“Stress test” by virus: german companies are struggling

The novel coronavirus poses a massive threat to the german economy. Industry expects "stress test" and fears "traceable negative effects". The stock markets slide into the basement.

In an already weak economic situation in germany, the lung disease threatens to become a "real economic inhibitor", warns the industrie- und handelskammertag on thursday. The german export industry, which has a strong international network, is already feeling the impact of the corona virus on global trade and companies are holding back their investment projects at many locations.

Federal economics minister peter altmaier (CDU) did not rule out the possibility that the corona virus could have an "incalculable impact" on previous growth forecasts.

"The spread of the coronavirus will have a considerable impact on the german economy this year," said DIHK head of the german chamber of commerce and industry volker treier. "Production stoppages at chinese and german companies in china, massive travel restrictions and trade disruptions between china and neighboring asian countries, as well as a drop in demand in tourism and retail are likely scenarios that could affect the economy in germany and europe as well."

Altmeier said the ministry of economy is determined to act prudently and calmly. He does not expect gross supply shortages. But the uncertainty in the economy had increased. Altmaier held out the prospect of countermeasures by the federal government in the event of a massive spread of the corona virus with repercussions for the economy.

German and other foreign companies doing business in china are already struggling. "The overall impact is dire," the german and european chambers of commerce in china noted after a survey of member companies. Almost 90 percent reported "moderate to severe effects" from the lung disease. "Everyone is affected," says the chairman of the german chamber of commerce in north china, stephan wollenstein, in peking.

Every second company has to revise its business targets for the year. As a result, nearly half of the companies expect a double-digit percentage drop in revenue in the first half of the year. One in four even expects more than 20 percent decline. A good third already have problems with their finances today. "People don’t make money by selling things, but have to pay rent and keepers at the same time," said wollenstein.

Small and medium-sized companies in particular can easily run out of steam due to the lung disease. "Some of them are already struggling to hang on," said the head of the european chamber of commerce, jorg wuttke. Yet the crisis could last even longer than expected, as the head of the chinese government’s expert commission, zhong nanshan, said. He expects that the epidemic in china will not be "substantially under control until the end of april".

To make matters worse, the virus is also spreading to europe. Fears are rife: like the international auto show in beijing, the watch show in geneva is now being canceled in april. Germans, usually so eager to travel, are unsettled, pulling back on their vacation plans. "The longer the crisis lasts, the more severely the travel industry will be affected," said norbert fiebig, president of the industry association DRV in frankfurt.

"The uncertainty about the effects of the virus is gross," said BDI chief executive joachim lang in berlin. China is germany’s largest trading partner. Economic crisis management by the federal government is also needed now, he said. "The effects of the virus can be clearly seen in the global economy and in the export-oriented german industry."Companies operating in china were working under high pressure to reduce dependencies and minimize concentration risks.

The immediate challenges for companies in china are initially unpredictable regulations, requirements for quarantines and extensive prerequisites to restart operations after the extended break since chinese new year. "The patchwork of conflicting regulations that the fight against covid-19 loved to create has spawned hundreds of different areas of power that make it almost impossible to move goods or people in china," said eu chamber president wuttke.

"China faces a delicate balancing act with two important but divergent goals: strictly enforcing measures to prevent the virus while struggling to resume economic normalcy," counterpart wollenstein said. China’s government should give special support to small and medium-sized companies until operations return to normal.

More than half of the companies complain about a slump in demand. "The market came to a standstill," said wollenstein. According to the german association of the automotive industry (VDA), for example, the automotive market in china shrank by 20 percent in january compared to the same month last year. However, this is also due to the fact that there were fewer sales days because of the new year’s holiday, said VDA president hildegard muller.

In addition, according to wollenstein, delivery deadlines could not be met due to the interruption of logistics (47 percent). Many companies lack personnel (47 percent). Production also delayed due to lack of supplies (45 percent). Uncertainties make it difficult to make business or investment decisions (44 percent).

If the trade war between the u.S. And china was already a "wake-up call" to reduce dependencies, the virus crisis underscores the need to "diversify supply chains" in the view of eu chamber president wuttke. This could happen in other countries in asia, but also within china. With a view to the enormous size of the second-largest economy, wuttke stressed: "leaving china is not an option." For example, a city of millions like shenzhen in sudchina has an economic output similar to that of israel. "There is no second china. It’s that simple."

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