China is the focus of attention these days. The zero-Covid policy is causing a shortage of supplies for German companies. Human rights violations in Xinjiang province are a headwind for Beijing.
Part of the deep water Port of Shanghai
For German companies, the problem of the shortage of materials and supplies is likely to get worse in the near future. According to economists, the rigorous lockdowns in China will only be felt in this country with a delay of a few weeks.
“We assume that the situation will continue to worsen in the coming days and weeks because ships that left the port of Shanghai before the closure have arrived,” said Bertram Brossardt, general manager of the Association of Bavarian Business in Munich . “We will only feel the actual consequences of the lockdown in Shanghai for some time, but then very drastically.”
Many companies are already suffering from supply bottlenecks for raw materials and intermediate products. After supply chains around the world came under pressure during the pandemic, the problems resulting from the war in Ukraine had worsened. And with Beijing's zero-Covid strategy and the shutdown of metropolises like Shanghai, a serious problem has arisen. Because Shanghai is one of the world's most important trading ports.
Screenshot of the Marine Traffic app from April 22, 2022. The situation has not improved since then – on the contrary
Delivery problems persist throughout the year
According to experts, the export volume of the port of Shanghai has fallen by around 40 percent as a result of the lockdown. However, it is by far the most important port for German container shipping. According to the Kiel Institute for the World Economy (IfW) and the Port of Rotterdam, noticeably fewer ships from China are heading west. The London shipping consultancy Drewry estimates that 260,000 containers destined for export all over the world were not loaded in the port of Shanghai in April alone. “The shortage of preliminary products will remain until the end of the year because China will stick to its corona policy for a long time to come,” predicted Commerzbank's chief economist, Jörg Krämer, to DW.
The subject of China will also determine many conversations and discussions at the Hanover Fair, which begins on Monday. “The standstill in Shanghai, which lasted several weeks, will send a shock through the world's supply chains, the consequences of which we will only see in six to eight weeks,” says Gunther Kegel, President of the Association of the Electrical and Digital Industry (ZVEI). “There's something else coming our way.” It is becoming apparent that Beijing's zero-Covid strategy is failing.
The fact that the lockdowns in China are only having an effect in Germany with a delay is simply due to the geographical distance: A boat trip from China to Germany takes around 30 to 40 days. Since container ships call at not just one but several ports on their routes, the transit time of containers on international waters is extended to around 80 days even in normal times. Due to corona restrictions, according to the Alphaliner shipping database, container ships are currently on the road for an average of around 100 days.
Quite a number of such container giants are waiting to be cleared in Shanghai
Sanctions against China for internment camps?
Meanwhile, there are voices calling for sanctions against China over leaks of human rights violations against Uyghurs in Xinjiang province. For example, the Green MEP Reinhard Bütikofer called on Deutschlandfunk for a sharp reduction in economic interests in China. Previous measures had only been “sanctions on gentle gear”. Now you have to step up and take action against leading Chinese officials who, for example, gave orders to shoot. Before that, photos from state re-education camps and other papers about orders to shoot given to the Uyghur minority in China had been circulating in various media. Bütikofer demanded that German and European commercial companies should finally decouple themselves from the Chinese market.
In contrast, the President of the German Federation of Industry (BDI), Siegfried Russwurm, warned of the possible consequences of China sanctions. “Of course, the consequences would be dramatic. Anyone who carelessly talks about decoupling from China must know how strong and how large this market and this economic power is.” The economic consequences would be great and would result in rising unemployment in this country.
In fact, China is Germany's most important trading partner. Not only, but especially the German automotive industry is heavily dependent on China. Car manufacturers such as BMW, Mercedes and Volkswagen make around 40 percent of their sales in the People's Republic. “And China also defines technical progress in the automotive industry,” auto expert Ferdinand Dudenhöffer told DW. Dudenhöffer is head of the Center Automotive Research in Duisburg. “In China, people are very advanced, for example in autonomous driving and in the software area, which is immensely important for the cars of tomorrow. Without China, we will be weaker in this development.”
At the Mercator Institute for China Studies (MERICS) see the tension between economic interests and human rights as a tightrope act for German politics and companies. “It's becoming increasingly difficult to stay out of these issues,” Merics chief economist Max Zenglein told DW. “Economic relations are being politicized from all sides. And the critical issues will increasingly become an issue.”