Cut dependence on China, says top German industry group

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BEIJING, June 13, 2016 (Xinhua) -- Chinese Premier Li Keqiang (R) shakes hands with German Chancellor Angela Merkel at a welcoming ceremony for Merkel before their talks at the Great Hall of the People in Beijing, capital of China, June 13, 2016. Xinhua/Liu Weibing

BERLIN (Reuters) – German firms should cut their dependence on the Chinese market, a leading industry group says in a strategy paper that underscores rising concern over Beijing’s state-driven economic model, according to a draft seen by Reuters.

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The 25-page China position paper from the Federation of German Industries (BDI), due to be published in January, argues that a long-promised opening of the Chinese market is unlikely to take place and voices concern about rising Communist party control over society and the economy.

Entitled “Partner and Systemic Competitor – How to cope with China’s state-driven economic model?”, the paper makes clear that firms cannot afford to turn their backs on China.

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But, in an unusual step, it urges them to reassess their presence there, while offering numerous recommendations for the German government and European Union.

The BDI is Germany’s main business lobby group and while its proposals do not always translate directly into policy, they carry significant weight.

“Despite the attractiveness of the Chinese market, it will be increasingly important for companies to closely examine the risks of their engagement in China and to minimize their dependence by diversifying supply chains, production sites and sales markets,” the draft reads. It is currently being vetted by BDI members and the text could change before publication.

Bilateral trade between Germany and China hit a record 188 billion euros last year. And big German firms, notably carmakers like Volkswagen, Daimler and BMW, depend heavily on the fast-growing Chinese market.

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