In recent years, the world has witnessed China’s rapid rise as a dominant economic power. As one of the world’s largest trading partners, it is not surprising that many countries have become heavily dependent on China for critical raw materials, such as rare-earth elements, and solar panels. Germany, as the largest economy in the European Union, is no exception. According to Ola Kaellenius, CEO of luxury carmaker Mercedes-Benz, decoupling from China would put most of Germany’s industry at risk.
In a recent interview, Kaellenius emphasized that China is Mercedes-Benz’s largest and most important market. Mercedes-Benz’s main shareholders are the Chinese BAIC Group and Geely Chairman Li Shufu. Furthermore, China accounts for a significant percentage of the luxury carmaker’s revenues and car sales – in 2022, Mercedes-Benz recorded 18% of its revenues and 37% of its car sales from China.
The importance of China as one of Germany’s leading trading partners and supplier of raw materials critical for green transition has resulted in growing concerns in the EU regarding the region’s economic dependence on China. Kaellenius mentioned that the major players in the global economy, which include Europe, the USA, and China, are so interconnected that disengaging from China makes no sense.
When asked if it would be possible for Mercedes-Benz to discontinue its business in China due to political tensions around Taiwan, Kaellenius replied that it would be unthinkable for almost the entire German industry. Furthermore, Europe depends on China for 98% of its rare-earth elements, 97% of its lithium for batteries, and 80% of its solar panels.
Kaellenius added that German industry needs to become more resilient and independent of individual countries, especially in lithium batteries. European Commission President Ursula von der Leyen stated last month that it was not viable for the bloc to decouple from China, but it needed to reduce risk and “rebalance” its economic ties.
China’s importance in the global economy cannot be denied, and many countries heavily rely on China’s dominance in certain industries to maintain their economic success. Therefore, it is essential for countries to balance their economic ties with China while also working to reduce their dependence on the country to achieve long-term stability and resilience.
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