Kearney's Chemical Practice and co-author of the study.
German companies are looking more towards Asia for business and trade
"The one factor is that an increasing number of decisions in procurement and development are being made with regards to Asia," Schulz told DW.
"So it is important we stay on the ball and develop capacities in marketing and development in Asia. The second important point is to defend European markets. European customer relations must be strengthened so the European market and the home advantage are not sold out."
From export-oriented to import-reliant
German chemical companies such as BASF and Lanxess make a lot of money selling chemical products to China and also producing there. The companies are now expanding production capacities to countries closer to Asia to fulfill market demands there. But it was just a matter of time before China was no longer reliant on imports, said Otto Schulz:
"By that time, we will be seeing imports from China and other Asian countries in Europe. The European market, which in the past has always been an export market, will increasingly become an import market," Schulz told DW.
This development was obvious in the trade statistics, he pointed out. Even now, Germany, the European export champion, has a trade deficit with Asia - it buys more from Asia than it sells there.