German Business Looks to Future in Asia

The Asia-Pacific region is by far the biggest growth area worldwide. From India to Japan, the region includes vastly different countries, from economic powerhouse China to the still impoverished war-torn Cambodia. Taken together, though, the region's combined gross domestic product (GDP) is set to rise for the first time to above €7 trillion ($9.1 trillion) -- surpassing even North America, and bringing the countries clearly into the focus of international business.

The potential for growth for German business is enormous. At present, only 13 percent of German foreign trade is done with the Asia-Pacific region; only 7 percent of German foreign direct investment finds its way to the region.

Chinese mega-market

Of course China is the buzz-word, and the biggest exception, when it comes to German business ties in the region. As the largest European trading partner, Germany exported some €1.8 billion worth of goods to China in 2003 and counted €1.4 billion in direct investment.

With an annual growth rate of 9 percent, China is an impressively strong market, and one many German firms are eager to get a piece of. From carmakers such as VW and BMW to electronics giant Siemens, many have opened up factories and regard the Chinese market as key player in their own business development.

However, many managers of German companies are trying not to be too enthusiastic about the Chinese market -- at least for the moment. William Tate, CEO of German mining equipment specialist Deutsche Bergbau Technik DBT acknowledged the prowess and attraction of China, but said it hasn't yet outranked more traditional markets.

"It's the hottest market, but not yet for us in terms of our real today business and where we're making it," Tate said. "Germany is still the most important market, and the US is the second most important market. But if we look five, six, or seven years in the future, at least half of all opportunities we know about are in China."

Looking beyond China

Other business leaders, like Heinrich von Pierer, the outgoing CEO of Germany technology giant Siemens and chairman of the Asia-Pacific Committee of German Business for more than 10 years, have said there is more to the region than just China.

"We are talking a lot about China, but it is not only China that is impressive. If you look at other countries like Malaysia, Thailand, Vietnam and Singapore there are growth rates above 5 percent," he told Deutsche Welle.

The new big market player to watch in the region is India, Pierer said.

"The Indian government has decided to move forward and look to China and see how fast and successful it has been," he said. "And they want to copy that."

But for Tate, and other managers still working to get a foot into the Chinese market, India is still a ways off in the future.

"We are just doing our pioneering work there," he said. "Our focus is to get China running completely and then take the same concept to India."

Residual uncertainty

Some business experts have been hesitant to support an outright embrace of the Asia-Pacific region since recession struck in 1997. Although most of the countries have recovered from the financial crisis that unraveled after the Thai currency collapsed and the International Monetary Fund stepped in with austerity measures, the days when Thailand's GDP plummeted by more than 10 percent have not been forgotten. A bit of residual uncertainty and caution is therefore not unhealthy.

The World Bank, which reported East Asian growth would reach more than 7 percent in 2004, has also warned that the outlook for further in the future was "uncertain." According to some growth for this year probably peaked during the first half and is now beginning to slow again.

In addition, the region has showed itself to be extremely vulnerable to high oil prices, as well as to a likely downturn in high-tech sectors resulting from a slowdown in the West. On top of that, the World Bank has warned of possible slowdowns in the region due to the threat of a US recession and risks connected to the inflated Chinese real estate market and attempts by Beijing to regulate inflation and slow growth.

But Heinrich von Pierer (photo, right), who sees China as key to the health of the region, was confident that the region's biggest economy is not heading for a "hard landing."

"I think you can read a lot of things, but if you talk to the Chinese leaders, you get much more confident... I'm confident that the Chinese will be very successful," he said.