Many German manufacturers are turning to China

German Chancellor Olaf Scholz discussed energy and trade relations with Vietnamese Prime Minister Pham Minh Chinh during a visit to Hanoi on Sunday, the first by a German leader in more than a decade.

Scholz’s stop in Vietnam en route to the G20 leaders’ summit in Indonesia highlights Vietnam’s growing role in global supply chains, as many German companies look to diversify their manufacturing operations by expanding their presence beyond China, their main hub in Asia.

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In a joint press conference with Chinh, Scholz said Berlin wants to deepen trade relations with Vietnam and will support the country’s transition to a greener economy, including through the expansion of the metro system in Hanoi, the capital. from Vietnam.

The visit to Hanoi follows Scholz’s trip to China last week, the first by a Western leader in three years since the start of the Covid-19 pandemic. He will then travel to Singapore before heading to the G20 summit on November 15-16.

Vietnam and Singapore are the only Southeast Asian countries to have concluded a free trade agreement with the European Union. As a result, they are the EU’s main trading partners in the region.

Germany is Vietnam’s second largest trading partner among EU states after the Netherlands, with trade worth $7.8 billion last year, according to law firm Dezan Shira – much less, however, than the United States, China, Japan and South Korea.

About 500 German companies operate in Vietnam, of which about 80 have manufacturing plants in the country, according to the German chamber of commerce in Vietnam, AHK.

Among them are engineering giant Bosch, energy company Messer and several smaller companies involved in the global automotive supply chain.

Many others are looking to diversify some of their businesses outside of China where about 5,000 German companies operate, Marko Walde, AHK’s Vietnam manager, told Reuters.

More than 90% of German companies planning such a move consider Southeast Asia their preferred choice, Walde said, noting that Vietnam and Thailand were favorites in the region.

James R. Rhodes