German companies seek diversification to mitigate risks amid China's geopolitical tensions 

A recent survey conducted by the German Chamber of Commerce in China reveals that nearly half of German companies operating in China are adopting measures to mitigate risks associated with doing business in the country, largely attributed to escalating geopolitical tensions, Reuters reported.

The survey, which encompassed 566 companies between September 5 and October 6, indicates a significant shift in strategy, with firms actively building supply chains independent of China, relocating some operations, and exploring markets elsewhere in Asia.

According to the survey, 83 per cent of companies identified geopolitical tensions as the primary reason for their risk mitigation measures. Additionally, 45 per cent and 24 per cent attributed their actions to China's economic slowdown and a greater emphasis on self-reliance, respectively.

The survey further highlights the ripple effect of this risk mitigation strategy on other countries in Asia. Approximately 57.5 per cent of surveyed companies expressed their intention to invest more in India, followed by 37.9 per cent in Vietnam, 30.1 per cent in Thailand, 23.3 per cent in Malaysia, and 20.1 per cent in Singapore.

The survey's release comes five months after the German government unveiled a strategy aimed at de-risking the country's economic relationship with China, its largest trade partner. The findings align with earlier reports by Reuters, providing empirical evidence of German firms strategically reducing their dependence on China amid geopolitical concerns.

Western countries are increasingly adopting risk mitigation strategies in response to China's assertive stance in various regions, including its growing influence over Taiwan and the South China Sea.

While German companies are diversifying to reduce risk, the survey also reveals that 54 per cent of the firms surveyed expressed a desire to further invest in China. This figure is slightly up from 51 per cent the previous year, suggesting that a significant portion of German companies remains committed to localising production in China. Economists speculate that such investments may act as a shield against potential repercussions stemming from geopolitical disputes.

(With inputs from Reuters)

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