German firms’ China worries pushing up costs, Bundesbank finds

Years of effort by German companies to diversify their supply chains is pushing up costs and further increases are still in the pipeline, especially for firms with ties to China, the Bundesbank said on Monday after surveying 8400 businesses.

Companies have struggled to maintain adequate supplies of raw materials and product components since the onset of the pandemic while Russia’s war in Ukraine, along with the associated sanctions, caused further disruption.”According to the survey, 45% of German companies expect cost increases due to the supply chain changes,” the Bundesbank said in a monthly report. “Almost a fifth of companies expect the measures to increase their manufacturing costs significantly, by 5% or more.”The survey found that 60% of companies have already introduced measures to improve the reliability of their supply chains and firms with an exposure to China took more measures than others.In addition, about 40% of companies planned further steps by the end of next year, partly because of rising geopolitical tensions, particularly between China and Western nations, the central bank added.

via Reuters