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German Companies Exit from China

According to the German Focus weekly magazine, many German companies have exited China for a number of different reasons. One important reason is that the robot revolution has reduced the German companies’ desire for China.

China has been an ideal country for large-scale companies for many years. It has huge markets and cheap labor. However, the limitations from Chinese political institutions and the ongoing Sino-US trade war have gradually made China less attractive. The heavy debt burden of Chinese private companies has posed potential risks to the Chinese economy. In particular, a new trend has begun to change people’s minds: robots are cheaper than Chinese workers and they can stay in Germany. As a result, the number of German companies that are shifting production abroad has decreased significantly and more and more German companies have begun to withdraw from Asia or Eastern Europe. Among them, well-known German enterprises include Marklin, Adidas, Bosch, and Gigaset Communications. Enterprises that have long been actively promoting digitalization are clearly at the forefront.

The ratio of robots to employed people in Germany is 31:1000, with the density of robots ranking third in the world. Economists have found that the more robots used in industrial countries, the fewer factories move abroad, and the more likely it is to move production back to the home country. Take the United States as a comparison: the United States has a robot density of only 19:1000, ranking seventh in the world. Many fewer U.S. companies than German ones are coming back home.

Source: Radio France International, October 7, 2018