China could become an even more important destination for German exports
Exports are vital to the future of the German economy and local businesses are increasingly looking for opportunities in faster-growing markets such as China and India. Germany is one of the world’s leading trading nations. The country exported goods worth USD1.45 trillion in 2013, third after China at USD2.21 trillion and the United States at USD1.58 trillion, according to the World Trade Organization.
Germany’s most important trading links are with Europe. Membership of the European Union (EU) means it can sell to 27 markets without having to pay tariffs or clear customs, and more than 55 per cent of German goods exports go to the EU. Europe has experienced significant economic turbulence over recent years, however, and growth remains lacklustre. HSBC Global Research predicts expansion of just 1.2 per cent in the eurozone in 2015.
Emerging markets, by contrast, are expected to grow by 4 per cent in 2015. China and India are forecast to continue to grow significantly faster than Europe on average over the longer term, according to HSBC Global Research. The average worker’s annual wages in China are set to increase sevenfold between 2010 and 2050 from USD2,500 to almost USD18,000. An estimated 67 million people are expected to join India’s workforce between now and 2018.
A number of German companies have put strengthening ties with faster-growing markets at the heart of their strategy
If German or other European companies want to benefit from this trend they should turn their attentions to the countries that are growing at a faster pace. A number of German companies have put strengthening ties with faster-growing markets at the heart of their strategy. Some 6.1 per cent of German goods exports in 2013 went to China, up from 4.5 per cent in 2009. Almost 40 per cent of German exporters already see Asia as the region offering the greatest opportunities for their business to expand in the short term, according to analysis by Oxford Economics for HSBC – more than the 35 per cent who see Europe as the most promising region.
As well as major corporates, the small and medium-sized firms that are the backbone of the German economy could benefit from tapping into new markets. As businesses forge new links, the factors that have helped Germany become a major trading nation will remain crucial: a high level of skills, sustained investment in research and development, and expertise in a number of high-technology sectors.
China could become the most important destination for German exports by 2030. India also has the potential to become an important trading partner, but companies will need to take a strategic, long-term approach to fulfil this potential. Building relationships in fast-growing markets can take time. Information and advice about what consumers want and what regulators expect is essential.
The world’s economy is in the middle of a long-term transformation, with influence shifting from west to east. Capitalising on the trend could help German businesses achieve their growth ambitions.