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Germany’s central bank warns that the country’s “business model is in danger” due to an overreliance on trade with China. The Bundesbank states that high energy prices, labor shortages, and the dependency on China are weakening Europe’s largest economy.
The central bank issued a stark warning that 29% of German companies rely on essential materials and parts from China, making their operations vulnerable to damage if there are disruptions in the trade route due to geopolitical tensions.
In its monthly report, the Bundesbank emphasized the need to reduce dependencies on China, particularly for primary products that are difficult to replace.
Germany’s foreign minister, Annalena Baerbock, called on Europe to reduce its reliance on China and expressed support for the EU’s investigation into Chinese electric vehicle subsidies.
Germany’s Chancellor, Olaf Scholz, blamed Germany’s economic stagnation on weak export markets, particularly China, high inflation, increased interest rates, and disruptions caused by the Covid pandemic.
Scholz’s government aims to reduce costs for companies by expanding renewable energy sources, although excessive bureaucracy is slowing down progress in this area.
Germany’s reliance on China for imports has led to concerns about disruptions in supply chains and production if there were to be a sudden separation from China.
The German central bank called for diversifying supply away from China through free trade agreements, integrating immigrants into the labor market, and speeding up state bureaucracy to make Germany a more attractive location for businesses.
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